In August 2023, South Africa hosted the BRICS group of nations for the 15th edition of the BRICS summit. BRICS is a group made up of leading emerging markets namely Brazil, Russia, India, China, and South Africa. This summit has been a topical issue for Africa in recent months, because the BRICS group itself has grown in stature. The growth in BRICS countries’ importance either as geo-political players or global trade participants has ignited debate pertaining to Africa’s relevance and role in today’s global economic playing field and financial architecture, mostly driven by multilateral institutions, as they relate to development. BRICS is informative as its story is more than just trade. It is a political collaboration which speaks to wider areas such as socio-economic development, science, and technology. But for Africa’s resource abundance, trade talks often get more crystallized in such engagements.
Trade talks are also at the heart of the African Continental Free Trade Area (AfCFTA) agreement and this may remain talks if policy coherence is not taken to heart. This is because many countries in Africa still view integration with suspicion for various reasons. While some countries view integration as having the potential to take away their macroeconomic policy power that they would otherwise have, others are hesitant to coalesce with existing “backward” partners who may contribute minimally to the entire ecosystem. This blog examines why the success of AfCFTA is precariously dependent on the degree of policy coherence that independent African countries can garner.
Policy coherence
Failure to achieve policy integration from the past, as observed from the shortcomings in the current Regional Economic Communities (RECs) set up, provide, through AfCFTA, the opportunity to effectively exploit the scenario for the benefit of Africa’s policy regeneration. The question of how Africa can reach its full potential is a valid one and African leadership should aim for policy coherence that optimizes African integration. We cannot sustain the continental agenda with a fragmented mindset. There should be deliberate policy interventions informed by oneness. Oneness in the sense that African nations should have continental goals despite their idiosyncratic nuances. If African countries do not whole-heartedly accept all aspects of what AfCFTA stands for, the success of the initiative to enhance intra-African trade would remain unworkable.
Though policy coherence is desirable, issues of technical capacity and the suspicious views on policy integration remain of concern. In addition to the widespread lack of technical capability in some existing regional arrangements, ineffective bureaucratic systems’, red tape, a less educated citizenry, and indiscipline in the national labour force stall continental progress. These issues stall the ability of market participants to do business within the different economic community blocs.
Potential benefits of policy coherence
Policy coherence through high level global engagements such as symbolized by South Africa’s performance in BRICS can be imitated. In ensuring equality and benefit for all in global engagements, policy makers are required to make the bold steps necessary for their citizens and generations to come. To achieve sustainable development, the OECD identified that collective policy action is required. The OECD defines policy coherence as government designing effective policies that exploit synergies across different policy areas or policy making communities such as trade, agriculture, health, migration etc. The interactions would enable country level and continental level mutual benefits and would also balance divergent policy objectives, minimizing negative impacts on development.[1]
The benefits of policy coherence from AfCFTA would spillover to the whole continent and would be in the form of enhanced intra-African trade, holistic infrastructural development, sustainable fishing, agricultural protection, food security, proper land use, strengthened educational systems, among others.
AfCFTA: The new frontier for policy coherence in Africa
African governments have concluded many regional integration arrangements one of which is the Southern African Development Community (SADC), housing economically powerful countries in Sub-Saharan Africa such as South Africa, Botswana, and Mauritius. SADC states, on average are cited as possessing relatively high-quality institutions, run efficient labour and goods sectors, and have overall well-developed financial systems. A few of these have membership overlaps. For example, Tanzania is a member of both Southern Africa Development Community (SADC) and the East African Community (EAC). However, most of these arrangements in most cases have a poor implementation record. The integration of the regional African markets means that the continental regional economic communities (RECs) should function optimally. This must be a pre-condition for a well-functioning African common market. A synopsis of the current set up and capacity of our regional markets could be informative as regards the great task required to reach efficiency. This will reveal where AfCFTA needs to close gaps and elevate continental effort.
The African continent has always been characterized by many small markets and landlocked countries [1]. However, with it’s focus on trade and increased competitiveness, the African Continental Free Trade Area (AfCFTA) is fortunately a good starting point in the continent’s integration agenda. With the target on trade, there is greater dividend to be earned in that sphere owing to a huge array of natural resources on the continent. The creation of a single market for goods and services on the African continent means that trade will be a vital component of the AfCFTA agreement. However, primary export diversification and transformation is required Africa should aim to beneficiate at scale and produce at high volumes in order to price compete.
In this instance tariffs will be placed under greater scrutiny. Tariffs have historically acted as an obstacle to trade among African states. However, reducing tariffs will have both positive and negative effects for the diverse role players on the African continent. For example, a reduction of tariffs will mean increased market access for producers in exporting countries. It will also expose producers in importing countries to more competition (Stilwell, 2005, p.55). Another critical element that will need to be attended to by African leaders is Non-tariff measures (NTMs). These are defined by the United Nations Conference on Trade and Development (UNCTAD) as “policy measures other than ordinary customs tariffs that can potentially have an economic effect on international trade in goods, changing quantities traded, or prices or both” (UNCTAD, 2019).
The 2019 International Classification of NTMs notes that these include technical measures (sanitary or environmental protection measures etc.), quotas, export restrictions, price controls, and contingent trade protective measures. They also encompass other behind-the-border measures, such as competition- and trade-related investment measures, subsidies, and government procurement or distribution restrictions (UNCTAD, 2019g).With hindsight, the pitfalls of the Lagos Plan of Action (1980–2000) and the Abuja Treaty establishing the African Economic Community as adopted in June 1991 can be leveraged upon to provide AfCFTA with a stronger and better trajectory. Regional integration has been on the agenda of African countries for many years. While this can be deemed a rational response to the various challenges afflicting the continent, contemporary world geo-politics dictate that Africa adopts this response as a critical bargaining and sustenance tool for the betterment of its future as a matter of urgency.
Asides policy coherence, remedies to the structural impediments in African country’s economy emanating from state entities’ incapacity and manifesting as inefficiencies in production and service as well as corruption need to be addressed. The holistic approach to policy coherence, with public-private partnerships, can ensure exports increase and competitiveness is sustained for the mutual benefit of Africans.
Disclaimer: The opinions expressed above are those of the author and do not reflect the official position of the Moses Kotane Institute.
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Author's bio
Elton Chinyanga is the Manager of the Economics Unit of Moses Kotane Institute, a research agency for the provincial government of KwaZulu-Natal in South Africa. He is interested in Africa’s political economy and has a certificate in African Political Economy from the Thabo Mbeki African Leadership Institute. Elton Chinyanga has a PhD in Economics (Economics of Financialization) from North-West University and an MCom in Economics from the University of KwaZulu-Natal.
Very insightful piece