By Kofi Ampeah-Woode
We publish a paper delivered at a Public Lecture (No.8), as part of the Ghana Armed Forces Command & Staff College (GAFCSC), MASTER OF SCIENCE IN DEFENCE AND INTERNATIONAL POLITICS (MDIP) program at the HAMIDU HALL of Otu Barracks, Teshie, Accra, on Thursday, 5th December, 2019, captioned;
“REGIONAL AND CONTINENTAL INTEGRATION: WHAT THE AFRICAN CONTINENTAL FREE TRADE AREA (AFCFTA) MEANS FOR AFRICA AND GHANA” by Professor SKB ASANTE – Executive Director, Centre for Regional Integration in Africa
The historic signing of the African Continental Free Trade Area (AfCFTA) Agreement on 21st March 2018 marked a momentous milestone for regional integration in W Africa Regional and continental integration have more than fifty years, been a key & development strategy to overcome the economic disadvantages of small size of the Africa countries, low per capita incomes, sparse populations and narrow resource bases, and of making possible a higher rate at economic growth and development. Regional and continental integration are therefore not a product of recent manufacture. Their roots go further than are usually appreciated.
The vision of the African continental integration to which AfCFTA contributes originates in an appreciation that political independence achieved with decolonization would be ineffective, in realizing a better life for the peoples of Africa, unless consummated with economic independence, as was vigorously advocated by Ghana’s first President, the legendary Dr. Kwame Nkrumah.
As with political independence, this ’economic decolonization’ was thought to be best leveraged through a regional approach championed by Adebayo Adedeji, proponent and architect of regionalism in Africa since the early 1970s. The signing of the Agreement strongly indicated commitment by policy makers and African leaders to regional integration.
The AfCFTA aspires towards deepening the integration of the African continent beyond merely a free trade. It includes u objectives, to create a liberalized market through successive rounds of negotiations, lay the ground for the establishment of a Continental Customs Union’ and ‘contribute to the movement of capital and natural persons.
This lecture focuses attention on first, what the AfCFTA is all about, second, the case for AfCFTA, its key objectives and potential benefits, third, challenge; likely to impede the efforts of Africa in general, and Ghana, the Mecca of Pan-Africanism, in particular, to derive benefits from the AfCFTA; fourth, how Ghana is positioning itself to harness the benefits of the AfCFTA. I conclude with an agenda for action highlighting policy recommendations and the way forward.
WHAT IS THE CONTINENTAL FREE TRADE AREA?
The AfCFTA is a flagship project of Agenda 2063 of the African Union (AU). It refers to a continental geographic zone where goods and services move among member states of the African Union with no restrictions. It is an African-wide free trade agreement designed to boost intra-African trade and pave the way for the future establishment of a continental customs union.
AfCFTA represents a key African initiative aiming to urgently take forward the continent’s long-standing integration and development agenda, and redress the vulnerabilities of Africa’s economies within the global economic order that have been manifest unbalanced gains for Africa in the World Trade Organization (WTO) and bilateral trade with international partners.
The AfCFTA is indeed a landmark achievement, in the context of the continent’s long and rich history, in fostering regional Integration to unify the comment. It will lead to the creation of a single continental market for more than 1.2 billion people, with a combined GDP of three trillion dollars and a control of about 60 % of the world’s arable land.
This is Africa’s renewed opportunity to steer its economic relations away from a reliance on external donors, foreign creditors and excessive commodity dependence, ushering in instead a new economic and political era focused on self-reliant cooperation, deeper integration and higher levels of intra-African trade.
The AfCFTA is a key driver for Africa to realize the structural transformation and industrialization of Africa as envisaged in the AU Agenda 2063, as well as promote implementation of the United Nations 2030 Agenda for Sustainable Development.
THE CASE FOR AfCFTA AND ITS OBJECTIVES
What is the case tor AfCFTA? David Luke, a renowned Trade Expert and Coordinator of the African Trade Centre at the UN Economic Commission for Africa (ECA) underlines, in a recent study that the fact that the AfCFTA is ‘win win’ for all African countries’ and the attainment of the sustainable development goals (SDGs) makes the case for the AfCFTA unassailable.
