March 18, 2019

Numbers Prove Free African Market Can Bring US Billions, Will Our Politics Allow?

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President Paul Kagame and other African leaders signed the AfCFTA in Rwanda early last year

Economists, ordinary citizens and politicians share the view that the African Continental Free Trade Area (AfCFTA) will have massive benefits for nations, companies and individuals on the continent once implemented.

While politicians express their beliefs rhetorically─ in rousing speeches at conferences where they confess how pan-Africanism and unity of Africans will be advanced through free movement of people; goods and services, economists tell their story in numbers and citizens express their perceptions in surveys─and their daily willingness to try to travel across borders despite multiple roadblocks placed in their way by governments.

As reported by The Chronicles last week, 77% of Africans surveyed in a study by the United Nations Economic Commission for Africa (UNECA), Eastern Africa office, believe that AfCFTA is important for the continent’s development.

The same study shows that, if implemented, intra-African exports for East Africa will, for instance, increase by US$1 billion.

Assuming economic liberalization across the continent, the study also shows that job creation will increase by between 0.5m to 1.9m; register consumer welfare gain of US$1.4 billion while labour intensive sectors will grow more than other sectors with food processing increasing by 76%; light manufacturing by 61%; heavy manufacturing by 31% and textile by 18%; etc.

The impact on the revenues of countries will be enormous compared with the cost of implementing the agreement.

For example, if implemented, Rwanda’s exports to Africa will increase by 22% (taking 2015 data as the base year). This will bring in $56,010m.

Elsewhere, Ethiopia’s exports would grow by 10% which would increase revenue by $10,718m and Uganda’s exports would increase by 21% racking in US$19,546m while Kenya’s exports would increase by 10% leading to an increase in the value of trade with Africa to US$188,227m; Seychelles’ will grow by 7% while Djibouti’s will grow by 5%, etc.

And despite fears that some African states will lose a lot of revenue as a result of embracing AfCFTA, numbers reveal that most countries will lose very little compared to gains.

For instance, by implementing the agreement, Rwanda would lose only 0.3% of tariff revenue as a share of total government revenue while Tanzania would lose only 1.3%; Uganda 0.6%; Kenya 0.6% and Ethiopia 0.7%; etc.

So, the problem with AfCFTA isn’t that countries would lose revenue, nor is it with what traders would do or what ordinary citizens want or whether they would benefit.

Indeed, thus far and informed by the past, the problem isn’t even with what leaders say but rather what they actually do or don’t do on a daily basis.

That’s, while some will sign the agreement, many will not easily allow free movement of people, good and services or, as is currently the case in the East African Community, disagreements between leaders or conflicts between countries will bring everything to a close, including shutting down borders.

And, of course, in countries where internal politics has undermined peace and stability, the agreement won’t bring requisite benefit.

In fact, one of the most interesting finding from the aforementioned study is that countries at the moment facing internal political strife are least likely to benefit from this agreement.

For instance, Burundi’s exports to Africa will increase by only 0.4% – brining in a total of USS$39m while S. Sudan’s export will increase by only 8% making US$401m and DRC’s exports will increase by only 1% making US$9,843m and Eritrea’s only 1%, etc.

In other words, while there are bottlenecks related to infrastructure and connectivity of the continent, the most serious challenge to the implementation of AfCFTA are political in nature─ including probable spoilers from powerful countries; internal conflict and war; small-minded politics; ultra-nationalism and protecting the tribal homeland; etc.

Possible spoilers also include those who perceive opening borders in terms of who will win or lose most or who needs who most.

For playing the card of which country will lose or win most by opening borders for free movement of goods, services and people is to have a provincial mindset; for countries are not only endowed differently but whether this or that country gains less or more, it’s still a gain.

In that sense then, a free African market might not materialize soon, not because it wouldn’t make us richer and at peace with each other but because we are still a continent where citizens still beg their leaders to resolve differences with neighbours so they can move freely and, in fact thank them profusely when they do; for most leaders still rule over their countries as if it were their personal farm!

All this illustrates an old truth: the continent’s underdevelopment isn’t inevitable; it’s a function of its dysfunctional politics and personalized relations between nations.

The same goes for individual nations on the continent; their material poverty isn’t inevitable, it’s inherent in dysfunctional politics and personalized eternal power.

The reason politics is the main spoiler to sustainable development is because it is its software; it organizes other realms of society; including economic and social development. You get politics wrong; you get everything wrong.

This is illustrated by many countries on the continent. For instance, its politics that brought Somalia on its knees just as its politics that almost destroyed Rwanda in 1994 and its politics that’s wreaking havoc in S. Sudan, the Central African Republic, Burundi, etc.

In the end therefore, AfCFTA will be realized not when leaders do whatever they want but when accountability is high; when voices of ordinary citizens mean something; when relations between nations on the continent are driven by national interests and pursued through formal institutions rather than individual leaders friendships, wishes or moods.  

NB: Aspirations, ambitions and ideals in agreements don’t much action and will

For politicians, as we have seen for example with Presidents Museveni and many in the EAC, aspirations and pronounced beliefs are in conflict with their actions and attitudes towards neighbours and those they disagree with.

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