18 January 2022

Let's avoid an AfCFTA own-goal – why Africa must invest in connectivity now

by Dr. Yakama Manty Jones / in Op-ed

The opportunities provided by the African Continental Free Trade Area (AfCFTA) agreement are well-documented. This single continental market for goods and services would create the largest free trade area in the world by membership, boost intra-African trade and investment, increase productivity and value, and create enormous employment opportunities. If implemented fully, by 2035, AfCFTA would increase intra-African trade by 81% and lift more than 100 million people out of extreme and moderate poverty.

According to Afreximbank, despite the formation of regional economic communities (RECs) in Africa intended to facilitate trade, in 2019, several African members traded more with Europe than with each other. That year, only 14.4% of total formal trade in Africa was intra-regional. However, an assessment of regional trade would be incomplete if it excluded informal trade. Though difficult to measure, partial surveys and other accounting activities have estimated Africa's informal regional trade to meet or exceed formal trade, especially for specific products and countries. Some studies have estimated informal regional trade to range between 30% and 40%.

One reason for the proliferation of low regional trade is poor connectivity. Hard and soft infrastructure would improve efficiency, drive down costs, and increase cross-border operations. Accelerating public-private dialogue to resolve these issues must be a top priority to ensure that AfCFTA reaches its full potential.

Hard Infrastructure

Many parts of Africa need to upgrade their physical infrastructure to facilitate movement around the continent. This encompasses the improvements needed for cost-effective land, sea and air travel and digital connectivity.

This year, Sierra Leoneans were offered the rare opportunity to see their men's national football team play in the Africa Cup of Nations. For many, getting to the tournament in Cameroon in January 2022 is proving all but impossible due to dire infrastructure. Direct flights from Freetown to Yaoundé are virtually non-existent. The indirect routes involve travelling twice the direct distance with multiple stopovers at the exorbitant cost of more than $1,000. Poor road conditions throughout the seven countries that would need to be traversed would make driving extremely arduous, never mind the additional costs of fuel, hotels, food, and the immigration and customs requirements across the various border crossings.

Imagine how poor physical infrastructure limits businesses if this is the difficulty individuals face when trying to travel to watch football. Without good roads, bridges, and railways, how can farmers in one country ensure that their goods arrive in another country in good time and prime condition at a reasonable price?  How can a West African textile manufacturer best export her products to Central Africa? The routing of shipping vessels is equally problematic, and there is a pressing need to negotiate more efficient and cost-effective shipping routes.

Soft Infrastructure

Physical infrastructure is useless without the soft infrastructure to build strong institutions and human capital to complement the movement of goods, services and people. Currently, inadequate knowledge of official procedures, difficulties accessing travelling documents and trading licenses, and excessive waiting times at borders often force traders to engage in informal trade. In addition, customs procedures must be simplified roadblocks along major trading routes and ports made more efficient.

In building the human capital element of soft infrastructure,  AfCFTA members must not lose sight of the need for frameworks to recognise and standardise skills and formal educational qualifications. These will enable people to work in other countries easily. The broader issue of immigration to aid mobility on the continent also needs to be addressed.

Therefore, African nations must invest in the digital and soft infrastructure needed to aid e-commerce, e-learning, remote work, e-governance and strengthen institutions. Without it, AfCFTA members may miss a crucial opportunity to become competitive destinations for trade and investment. Moreover, the world needs Africa's contributions to the fourth industrial revolution.

Public-Private Dialogue

Infrastructure investments are not cheap. Governments need to prioritise based on local needs and leverage private sector participation. Open dialogue with the private sector, including entrepreneurs in the informal sector, could help governments understand their priorities for hard and soft infrastructure. Every firm or individual trader serious about leveraging the AfCFTA has initiated some form of planning and is strategising on adapting or developing more innovative products and other solutions. Therefore, governments must create platforms for them to share their experiences and potential offerings. Public and private sector stakeholders must be more proactive in communicating plans with each other to ensure that the right policy frameworks and infrastructure are in place to enhance daily business routines, competitiveness and the broader success of the AfCFTA.  

For example, in Sierra Leone, should the government focus on negotiating better shipping routes to position our port as a leading transhipment hub? Or would focusing on positioning the country to benefit from the planned Africa Integrated High-Speed Network be a more effective use of time and funding? Should digitising government services be the topmost priority or the establishment of payment platforms?

Avoiding an 'own-goal' for Africa

In football, when a player inadvertently strikes the ball into their own team's goal, it is an 'own goal'. An own-goal is an act that unintentionally harms one's own interests. If AfCFTA stakeholders fail to adequately address the soft and hard infrastructure needed to boost connectivity on the continent, there is a risk of scoring an 'own goal'. This infrastructure for connectivity is a long-term investment that may take many years to develop. It is critical that African governments start working together with the private sector and other stakeholders at pace to improve trade routes, quality digital infrastructure, and policies that will create the passages and links to facilitate trade.

There are several pressing questions: What regulations are needed to support new business models and encourage innovation? What policy and regulatory frameworks must be revised to facilitate the free movement of labour? Is an African passport a viable proposition? What are different countries' positions on intellectual property and competition policy? Development of which infrastructure should be prioritised to accelerate investment?

By working together, stakeholders across various sectors can avoid wasting resources and build the necessary systems. It is said, 'the devil is in the details'. The AfCFTA's success lies in last-mile implementation. Connectivity and mobility are key. Therefore, how can we lead action-oriented dialogue to accelerate the needed investments in better soft and hard infrastructure to prevent an AfCFTA' own goal'?

Any views and opinions expressed on Trade for Development News are those of the author(s), and do not necessarily reflect those of EIF.