African Union summit: Boosting trade to raise standards of living

The African Union summit’s goal is to get all 54 nations to agree on the African Continental Free Trade Area.

People shop at Idumota Market in Lagos Nigeria
The African Continental Free Trade Area is expected to reduce trade restrictions across the continent and boost standards of living [Nyancho NwaNri/Reuters]

“It is too expensive to import things into Nigeria because of the high customs duties.” Bikola Alamu said while tending to her small beauty shop in Lagos. She is one of more than a billion Africans on the continent whose lives and livelihoods could soon change because of what’s happening in Niger this month.

On July 7, African leaders, top people in business and senior technocrats will meet in Niamey for the African Union’s Extraordinary Summit. They will discuss the African Continental Free Trade Area (AfCFTA) and determine how to best implement key African Union (AU) reforms. But the biggest moment will be when — after months — Nigeria formally joins the trading bloc.

boys walk past a tea shop d
Of the 2.37 billion people the United Nations expects to be born by 2050, more than half will be African. [Afolabi Sotunde/Reuters] 

The meeting has historic implications because of the drastic demographic shifts expected to impact global markets. Of the more than 2 billion people the United Nations expects to be born by 2050, more than half will be African. In that year more children will take their first breaths in Nigeria than in any other country. Put consequentially, if your genetic line survives the next 100 years, you will likely have an African descendant, which is why Alamu’s day-to-day frustrations in Lagos are so important.

“I understand the tariffs are high to encourage local production, but this is not happening. We are still importing most things. If the border is open, the opportunity to import will expand to include more people and not just the well connected.”

What to expect

The summit’s main push is getting the continent’s 54 nations to agree on the AfCFTA and the implementation of the AU reforms. After months of debate and meetings with stakeholders, Nigeria has agreed to join the pack, but Eritrea is still holding out.

The Niamey meeting will focus on what it means for Africa to operate as a single trading bloc. They will discuss technical details needed to ease trade on the continent, including the Pan-African Payments and Settlement Platform; an online mechanism for monitoring, reporting and eliminating non-tariff barriers within the AfCFTA; a password-protected online portal for tariff concessions, and a dashboard of the African Union Trade Observatory. The summit will also formally adopt the agreed Rules of Origin for AfCFTA.

Just as critically, leaders are expected to decide where the new bloc will be headquartered.  AfCFTA‘s administrative office has to be easy enough for member states to reach without alienating smaller countries who may feel their interests are not being given equal weight. Already seven member-states, including Egypt, Eswatini, Ethiopia, Kenya, Ghana, Madagascar and Senegal, have submitted bids to host the trading bloc’s secretariat. The summit will be preceded by a civil society forum on July 3 and a business forum on July 6.

Nigeria: Why so late?

Nigeria is one of the continent’s shining jewels. Reducing intra-continental trade barriers will likely expose it to greater risks, as President Muhammadu Buhari acknowledged, in a tweet the day he confirmed Nigeria would join the bloc.

H.E. Muhammadu Buhari, Chair of ECOWAS Authority of Heads of State and Government and Jean-Claude Kassi Brou of the ECOWAS Commission. Abuja, 29th June 2019 [ECOWAS]
Nigerian President Muhammadu expected to formally bring his country into African Continental Free Trade Area [Reuters] ]

To understand Buhari’s concerns consider the state of play: African countries currently compete with each other to export raw materials to developed economies. Trade among African countries is about 15 percent of the total, compared with 58 percent in Asia, according to the African Export-Import Bank. This is one reason the continent’s infrastructure appears better able to transport goods out of Africa than within it. But the modernised transportation systems promised by AfCFTA could also pave the way for what Toyin Omotosho, a retired director at Cadbury Nigeria describes as “back door dumping”. “It is justified for us to be afraid. We do not have strong [enough] manufacturing bases to enter into stiff competition with imported items that will be dumped on us from stronger economies [from] Europe and Asia via other African Nations.”

Adebayo Adeleke sees the possible impact of AfCFTA on Nigeria differently. “Nigeria’s inefficiency fuelled by corruption, bad governance and lack of infrastructure will be exposed by a continent-wide free trade agreement,” Adeleke told Al Jazeera. He is a managing director at Lancelot Ventures Limited, which specialises in real estate and business investment. Nigeria’s population, which is about 18 percent of Africa’s, “would become a huge market for smaller but more efficient economies in Africa,” he said.

Still, the benefits for Africa clearly outweigh the risks to any one nation. If all countries sign on, AfCFTA will be the largest free trade zone in the world with more than 1.2 billion consumers. The UN Economic Commission for Africa (UNECA) estimates that intra-Africa trade could likely increase to 52.3 percent by 2020.

Made in Africa’

Nigeria’s Buhari wants Africa to be known as much for its products as it is for its natural resources, but in order to do that, he said “Africa,..needs not only a trade policy but also a continental manufacturing agenda”. “Our vision for intra-African trade is for the free movement of ‘made in Africa’ goods.'”

There is, however, a catch: making it easier to trade goods through Africa for Africans will also further open the world to the purchasing power of Africans. Adeleke believes China might be the ultimate beneficiary from the AfCFTA. “It’s already strategically positioned across Africa to take advantage of the huge market,” he said. “Trade liberalisation, single currency etc. will pave a way for China products to compete with Africa products more favourably. China would become the last but luckiest to ‘colonise a united Africa’. The dismantling of trade barriers would facilitate that.”

David Luke, the coordinator of the African Trade Policy Centre at the UN Economic Commission for Africa, is a key person in developing and promoting the AfCFTA. He told Al Jazeera the free trade area represents the future of Africa. He also believes that multinational projects such as China’s Belt and Road Initiative will quicken Africa’s integration.

“One of the key limitations to intra-Africa trade is inadequate trade-related infrastructure that has contributed to high transport costs … to the extent that China’s Silk and Road project will help African countries in addressing infrastructure gaps,” Luke told Al Jazeera. “While the  AfCFTA is an African project, under the auspices of the African Union, it is in itself a development of continental significance, and global importance.”

Our frustrated Lagosian shop owner is hoping new trade rules will lower the prices she pays for the beauty products she sells and thereby increase her profit and standard of living. She supports  AfCFTA so that more people, “Even someone like myself can also start trading with neighbouring countries without problems,” she said.

Source: Al Jazeera