Consolidating the African continent into one trade area, provides great opportunities for trading enterprises, businesses and consumers across Africa and the chance to support sustainable development In the world‘s least developed region. The ECA estimates that the AfCFTA has the potential both to boost intra-African trade by 52.3 per cent by eliminating import duties and double this trade if non-tariff barriers are also reduced.
Besides, the CFTA would resolve the challenge of multiple and overlapping memberships of the regional economic communities (RECs) and expedite the regional and continental integration processes. Perhaps more important, it would also produce more jobs for Africa’s bulging youth population. This is because CFTA offers substantial opportunities for Industrialization and employment in Africa. The anticipated expansion in intra-African trade is key to creating decent jobs, improving productivity, increasing incomes, and reducing economic vulnerability and risks.
Let me conclude this section of my lecture by quoting President Uhuru Kenyatta of Kenya’s statement at the 10th Extraordinary Session of the Assembly of the AU held in Kigali, Rwanda, on 21st March 2018, on what AfCFTA means for Africa.
The African CFTA means an end to poverty. CFTA means prosperity for our continent. CFTA means jobs for our young people, who today struggle and are fleeing our own continent. CFTA means peace and security because we have gainfully engaged our population. CFTA means Africa being able to be self-reliant. CFTA means the African Union meeting to discuss what to do with our prosperity and not what to do with the problems we suffer.
It is not surprising therefore that Ghana, a sustained advocate of continental integration for the development of the continent, significantly contributed towards realization of Africa’s dream of establishing the single Continental Market.
First, the initial decision to establish a CFTA, was taken at a Trade Ministerial Meeting held in Ghana and chaired by Ghana, in September 2011. So it was in Ghana where the formal conversation about CFTA actually started.
Second, it was at the 18th Annual Summit of the Heads of State and Government of the AU held in January 2012, where the Ministerial Decision to establish the AfCFTA was officially endorsed, following the motion formally tabled by the then President of Ghana, Prof. John Atta Mills for the establishment of the CFTA.
Third, Ghana played a central l rote in the actual negotiations of the AfCFTA between 2015 and 2018 by making substantive contributions to the debates at the Negotiation Forum.
Fourth, in keeping with its tradition of “first“ on the continent, President Akufo-Addo was one of the first Head of States to sign the AfCFTA Agreement the President ensured that Ghana was also the first country to ratify the Agreement, and the first to offer to host the AfCFTA Secretariat.
While potentially deriving benefits from the AfCFTA, like any other African state, Ghana has much to gain from the AfCFTA project, as it might help wean Africa off foreign aid, an initiative that President Akufo-Addo vigorously advocates in his ‘Ghana Beyond Aid’ campaign.
As Mickson Opoku of the Ministry of Trade and Industry rightly notes, Ghana needs AfCFTA to realize government industrialization and economic transformation agenda. Decentralizing industrialization through 1 District 1 Factory initiative, with the private sector playing a critical role fits into the CFTA concept with more access to diversified products to stimulate growth.
Ghana presently makes far less than 10 % from cocoa exports. With CFTA, Ghana will no longer sell raw cocoa beans in that magnitude but rather begin to add value to the production line to become more competitive. AfCFTA has the prospects for changing Ghana’s economic development and changing the country’s economic competitiveness with the world.
Above all, Ghana would derive enormous benefits ham hosting of the AfCFTA. The country can and should Ieverage the opportunity of hosting the AfCFTA Secretariat to become the new commercial capital of Africa, a regional trade hub and economic epicenter and the new gate way to the continent, in hosting of the Secretariat would promote Ghana as an attractive investment destination and actively facilitate foreign direct Investment into Ghana.
The AfCFTA Headquarters would attract major international financial institutions to locate in Ghana other international companies doing business in Africa are likely to consider Ghana as the preferred location for siting their corporate headquarters.
