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Will intra-Africa trade come of age in 2018?

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Will intra-Africa trade come of age in 2018?

Photo by Bloomberg

3rd January 2018

By: African News Agency

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Overcoming the barriers for intra-African trade to double in a decade can feel like a Sisyphean task – impossible to complete. But that is the objective of the Boosting Intra-African Trade (BIAT) action plan, which targets to double flows between January 2012 and January 2022.

Many individual African nations will not, on their own, have significant production or purchasing power any time soon.  To accommodate such young populations and produce or enable meaningful employment, GDP growth has to sky-rocket, not hobble along. That requires clubbing together.

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Yet global and regional trade agreements are grappling with shifting geo-politics or are being tripped up by populism. Or both. So, on a continent not known for its speedy cohesiveness, will leaders have the pragmatism to give up lofty individual ambitions that may be more realisable at a regional level?

Traditionally, governments have sought the hegemony given by a national airline, stock exchange, broadcasting corporation and grid.  But when, in November 2017, an east African chief justice broached the idea of a regional court to handle electoral disputes, it sounded sensible and not just because it would mitigate the risk of bias. It would also enable the building of expertise.

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Of course, there is no shortage of plans and accords in Africa.  Most political leaders can put together a team of policy wonks, legal eagles, technology experts, financial pundits. Eventually a reasonable agreement is likely to be born, preferably capturing the many disparate, uneven needs and desires across the continent, after behind-the-scenes retreats and maybe even Skype calls.

Once agreed, implementation creates a whole new world of opportunities. It also opens a Pandora’s box of Machiavellian tricks that can appear as suddenly as police officers on our roads.

This requires leadership at another level. Leadership that is about anticipating, preventing and removing blockers to make way for a common good. Leadership that is equally about promoting the upside and advocating compliance (in actions, not just words), as well as celebrating success just long and judiciously enough to make it feel worthwhile. There is still too much to be done.

The BIAT action plan focuses on seven interlinked areas. The objectives, at times, reiterate the obvious, such as harmonising and simplifying customs and transit procedures and documentation.

One of the worst legacies of colonialism is a disproportionate passion for forms, stamps and (in some cases) queues. All reinforcements of an outdated authority. Even introducing technology has not always been radical enough. We need to go back to basics. Allow the trader to transport that food product or spare part container to its destination quickly, safely and legitimately.

The plan’s success rate will be improved if it uses African and global lessons learnt where appropriate.

Coupled with BIAT – as closely as possible if we are to avoid duplications and contradictions – is the Continental Free-Trade Agreement (CFTA), due finally to be adopted in March 2018. How it will overcome the hurdles that the current regional economic communities have not remains to be seen.

The president of Niger and the executive secretary for the United Nations Economic Commission for Africa consider intra-African trade to be “different from the trade goods that flow from Africa to the rest of the world, which are mostly crops, mineral products, metals and oil” — presumably because all of these are susceptible to globally-determined prices and bought by companies that want to create their own end products in factories that have reliable, cost-effective power, trained labour, good transport links, scale and so on.

Instead, President Mahamadou Issoufou and Vera Songwe believe that the CFTA will allow local small and medium-sized enterprises, the continent’s overwhelming employer, to manufacture and sell “value-added and industrial products like processed agricultural goods, basic produce, and financial and retail services” to neighbours, both next-door and a few thousand kilometres away. This could force infrastructure and education to improve. It could even substitute imports.

It is incumbent upon BIAT and CFTA to enable and require Africans to:

1.    Produce physical and digital products and services that Africans need or want

Here’s a list to start with:

·      Dairy, especially in west Africa. I know Hausa-Fulani cows can produce yoghurt, as I saw it on sale in Ibadan, Nigeria. I went back to buy it the following day, having been assured I would find the shop open. It was firmly closed. (Will the trade agreement encourage better service?)

·      Suitable textiles and clothes for the different climates across the continent.

·      Solar PV panels. Renewable energy is a significant new employer in countries like the United States of America, Germany, India, China and Brazil.

·      Integrated inter-city and urban transport using renewable energy (carriages and stations) and offering modern payment options and amenities such as wi-fi.

·      Affordable financial services (not only plain vanilla collateralised loans) for small and medium-sized enterprises. Fintech platforms such as loans4SME.com, Lendingkart Finance and incomlend.com already exist and, where appropriate, could be adapted for Africa.

·      Patent lawyers. Generally, I am concerned Africa is producing too many lawyers, given the advancements in artificial intelligence, but this is a specialisation the continent needs.

2.    Make it easier to pay for them

Ever tried buying cotton from Burkina Faso when you’re in Nigeria? Flutterwave is a Nigerian/US payments solution that can be used across the continent. Binkabi is allowing cross-border trade to take place without using the US dollar.

3.    Resolve disputes quickly and online

To encourage cross-border (including high volume, low value, business-to-consumer) trade, buyers and sellers must have confidence that any issues will be resolved in a timely and efficient manner.

Consumer ombudsmen have signed up twenty large, voluntary retailers (including supermarkets) in some European Union countries on a single platform. Once a customer inputs a case onto this platform, the retailer has to respond, otherwise it gets heavily penalized. This gives a controlled environment, with a centralized authority.

In Africa, we require functioning ombudsmen in the major economies where there are common retailers.  How will the CFTA/BIAT address this?

4.    Protect personal data

Governments in Africa must start taking data protection and encryption far more seriously. Only then can they get the private sector to do so. And not just for financial transactions – data can be worth more than the money.

5.    Protect intellectual property

The capacity for evaluating and protecting intellectual property varies vastly across the continent. It needs to be in place in order to improve the quality, relevance and timeliness of research and development on the ground.

6.    Have affordable, reliable Internet access

“The ability for businesses and consumers to use the Internet requires an enabling environment – a set of laws and institutions that support the process of buying, paying, and delivering digital [and physical] products”, hence the points above.  Robust Internet and communications technology is the infrastructure to enable e-commerce, which will in turn bolster cross-border trade.

7.    Selectively use blockchain

Nuts don’t require sledgehammers.

It is, understandably, tempting to use technology that can combat corruption, even at a price. However, scalability, latency, lack of mainstream understanding, resistance (deliberate or otherwise) by some sectors to rely exclusively on data in digital form, outdated legacy systems (which may not always be the case in Africa), lack of national/cross-border regulation (which may appear counter-intuitive, but is it being discussed by CFTA/BIAT?), standardisation, interoperability, accountability, legality of smart contracts, privacy/security, and competition/anti-trust are all open challenges. Private distributed ledgers could help, but the cost-effectiveness still needs to be evaluated.

8.    Cede national pride for the benefit of the continent

CFTA has to be phased in if it is to work.  Competition will, like IP and e-commerce, only “be part of the second phase of CFTA negotiations – expected to be launched after the conclusion of negotiations on goods and services”. However, it is one of the causes for any regional trade agreement to unravel. Still, African governments that are ready to stop hanging onto old, territorial ways of doing business and share the cake (or kola nut or other equivalent) may be pleasantly surprised at the results.

* Aarti Shah is an analytical writer for ANA. She is a business and government relations director with an extensive network in financial and professional industry-related institutions in the emerging and frontier markets, notably Africa. She advises governments and corporations in these regions on using technology to improve transparency and efficiency.

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