Africa opens world’s largest single market (2)

CONVERGENCE OF AFRICAN countries on trade and the success recorded over time will serve as a litmus test for the continent’s resolve to move out of poverty, experience economic growth and gain competitive edge on the world stage as a continent. Hitherto, Africa has been a laggard as continent, judging by the various indices of global economy. But things can change, depending on handling and approach to development. Optimism is not enough, however. Realism is a crucial attitude required for propelling the continent forward at this time.

The continent, seen from outside, could easily be regarded as one. But that has not been the case from within as many Africans know little or nothing about countries other than their own countries of origin or residence. It happens at the level of government and the governed. This explains the seriousness of the various forms of distancing existing among and between the countries of Africa. Although Africa has many regional economic communities (RECs) dating back in decades, the levels of integration within and between them have been anything but inspiring in terms of social, political and economic impacts.

State capitalism did not seem to have led to Africa’s massive prosperity during the period of nationalisation of many industries and corporate commercial entities in many countries back then. Nor has privatisation, as the failure of various governments to create and maintain robust and sustainable policy supports has shown over the years. Take supply chain development as a deliberate strategy. Taken at country and regional levels, Africa has proven to have less emphasis on business structure that promotes intra-regional trade. The RECs have not helped much. 

The logistic chain has especially not been strong enough as to significantly boost business, particularly trade. At the level of international trade, the states of African seaports have largely affected countries’ competitiveness. Although no port could be said to be 100 per cent perfect in all its operations anywhere in the world, African ports are particularly wanting in certain critical areas. A 74-page report published in 2015 on “Port Security – Threats and Vulnerabilities, a case study of Takoradi Port,” drew attention to terrorism, criminal activities, cargo theft, extortion, trafficking, corruption, stowaway, human factor as a threat, economic espionage and poorly trained security personnel as major threats and vulnerabilities to maritime industry needed to facilitate supply chain of traded goods within the continent. These observations could easily provide fair ideas about efficiency of trade within the continent as a whole.

A report from the Organisation for Economic Cooperation and Development (OECD) in July 2003 indicated that, “the world pattern for global prosperity has been predicated on near-frictionless transport and trade.”  In that sense, seaport remains a crucial component of the world economy and global transportation infrastructure. Africa’s competitiveness requires innovations, the types that could shore up the continent’s ecological niche in the global markets. As noted in a study by the Institute for Security Studies on ‘Maritime cyber security, Getting Africa ready,’ “Africa’s future development objectives are anchored in well-functioning shipping and ports industries, whose cyber security is vulnerable to breaches and disruptions caused by deliberate and indiscriminate attacks. These industries are facing a number of challenges related to efficiency and effectiveness, and their continual innovation and transformation is critical if they are to serve Africa’s socio-economic needs.” The study recommended that, while cyber security is slowly becoming recognised as an important dimension of maritime security, its integration into African maritime security instruments and frameworks must be accelerated.” 

Where economies depend significantly on trade, the shipping and ports industries are undergoing rapid digital transformation, as new technology improves their efficiency and effectiveness. But a major reason why there is need for innovation is that the new technology presents new opportunities, and new threats, given the increasing number of cyber security incidents that are affecting ports and ships across the world. Africa must be prepared against the various maritime cyber security risks in terms of their potential impact, as evidence has suggested that an attack on a logistics hub, such as a port, could quickly disrupt a supply-chain network with tremendous financial damages extending far beyond the point of the attack. Although it has been acknowledged that there is a lack of Africa-specific research and knowledge on maritime cyber security, Africa is in an advantageous position to learn from external experiences to mitigate maritime cyber threats and address vulnerabilities.

Maritime cyber security cannot be achieved in isolation. It needs to be emphasised that the African Union and regional economic communities have a central role to play regarding adoption and harmonisation of national policies and laws. Most African states are not yet dedicating sufficient resources to address current and future cyber security challenges. For effective implementation of African Continental Free Trade Area (AfCFTA), cyber security innovation is a vital step. This, however, presupposes that the cyber security concerns also have points of combined impact with innovation gap. Africa’s ambitious project of one big regional market therefore requires a commensurate ambitious innovation to cope with the realities the market will throw up during operation. One of them is the cyber security that is Africa-specific.