Furthermore, hosting the Secretariat would provide opportunities to recruit many Ghanaian professionals and administrative staff to work In the Secretariat. More Ghanaian professionals, public sector officials and civil society representatives will benefit from training and capacity building initiatives organized by the Secretariat.
Besides, Ghana will have the opportunity of hosting expected 36 annual various Regional and Continental meetings and other events associated with the AfCFTA. In short, the hosting of the AfCFTA Secretariat is going to be a game changer and a launch pad for Ghana’s private sector to explore and exploit business opportunities in Africa. It is without doubt the important major step in Ghana’s march towards economic prosperity.
Undoubtedly, the CFTA has opened a new chapter in the history book of the continent. That chapter, which is full of opportunities and challenges, is capable of booming or drowning the economics of member countries, including Ghana. What are the challenges likely to impede implementation of the AfCFTA? There are first, challenges confronting African countries In general, and second, specific challenges likely to impede Ghana’s efforts to harness the benefits of the AfCFTA.
CHALLENGES OF IMPLEMENTATION OF THE AfCFTA
Key challenges confronting African countries are first and foremost, capacity imperatives for the implementation of the AfCFTA. Capacity is indeed an enabler for development. It remains the critical missing link for fulfilling the development agendas of most African countries. Not surprisingly, following the historic signing of the AfCFTA Agreement, in March 2018, the African Capacity Building Foundation (ACBF) called on African nations to bolster their capacities in readiness for implementation of the ambitious plan.
Prof. Emmanuel Nnadozie, the Executive Secretary of ACBF, underscored the importance of enhancing skills necessary for the actualization of AfCFTA. Capacity is central and is the very heart of Implementing, actualizing and maximizing the AfCFTA.
The second critical challenge is lack of productivity as one of the barriers to Intra-African trade, there is the question of what to trade between African countries though the AfCFTA provides considerable export opportunities, only countries that can produce the goods desired by that market can use the opportunities.
The third challenge is the absence of critical connecting infrastructure to overcome fragmentation of African markets; fourth, commitment to integration which varies across countries. Some countries have not undertaken any liberalization within their respective RECs Free Trade Area (FTA).
Accordingly, if they cannot commit themselves to a smaller FTA, it will be difficult for them to commit to a CFTA. Indeed, implementing the AfCFTA is about more than trade. It is about dispelling the persistent “crisis of implementation,” including implementation of AU decisions and initiatives and validating the AU and its Agenda 2063. It is a litmus test of the commitment of African countries to economic integration.
The fifth challenge is overlapping membership. Most African countries are parties to more than one REC, and convergence between different RECs should be made compatible with the goals and timeliness set for the CFTA.
There is sixth, the challenge relating to the need for harmonizing the business laws in Africa. An essential component for successful regional economic integration is the harmonization of trade legislation and commercial practices. There is much evidence to establish that disparities in legal systems has the potential to distort “trade flows, as it makes the regional trading environment uncertain and unpredictable for private trading partners and contracting parties“.
This constitutes a major challenge to effective implementation of AfCFTA. First, there is no institutional organ in Africa, which is responsible for harmonizing the business laws at the continental level. Second, Africa does not have “judicial or monitoring Institution to ensure uniform interpretation of legal norms relevant to regional commerce”. And third, there is no mechanism to harmonize Africa’s business laws amongst the AU member states.
The seventh challenge is external. Externally, Africa‘s governments continue to make commitments In arenas like the World Trade Organization (WTO), the Economic Partnership Agreements (EPAs) and bilateral treaties which are liable to undermine their ability to meet the continent’s own agenda.
If the CFTA results in an African common market with no changes to the terms of existing EPAs, goods that enter African countries from Europe will travel throughout the region to the detriment of goods produced in Africa. The CFTA will simply expand the market for cheaper goods produced abroad, rather than stimulate productive capacity by increasing demand for goods and services originating from the African continent.
