Theme 5 – (Enhance the competitiveness of State Parties)
By now, most PanAfreekans know one or two things about the opportunities that the AfCFTA offers. Reducing and in some cases eliminating barriers to trade opens up several opportunities for the stakeholders of trade that are on the continent. Furthermore other objectives like structural transformation of the continental growth drivers (e.g. promoting of industrial development) as well as corresponding flagship projects that will inject capital as well as improve ease of movement will contribute to the objective of enhancing competitiveness.
We will like to however point out that just like in sport, competitiveness may be assessed on the day of the sport event, but the ability and skill to compete is a collection of many activities leading up to competition day. Our point here is that while we can measure competitiveness as the Free Trade Zone gains momentum, we also have to measure the internal and underlying state of each State Party related to certain key factors or parameters and then track these on an ongoing basis to determine, firstly how each State Party improves over time and secondly how each State Party ranks when compared to other State Parties
To illustrate this point further, the first aspiration of Agenda 2063 on the journey to creating the Africa we want is to deliver a prosperous Africa based on inclusive growth and sustainable development (Ref-3). This aspiration is very much aligned with the enhancement of the competitiveness of State Parties however for all of this to be possible, we will have to ensure that certain issues are addressed on an ongoing basis that will over time contribute to a more prosperous State Party and inherently Africa. Many of these issues are socio-economic in nature [see Theme 4 (part 5 of 8)] and just like the sports event analogy, teams/athletes that are able to perform at the highest level have invested in resources that are key contributors to allowing the team/athlete to give themselves as much opportunity and preparation as possible to perform at their best.
So all in all, to enhance competitiveness of State Parties, we have to identify certain key issues that impact inclusive growth, competitiveness and sustainable development and address these issues iteratively and then measure the progress. Examples of these issues are skills, education and infrastructure etc. On skills and education, to manufacture good quality goods in high volume while managing costs of production requires a significant investment in education that compliments the Free Trade Strategy for each respective State Party. This is not only related to goods but also services that will benefit from the free trade zone. State Parties have a responsibility to ensure that there is an alignment between what is going on in the classrooms and how the State Party is planning to benefit from the AfCFTA. Such alignment will not only ensure that the skills and knowledge required to manufacture the goods and services that can be exported are readily available but it will go a long way in ensuring that structural unemployment is reduced.
A Case in Point
Similar to skills and education is infrastructure. Getting infrastructure right can go a long way in being able to compete on trading factors like price without necessarily compromising on quality. As an example, let us look at the difference between the cost of production of the same product for two businesses (Business A and Business B) assuming ceteris paribus that are supplying the African Continent from two separate State Parties when it comes to infrastructure issue that has to do with the supply of electricity or power.
For Business A, it may be that power supply is regular and they can rely on the State electricity suppliers to supply electricity and for Business B, this is not the case, they have to own a generator and also worry about adequate fuel supply (as it may or may not be readily available due to a nationwide fuel scarcity) to keep the generator running so as to keep production going. Due to the delays in production process, Business A not only finishes production a week ahead of Business B, but at a lower cost of production compared to Business B.
Furthermore there could be other differentiators between Business A and B like the barriers to moving the finished goods from the manufacturing plant to the point of export. Perhaps for Business A, the government has a subsidised Free Trade logistics and transportation public private partnership program in place to support small to medium size businesses (SMMEs) that will pick up the goods from Business A’s premises and move it to the point of export at a reduced cost while for Business B, they have to move it themselves and furthermore contend with congested roads because the rail freight transportation service that they would have preferred to use has become unreliable and notorious for delays due to the irregular electricity supply.
In the above scenario, we hope you can see how Business A is already in a privileged position that sets them apart from Business B and while it is possible that Business B may actually be able to provider cheaper and better quality products had it been located in Business A’s State Party, it will likely struggle to compete with Business A due to the fact that the underlying resources that can enhance competitiveness has sabotaged their manufacturing, exporting and trading activities.
Conclusion
To conclude, within the Preamble of the Protocol on Trade in Goods of the African Continental Free Trade Area Agreement contains the following paragraph:
“We, Member of States of the African Union (are) COMMITTED to expanding intra-African trade through the harmonisation, coordination of trade liberalisation and implementation of trade facilitation instruments across Africa, and cooperation in the area of quality infrastructure, science and technology, the development and implementation of trade related measures”. (Ref-1)
We at PanAfreeka believe that cooperation (and collaboration) between State Parties is key in order to address the underlying issues (of which we only touched on two above as we believe there are many) that can positively contribute to enhancing competitiveness. When you look closely at Africa and examine underneath the hood of various countries, you find nuggets of excellence that can be scaled across the continent.
There are issues which pose challenges by one country that are being efficiently addressed in another country and it should be possible to establish several intra-continental ministerial committees consisting of both the private and public sector as well as the older and younger generation with the main objective of identifying and addressing these issues over an extended period of time.
Our belief is that enhancing the competitiveness of State parties is guaranteed if adequate attention and resources is invested into addressing the underlying issues that contribute to State Party growth, competitiveness and sustainable development.
References (Ref.)
- Agreement Establishing the African Continental Free Trade Area – African Union
- https://www.weforum.org/agenda/2016/01/how-africa-can-feed-the-world/
- https://au.int/en/agenda2063/aspirations
- African Continental Free Trade Area Question and Answers – United Nations Economic Commission for Africa (Africa Union)
- https://www.sacu.int/show.php?id=394
Useful Links (UL)
- https://au.int/en/agenda2063/overview
- The Continental Free Trade Area (CFTA) in Africa (A Human Rights Perspective) – United Nations Economic Commission for Africa