Financial distance could be taken as an explanation on inequalities between individuals and countries. This varies widely between countries of Africa, but can also provide a basis for innovation if recognised for what it is. The space can widen between the wealthier and poorer countries if improperly handled. Distance between those in power and those being governed can also widen. Despite Africa’s financial distance, governments that are expected to lead the way in the provision of needed infrastructure are generally hamstrung financially. This may slow down a lot of things or prevent the accomplishment of certain things. Many countries, particularly the small ones, will need a lot of funds to bankroll and support infrastructure, information management, security apparatus and other projects that will boost their competitive edge. The small countries may be at greater disadvantage in these areas, particularly with regards to their volumes of trade. The size and modernity of their port infrastructure matter a great deal. Cote d’Ivoire is fortunate to have some external support in trying to build a regional maritime hub, for instance.

On the health frontier, wellness distance could well be a major impediment to a smooth and effective take of an implementation of AfCFTA. Health-related distancing could become a strict policy as already known during this COVID-19 pandemic era as “social distancing.” This will not only be operational at inter-personal levels, but also at the level of governments and countries in forms of lockdowns that have demonstrably affected the productivity of means of trade-related activities since they have hamper productive activities. Lockdowns will particularly have far-reaching impacts on Africa because those in the huge informal sector activities cannot afford to work at home, since their activities require more of human-to-human contacts. They will have to make unpleasant trade-offs when strictly required to work at home, or at safe distance, which will lower their individual productivity and overall economic performance.

Governments’ repeated lockdowns will affect supply chains and cross-border movement of people and goods, serving indirectly as non-tariff barriers (NTBs) to trade. Some countries will use this as a subterfuge for NTBs. COVID-19 has particularly effectively become a barrier to free movement of goods, humans and some types of services, especially those that involve physical presence of service providers and service users. Countries of Africa that depend heavily on tourism are expected to be at a disadvantage under this dispensation; examples are Kenya, Senegal and South Africa. Trans-border trading activities have become particularly susceptible to the pandemic and it has shown it has potential for slowing down the momentum of the nascent AfCFTA. A report in 2020 predicted that, without a swift recovery in the second half of the year, the impacts of COVID-19 would have led to a plummeting of international trade by about 20 per cent or, by about $6 trillion. Such a decline would have been unprecedented, being significantly larger than the $4 trillion fall seen during the 2009 recession.

A huge trust gap, deficit or distance has been created based on the COVID-19 pandemic 2019 and the Ebola virus in 2014. The outbreak of COVID-19, its management and spread across the globe were all a product of trust distance, all the way back to Wuhan in China where the disease reportedly originated from. Keeping trade flowing requires co-operation and trust. The deterioration of trust between China and the United States led to the trade war and the consequences between the two conflicting countries have been anything but pleasant. This has been made worse by the COVID-19 pandemic. In some cases, some countries have had to impose export and import restrictions based on suspicions and fears about potential health risks.

Slowbalisation, a term currently gaining currency as continued integration of the global economy through trade, financial and other flows at a significantly slower pace, now appears to have greater impacts on the post-COVID-19 world, with the emerging realities of a fractured and regionalised one. An important observation is that the COVID-19 pandemic has led policymakers and business leaders to question whether global supply chains have been stretched too far. Another is that the pandemic simply adds further momentum to the ‘deglobalisation’ trend. Even if Africa is not able to expand its influence as widely as colonial countries during the colonial era or as China has been doing since the inception of the Belt and Road Forum, Africa can, at least, turn AfCFTA to an advantage if it has, and pursues, a policy of “Africa First” to boost intra-African trade up from the existing 18 per cent.

The coincidence of the effective date of take-off of AfCFTA and the decoupling of Britain from the EU sends a subtle message with profound significance. While EU might shrug its shoulders and regard the UK as the unfortunate one, the unspoken realities of the intra-EU crises have been exposed in part by the COVID-19 pandemic as some countries were not comfortable with others when stimulus support was being contemplated. But, according to Financial Times, EU leaders did not want Brexit in the first place, with Thierry Breton, EU internal market commissioner, even calling it “a tragedy.” The unfettered trade, tourism and travels industries will be slowed down, particularly as spurred by the COVID-19 impact. The world should expect more of regionalisation and localisation, even in Africa despite the take-off of AfCFTA at this time. An increase in vulnerability of supply chains and unanticipated disruptions should be expected. On these disruptions, business executives at the top are already discussing about supply-chain risks and insurance against such risks.

The disruption of movement of goods, people and capital is becoming worrisome and the fear of a post-industrial economy for Africa is looms as Africa is unable to keep pace with the rising profile of the service industry while, sadly, the continent has undergone years of de-industrialisation. This structural change is happening at a time UK is leaving the EU, with many export trade-dependent countries experiencing fiscal distance through policies that engender economic backwardness through a fiscal space that has been made worse with the pandemic. How can AfCFTA alter this reality is a task that must be done.