External challenge is related to the AfCFTA and the French Colonial Tax I Mawuna Koutonin and Baffour Ankomah highlight In their respective opinions, recently reinforced by Daniel Dugan, the potential benefits of the AfCFTA could be a dream, unless France is permanently stopped from continuously implementing the Colonial Tax Pact It has Imposed on 14 French speaking African countries’.
Under the “solidarity” Independence pact, the 14 former French colonies are obliged, since gaining independence, to annually put 85% of their foreign currency reserves into the French treasury’. This means these countries only ever have access to 15% of their own money. One can thus suspect France’s fiat m the implementation of the ECOWAS Eco and the CfTA Agreement.
With regard to Ghana. the first disturbing challenge is the country‘s ailing manufacturing sector. As Maxwell Adombila rightly notes, when the AfCFTA is fully implemented, Ghanaian manufacturers and traders, like their counterparts elsewhere on the continent, will be allowed to export their goods and services, to other African countries, without paying duties or being restricted on a quota basis.
For Ghana to be able to enjoy the full benefits of the CFTA, the country’s manufacturing sector ‘must be robust, competitive and innovative, to be able to churn out the goods that will be traded. ‘Sadly this is not the case of Ghana’s manufacturing subsector. Data from the Ghana Statistical Service show that the manufacturing subsector’s share of GDP averaged mow than 30 pm mm: per annum In the early 2005 but declined to 122 per cent in 2018
Drawing from Adombila‘s highly instructive study, let me stress that after a sensational start in the years following independence, the fortunes of the manufacturing business have been at the mercy of cheap imports; erratic and costly power; weak policies; and pricey credit fuelled by a sheer taste of foreign brands, imports have now displaced local products, resulting in the crumbling out of giant local firms, such as the Appiah-Menka Complex, and its flagship product, the Apino Soap, the B.A. Mensah Group of Companies, the Nsawam Cannery, the meat and tomato processing and the textile manufacturing nationwide.
But for the history books, nobody would have believed that Ghana was once a producer of electronics and electrical gadgets such as pressing irons, television sets and electrical bulbs. The challenge before us now is how we can make the CFTA a means to the revitalization of our challenged manufacturing subsector.
Another challenge likely to impede Ghana’s effective implementation of the AfCFTA is the troublesome issue of capacity constraint. A recent study by the Centre for Regional Integration in Africa has identified a number of interlocking capacity constraints impeding Ghana’s efforts to realize the potential development opportunities open to the country within the framework of ECOWAS, AU and now the CFTA.
There is the lack of Institutional capacities of national organizations that are tasked with implementing sustainable development Related to this Is the lack of capacity to mainstream the ECOWAS, AU and now the AfCFTA integration agenda into Ghana’s national development strategies and plans.
Whereas decisions taken at the EU level, for example, do find their way into national decision-making processes, those taken by African regional and continental groupings do scarcely feed into national policies and plans.
No relevant institutional machinery has been established to enable the business community, the private sector and civil society groups to find appropriate and adequate channels of participation in economic development activities at the national level, as evidenced in the member states of Latin American regional groupings such as the Andean Group.
As the Association of Ghana Industries (AGI) concludes in a study, “the feeling among economic operators in Ghana is that integration remains a political project.” This is in stark contrast with the EU, where organized corporate groups emerge to support European integration.
Significantly, too, despite Ghana’s age-old commitment to the promotion of regional and continental integration, there is no widely recognized agency capable to coordinate implementation of ECOWAS and the AU agenda. In Ghana, no effective national apparatus has been established for monitoring and coordinating the country’s involvement in regional and continental integration.
This constitutes a major setback in ensuring progress on the ECOWAS and continental AU agenda. The situation is compounded by (a), Inadequacy of human capacity, limited skills, lack of financial and technical capacities to oversee the implementation of regional and continental program and (b) the ignorance on the part of public officials, including police, customs, immigration personnel and other security officers, at the border posts, who display considerable knowledge gap about current protocols guiding, for example, free movement of goods and people across countries in the sub-region.
