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Is Africa Ready to Take the AfCFTA a Step Further? The Case for a Common African Market

December 16, 2024

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Event
Is it Time for a Common African Market?
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October 26, 2023
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A Common African Market - A Webinar Series
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June 06, 2024
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The African Continental Free Trade Area (AfCFTA), launched in 2021, aims to create a more unified market that can lift millions out of poverty by liberalizing and integrating economies across the continent. While all African countries except Eritrea have now signed on, the AfCFTA has yet to fully deliver on its promise.  

In partnership with the AfCFTA Secretariat and the UN Development Programme, CGD hosted the Common African Market Working Group Series on Advancing Regional Economic Integration in Africa. In a series of webinars, experts convened to discuss the trajectory of the AfCFTA and the barriers to mobilizing a common market. This blog explores the key takeaways from those discussions, including policy recommendations for strengthening the AfCFTA and advancing Africa’s economic integration. 

Free movement of people 

The first session of the webinar series asked, is it time for a common African market? The Abuja Treaty of 1991 envisioned the creation of an African market by 2023. Participants in the first webinar discussed two major hurdles to a common market. Alan Hirsch from Cape Town’s Nelson Mandela School of Governance argued that the lack of free mobility under the AfCFTA is a major flaw because such mobility is necessary for a common African market. Of the 47 African countries that ratified the AfCFTA, only four have ratified the free movement of people clause. This means traveling from Africa to other regions of the world is often cheaper than traveling within Africa, hurting both the public and private sectors. For example, travel from Kinshasa, DRC to Lagos, Nigeria (US$500 - US$850) is upwards of 20 hours, but traveling from Berlin to Istanbul (US$150) is about a 3 hour flight. Both are approximately 1,100-mile (1,780-kilometers) trips. 

Contrary to popular belief, most African migrants migrate to other African countries, not to Europe or the US. Still, immigrants make up just 1.5 percent of the population in African countries on average, compared to a global average of 3.6 percent, according to Hirsch. The African regional economic communities (RECs) have partially addressed the barriers to movement as many are visa-free for bi- and multilateral arrangements, and in some cases, offer work permits. However, these permits are usually only available to highly skilled workers. Another challenge is that the African Union’s Free Movement of Persons Protocol (FMPP) has been poorly supported and implemented. Hirsch argues that the FMPP was negotiated “quietly,” whereas the AfCFTA was championed by a head of state and galvanized support from other countries, and the media and governments were briefed in Addis Ababa regularly about its progress. Another barrier to free movement is the lack of familiarity between countries across the continent, while nations often have established trust and credibility with their neighboring countries. Many people have families and similar ethno-religious groups with neighboring countries, but even then, the free movement of people has remained politically sensitive. With a common African market, the FMPP would be part of the blueprint of the market and could generate more support among African heads of state. 

Standardization of products 

Hermogene Nsengimana, secretary-general of the African Organisation for Standarisation (ARSO), argued that information-sharing is one of the largest hurdles in the development of a common market, particularly sharing standards, processes, and environmental sustainability goals. According to ARSO, over 70 percent of agricultural and 40 percent of manufacturing exports are rejected, because the products do not conform to the importer’s standards intra-Africa; and at least 4,077 new products could enter the AfCFTA, or better yet, a common African market with improved conformability regulations and infrastructure. Many of these products are from small African countries, so harmonizing the standardization process would also give way to integrating smaller countries into the global economy. Nsengimana suggested that agro-processing requires the most immediate standardization because it has proven to be a priority sector for the RECs. In the third workshop of this series, we touch on the digital and infrastructural hurdles that perpetuate information-sharing gaps on the continent.  

Supply chain integration and innovation  

How can a common African market strengthen digital economies, innovation ecosystems, supply chains, and regional cooperation? US companies often design products with an understanding of China’s regional specialties. As a result, American products often integrate into existing Chinese supply chains, something Nsengimana says the AfCFTA has so far failed to do, especially for critical minerals. A common African market would target this decades old issue of supply chain integration on the continent, and maybe even improve social and diplomatic cohesion amongst countries who have common interests in maintaining the supply chains.  Just as it is often cheaper to travel from Africa to other regions of the world, it is also cheaper to import products into Africa rather than trade intra-Africa.   

