DIANNA GAMES: African trade is crippled for a reason and fine words will not change that
Road to market of 1-billion people is bedevilled by inefficiency, poor infrastructure and a lack of political will
As the ink was drying on the African Continental Free Trade Area (AfCFTA) agreement signed in Rwanda a few weeks ago, a crisis was developing at Kasumbalesa border post, between the Democratic Republic of Congo and Zambia.
Delays in transit clearance procedures at crossing had resulted in a 70km queue of trucks on the Congolese side of the border, mostly laden with mineral exports destined for vessels to the south. Common Market for Eastern and Southern Africa (Comesa) officials intervened to sort out the mess, blaming the situation on the failure of the two countries to integrate their customs systems.
On a good day Kasumbalesa is a problematic border, characterised by delays and inefficiency. Trucks can get stuck for weeks, particularly on the Congolese side, where roads are poor and few roadside facilities exist. The mining town of Lubumbashi 100km away feels the pinch when its main supply route to the south clogs up. Supermarket shelves start to empty and food prices rise.
Protectionism through the back door undermines the publicly stated commitments to regional integration by leaders
A reminder of the embedded problems in intra-African trade is necessary, given the hype about the launch of the continental free trade area. The initiative is certainly symbolic and important in setting targets for countries to improve their trade facilitation, develop industry and broaden markets.
But the enthusiasm for a pan-African success story does not match the reality on the ground across much of Africa. Inefficient bureaucracy and poor infrastructure continue to frustrate the limited trade African countries have among themselves and impose huge costs on African consumers and economies.
Protectionism through the back door undermines the publicly stated commitments to regional integration by leaders. A flagship project of the AU, the AfCFTA aims to fast-track intra-African trade and economic development by creating a market of more than 1-billion people with a combined GDP of over $2-trillion. It contains provisions for countries to reduce tariffs by 90% and address impediments to trade, thus enabling intra-African trade to grow by more than 50% from less than 15% at present.
The spirit of free trade is well represented at public forums across Africa. But policies and actions at a national level tend to paint a different picture, one that is characterised by slow movement towards the very agreements that African leaders sign up to.
Why would the continental initiative be different? It is instructive to ask what has happened to the last bold trade initiative signed up to in Africa, with almost equal fanfare: the Tripartite Free Trade Area.
It links three regional economic communities and 26 countries from Cape to Cairo and brings together 700-million people in an area with a GDP of $1.4-trillion.
Launched in 2011 in SA and signed in 2015, it still does not have all of the member states on board and the initiative has drifted. It has been bogged down by outstanding negotiations on key issues such as rules of origin, dispute mechanisms and tariff phase-downs and has missed several deadlines for completion.
Some analysts say the tripartite plan is now being treated as the poor cousin of the continental initiative, particularly by the Francophone bloc in West Africa, a region that it excluded. Many other regional integration deadlines in Africa on customs unions, currency harmonisation and other issues have been missed over the years, the economic reality on the ground undermining ambitious political plans.
The AU and the heads of state and ministers who frequent its hallways cannot be faulted for the size of their vision. But the vision is the easy part. Ensuring their countries are able to live up to and participate in political initiatives is usually the sticking point.
For example, more than 30 countries in Africa are least developed countries, a categorisation that describes low-income nations that suffer severe structural impediments to development. They have little to trade with each other.
Even the largest economies have stepped back from signing the continental agreement, albeit for different reasons. SA, which stands to gain handsomely from the new free trade area with a trade surplus with the rest of Africa of $15bn, is preoccupied with process issues, though it is ready to sign up once these have been addressed.
Nigeria, on the other hand, has a more enduring problem. Its efforts to build manufacturing capacity are moving slowly. President Muhammadu Buhari echoed the thoughts of many African leaders when he tweeted: "Our continental aspirations must complement our national interests."
The country has a list of items banned from importation as part of a drive for import substitution. It added further trade restrictions in 2016 to save foreign currency.
Nontariff barriers have proliferated even as tariffs have come down across the continent. They include import bans and product quotas, rules of origin issues, unjustified sanitary and phyto-sanitary regulations, packaging and labelling standards, restrictive licences and corrupt and/or lengthy customs procedures.
There are many reasons why intra-African trade remains low. Key among them is the fact that many economies export unprocessed commodities. In the Comesa region, copper ores and concentrates were the most exported products in value terms between 2011 and 2015.
Another is the lack of industrialisation.
There is not much to trade and most manufactured goods that do move across borders originate from just a few countries, mostly SA, Egypt and Kenya. A large chunk of goods that are traded are imports, mostly from Asia, that have little or no local value addition.
Then there is the cost factor. Expensive and inefficient business environments make many African-made goods uncompetitive. Exporting them pushes up costs exponentially as consumers in recipient countries indirectly pay for the long delays of cargoes at border crossings.
According to policy research organisation Trade & Industrial Policy Strategies, 78% of all complaints captured by a reporting mechanism on nontariff barriers set up by regional blocs are accounted for by border delay issues, clearing issues and other border post problems.
Southern African border posts were described as repositories of "disorganised chaos".
One-stop border posts were mooted as the answer to the delays and bureaucratic menace at road borders. Chirundi, straddling Zambia and Zimbabwe, was among the first. Launched to great fanfare in 2009, it worked well for a while but congestion is now worse than ever, not because the plan is poor but because its application is problematic, with unnecessary cargo searches holding up hundreds of trucks that regularly move through the crossing.
There is no doubt that many years of trade facilitation and liberalisation efforts across Africa have borne fruit. The statistics don’t capture a lot of trade that does happen, such as informal movement of goods across borders. Formal trade has also increased, particularly in the East African Community, where integration has progressed faster than other regional economic communities.
But much more needs to be done at a national level to give ambitious pan-African programmes a chance of succeeding. As Rwandan President Paul Kagame said at the Kigali launch: "The creation of one African market necessarily entails a metamorphosis in how we think and act."
The AfCFTA is undoubtedly a noble initiative. But the political will to make it work needs to move beyond bold statements on public platforms to action. Without that, it will end up being just another vision built on shaky foundations.
• Games is CEO of business consultancy Africa @ Work.