The lack of critical capacities to manage regional and continental integration processes has been heightened by the comparatively limited training to update the skins and enhance the productivity of existing staff, including professionals whose fields are characterized by rapid advancement of knowledge.
As I am speaking at a Military Camp, it would be appropriate to remind you of Julius Caesar’s popular quotation, “Without training, they lacked knowledge. Without knowledge, they lacked confidence. Without confidence, they lacked victory.”
Ghana lacks a strategic plan or a training policy or program that is aimed at equipping integration staff with necessary skills or upgrading the skills of the staff.
HOW IS GHANA POSITIONING ITSELF TO HARNESS THE BENEFITS OF AfCFTA?
No doubt, Ghana is firmly committed to the successful implementation of the AfCFTA for accelerated inclusive growth and development. Towards this end, a recent Press Conference organized by the Ministry of Trade and Industry highlights several interventions which have been initiated, in preparation for the AfCFTA.
To enhance Industrial productive capacity, Ghana’s interventions include 1 District 1 Factory initiative; One Region One Park (Industrial Parks and Special Economic Zones); Strategic Anchor Industries; and Small Medium Enterprise Development. In the area of Trade Facilitation Agreement, Ghana has introduced Customs Management Reforms, while implementing the WTO Trade Facilitation Agreement.
With regard to Trade-related Infrastructure, Ghana’s intervention includes Tema and Takoradi Port Expansion Project, roads, airports and rail infrastructure development. Relating to Access to Finance, Ghana has developed Stimulus Package for local industries; EXIM Bank Financing Facility and other Banks have pledged to support government initiatives. For Trade Information, Ghana has initiated Commodity Exchange, Electronic Trade Information (GEPA) and Trade Fairs and Exhibitions.
National institutional support structure for AfCFTA is being set up to ensure the smooth Implementation of the AfCFTA in Ghana. It includes (a), an Inter-Ministerial Facilitation Committee constituted by the President to provide strategic direction and coordinate support for the Implementation of the MCFTA in Ghana: and (b), a National AfCFTA Coordinating Office is being established at the Ministry of Trade and Industry, to act as a one-stop facilitation centre and information hub. Importantly, too, a series of sensitization workshops and seminars are being organized to provide information on the implementation of the AfCFTA.
THE WAY FORWARD: AGENDA FOR ACTION
What else should be done as the way forward for Ghana and Africa? What is the agenda for action to enable Africa and Ghana successfully meet the interlocking challenges of AfCFTA? A critical issue to address is the crisis of implementation and translation of promises at the continental and regional levels into action. These include ratifying and implementing the AfCFTA, the Single African Air Transport Market, peace and security instruments, monetary integration commitments and the AU protocol on the movement of persons.
Other areas requiring strong commitment of the CFTA will include harmonization of custom rules and cooperation in customs matters, issues concerning rules of origin and other areas at trade law such as anti-dumping, countervailing and safeguard measures
Implementing the AfCFTA will be more effective, if African national ministries responsible for trade create AfCFTA committees, to follow Ghana’s example. The committees can comprise persons local [or satisfying the commitments and Interest of the MCFTA and can harmonize their country’s approach to implementation. These should ideally be framed within the structure of an AfCFTA national strategy. To take full advantage of the AtCFTA, countries must buttress its Implementation with complementary measures in investment, production, trade facilitation, trade related infrastructure and import defence.
As regard the French Colonial Tax Pact, the AU must lead the fight against France to make it cancel the Pact. Much of Europe is against this arrangement, and so Africa can rally support from the EU and the UN to compel France to cancel the Pact. One other critical issue is the need for Africa to adopt mechanism for harmonizing trade laws within the continent in order to realize the potential benefits of a CFTA and to make the continent more attractive to international investors and business partners
In the particular case of Ghana, to avoid the drowning of the country’s largely weak manufacturing companies, the private sector needs to first whip up the government and later partner it to draw up a comprehensive policy on how the country can build the capacities of the manufacturing sector to benefit fully from the AfCFTA agreement.