Another benefit to coordinating regional specialties is the incentive of innovation in products, machinery, processes, and (digital) infrastructure. Marisella Ouma, advocate of the High Court of Kenya and deputy general counsel of the Central Bank of Kenya, explained that there remains little capacity and government incentivization to encourage innovative methods to improve market-sharing on the continent. In a recent episode of the CGD podcast Lagos to Mombasa, Gyude spoke with the UN Economic Commission for Africa’s deputy executive secretary, Antonio Pedro, about fostering innovation on the continent to reach Sustainable Development Goals targets in infrastructure, climate, and economic growth: high-income countries spend 3 to 3.6 percent of GDP on research and development of new technologies and the global average is 2.63 percent. There is not a lot of data available on R&D in Africa, but the most industrialized African country, Egypt, spends only 0.92 percent of GDP on R&D. In a common market, countries are incentivized to work in concert to reap growth, innovations, and systems that are otherwise difficult to achieve individually. 

While the world is still adjusting to the novelty and uncertainties of AI, Martin Mbaya, director of executive education at the Strathmore Institute of Public Policy and Governance in Nairobi, explained why it is important for African countries to develop AI tools and policies that are relevant to their needs rather than simply inheriting AI technologies developed by the US and China. To develop Africa’s tech competitiveness in the global market, it is important to address this sooner rather than later. An important AI concern in supply chain development and business ecosystems at large that has yet to be addressed widely on the continent are the issue of safety, human rights, and intellectual property rights. Kenya has developed initiatives like Konza around AI to ensure that people are safe, and South Africa has recently given AI patents. During discussions, experts recommended that African think tanks prioritize AI technology to support governments, and the AfCFTA Protocol on Digital Trade should pilot practical internet access, payment systems, and other mechanisms to streamline the delivery of major services. However, encouraging technological innovation requires incubators, access to finance, more clarity on patent rights, and addressing administrative hurdles. 

The chicken and egg problem: Infrastructure and trade 

How can a common African market address SDGs, intellectual property rights, industrialization, and geopolitical tensions? In addition to innovation, a major impediment to supply chain integration is high transport costs, which account for 30-60 percent of the final cost of goods. In fact, five coastal countries—Angola, Nigeria, Kenya, Sudan, and South Africa—together make up 70 percent of the continent’s GDP. During the discussions, Liberian Minister of Public Works Roland L. Giddings spoke of the “chicken and egg” conundrum. On the one hand, a systemic, digitized, and integrated approach to trade is crucial. On the other hand, trade without paved roads and electricity is very difficult. Not only is trading across borders too expensive, but border enforcement continues to struggle with processing goods and enforcing standards due to computer shutdowns. This issue was also highlighted in the first workshop by ARSO. According to ARSO, only six member states have quality infrastructure, 23 have limited or little quality infrastructure, and 19 do not have quality infrastructure. ARSO believes that standardizing products and opening new African markets requires countries to also finance, build, and share infrastructure, which could also incentivize peace and security amongst countries and bring in more money. Giddings also proposed “working backgrounds,” by encouraging the Africa Export-Import Bank to utilize diaspora remittances and other resources to focus on building infrastructure for continental trade. In deconstructing cross-border trade issues, the group also discussed challenges faced by women, who make up 70 percent of informal cross-border traders and are often a neglected demographic in continental trade policies.  

Conclusion 

A common African market could address integration challenges faced by the AfCFTA by promoting the free movement of people, strengthening supply chains, encouraging innovation, and pooling resources to decrease the infrastructure gap for intra-African trade. These workshop discussions and proposed recommendations are not exhaustive, but rather offer basic catalytic areas for stronger economic integration on the continent. Ultimately, strengthening the AfCFTA, or in the hopes of many experts, the development of a common African market,  depends on technical organization, error management, and political will. Areas for future discussion include political will and how a common market contributes to peace and security.  

In recent roundtables at CGD, a primary concern from DC researchers, policymakers, and civil society was the lack of clear and unified messaging from the continent’s leaders on global financial architecture reform, changes to the African Growth and Opportunity Act, and the type of improvements needed in US foreign investment initiatives (like the Development Finance Corporation and the Millennium Challenge Corporation). While it is true and often problematic that the US has meshed national interests with foreign assistance programs, it is also imperative that African countries build unified trade values, standards, and aligned messaging to non-African countries. Building a common African market is not only about empowering African economies through continental integration, but also developing and enforcing a continental strategy in trade and diplomacy for countries outside of the continent. 

Disclaimer

CGD blog posts reflect the views of the authors, drawing on prior research and experience in their areas of expertise. CGD is a nonpartisan, independent organization and does not take institutional positions.


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