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Ideas & Debate

Roads, rail are critical to free trade growth

cargo train
An SGR cargo train. FILE PHOTO | NMG 

For sure, the signing of the Kigali Declaration on African Continental Free Trade Area (AfCFTA) in March 2018 by African heads of state and government marked a significant shift in expectations by Africa’s business community, among others, for Africa’s future economic growth and development. The declaration introduced the enhanced intra-African trade, achievable through AfCFTA as the sure way of achieving the much elusive sustainable economic development, employment creation in member states and most importantly, reversing the declining economic growth and development trend in the continent.

Indeed, over the past 15 or so years, most countries in Africa experienced have sustained economic growth, with the rates often exceeding five percent a year. Between 2000 and 2010, the continent achieved average real annual GDP growth of 5.4 percent, adding $78 billion annually to the GDP (2015 prices). This growth indeed inspired optimism around and about the continent’s socio-economic prospects and in its ability to deliver better socio-economic welfare gains to the people.

However, this was not the case. Between the years 2010-2015, Africa’s economic growth slowed down. Growth dropped to an average of 3.4 percent per year thus sending shockwaves through leadership of Africa and the entire business community. Despite this decline in the performance of the mentioned economies, the rest of Africa economies were able to maintain stable growth rates in general. Nonetheless, African economies amid many internal and external shocks have been resilient. According to the World Bank Review (2018), growth in sub-Saharan Africa is estimated at 2.3 percent for 2018, down from 2.5 percent in 2017. Economic growth remains below population growth for the fourth consecutive year. This trend sent shockwaves through economic policy maker in Africa, leadership and the entire business community.

Realising that time for economic growth and development ‘catch-up’ is over, and that spiritual, economic and political history would judge them harshly, the African leadership moved with speed and agreed to establish the Continental Free Trade Area (CFTA) by 2017. In so doing, they endorsed a road map and architecture for fast-tracking the establishment of the CFTA and the Action Plan for Boosting Intra-African Trade by: fast-tracking the EAC, COMESA and SADC (Tripartite FTA), oversee the completion of Free Trade Agreement (FTA) and consolidated the tripartite and other regional FTAs into a CFTA initiative. It is believed that a more open Africa through CFTA will grow intra-Africa trade from its current levels. Under the present policy environment and physical conditions, intra-African trade remains low. In the trading period 2017-18, intra-Africa exports accounted for 16 percent of Africa’s total exports. The share of intra-African exports as a percentage of total African exports increased from about 10 percent in 1995 to around 17 percent in 2017 with some slight improvement expected in 2018, but it remains low compared to levels in Europe (69 percent), Asia (59 percent), and North America (31 percent).

But isn’t the iniative ambitious?

No doubt, the AfCFTA, among other commitments that Africa’s leadership has made in the past such Comprehensive Africa Agriculture Development Programme (CAADP), Programme for Infrastructure Development in Africa (PIDA), to name a few, is one and probably the most ambitious commitment we have ever seen in the recent time.

Though looking good on paper and in economic spirit, Africa’s economic development planning history shows us that the AfCFTA could be a public relation exercise unless African governments through their respective RECs act on trade barriers, physical infrastructure challenges and overall national competitiveness”

Physical dynamics

So Africa must do the following: Africa must make AfCFTA work. African governments through their respective RECs must have the courage to read and implement the economic textbook requirements. We understand that structure, nature and physical dynamics in Africa can be intimidating to intra-Africa trade and its CFTA policy component of free movement of goods. But Africa must have the courage to fix it.

First, Africa through the AfCFTA must try to remove trade barriers within and across all RECs and allowing the free movement of goods, services and people across Africa, the CFTA could help to increase combined consumer and business spending on the continent to $6.7 trillion by 2030.

Second, Africa has the worst road and rail network that has stood against intra-trade. Africa must put its road and rail infrastructure in place. All roads connecting countries and every RECs will be key in speeding up movement of goods and reducing transport costs. For example, a road from Mombasa (Kenya) to Matadi via Kinshasa (DRC) or from Mombasa, Kampala to Kisangani and Bangui, would expand trade with central African region.

Third, Africa must engage, promote and participate in massive private sector development agenda that would primarily start with national completeness programmes that are cascaded down to the SMEs. Such a programme will make the AfCFTA work for the African consumer as well as make African goods globally competitive.

The writer is an economist.

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