Towards this end, in September 2019, an Industrial Summit organized by the Association of Ghana Industries called on Government to urgently help In developing the local production capacity,’ as the AfCFTA Agreement comes into full force. Thus was reinforced at the association’s 59th Annual General Meeting held a week ago, on 28th November 2019, which engaged the government over special financial support to save struggling companies from total collapse. Government must help develop local capacity to leverage AfCFTA.
With the local capacity fully developed, it would position Ghanaian industries to fully leverage the opportunities under the AfCFTA Agreement, else the country risks being marginalized. Indeed, for many countries In Africa, improving productive capacities is a prerequisite for taking advantage of the AfCFTA opportunities.
What Ghana and, by extension Africa, need is to draw the necessary bitter lessons from the past development experience and prepare for the future with a conviction that, in this brave new world of the twenty-first century, the people of Africa must occupy the driver’s seat, establish ownership and provide the leadership of our own development, directing the recovery and transformation process of our economics, harnessing the benefits of a CFTA and, with a purposeful determination to be masters of our own destiny – Africa Beyond Aid.
It is not by accident that Ghana, a giant pillar In the African integration agenda, is the host of both the CFTA and arguably the only pan-African -focused Centre for Regional Integration in Africa, which, like its counterparts in Europe and Latin America, offers Master and Executive Master of Arts degrees in Regional Integration and African Development to enhance capacities of key technocrats of Africa’s regional economic communities and the CFTA.
The CFTA scheme is critical to Africa for making poverty history and sustainable development the future; critical for building credibility at home, critical for reduction of dependence on vulnerable and fluctuating overseas markets, and elimination of external pressures; critical for the African continent in meeting the challenges of globalization, a world of trading bloc: and rapid changes in stations should be part of the press corps to make it ‘people-centred’ and people-driven’.
In order to accelerate Ghana’s industrial development, policymakers must bring the cost of doing business down, addressing cost -effectiveness challenges such as energy, access to roads and ports, security, financing, bureaucratic restrictions, corruption, dispute settlement, and property rights, among others. They should also ensure the effectiveness of special economic zones to fast track the process.
The key message of this lecture is that the case for AfCFTA, then and now, is well founded and cannot be disputed. The ultimate destiny of Africa lies in some form of continental free trade area. An analysis of the African economic situation within the context of the globalizing world of today, would seem to suggest that maximization of African economic power demands an economically unified Africa as reflected in the CFTA.
The stark reality of the situation is that as long as African states hesitate to take a giant step to establish a CFTA, they guarantee their own continued economic exploitation, international economic domination and marginalization in world affairs.
As Landry Signe recently underlined, in order to grow and be competitive, the manufacturing sector needs capable, healthy, and skilled workers. Policymakers should adjust curriculum to ensure that skills are adapted to the market and should include special attention to youth.
Policymakers should revisit education curricula to focus on skills acquisition and build capacity for entrepreneurship and self-employment through business training at an early age, skills upgrading at an advanced one, and better promotion of science, technology, engineering, entrepreneurship, and mathematics as well as vocational and on-the-job training, importantly, too, policymakers should build the human capital necessary tor the industrialization of Ghana and, by extension Africa.
Besides the highly beneficial Master and particularly, the 1-Year Executive Master of Arts degree program in Regional Integration and African Development offered jointly by the Centre tor Regional Integration in Africa and the Ghana Institute of Management and Public Administration (GIMPA), specialized capacity building programs in regional and continental integration must also be introduced at media training institutes to enable journalists professionalize their reporting and improve media content on integration processes.
Press corps on regional and continental integration should be established to complement national capacity building. Reporters from local language and community radio technology; and above all, critical for evolving an effective people-centred development strategy that constitutes the essential key to the dawn of African renewal, indeed, African renaissance. And we must learn how to use this key without delay and without hesitation. It is time for action.