AfCFTA Meets BRI: Can Africa Take Advantage Of This Opportunity

By Amodani Gariba

African Union meeting for trade
Credit: African Union

Europe’s colonialization of Africa was bad in every way you perceive it. It is even worse when you consider how intra-continental trade fared under it. The Berlin Conference of 1884, which carved up Africa, not only separated tribes but also created rigid barriers to trade amongst the colonized. The general flow of trade was between the colonies and the metropolis of the colonizing power. As natural resources made their way from Africa to Europe, manufactured goods followed the reverse route. 

The major task for the immediate post-colonial African leaders was to change the colonial superstructure of their economies. Sadly, many failed this test. Half a century later, here we are in Africa, shamefully exporting raw materials and importing manufactured goods. No progress made since colonialism. The boundaries remain intact. In fact, we have created more ourselves. Think Eritrea and South Sudan. Truth be told, rigid immigration control and border patrols have made intra-African trade even more challenging than was the case under colonialism. 

Considering the potential it holds for the continent, it is commendable that contemporary African leaders are seeking to stimulate intra-African trade, through the Africa Continental Free Trade Area (AfCFTA). The fact that Africa happens to be the worst hit by the economic impact of the pandemic makes it a matter of urgency that the AfCFTA works. This article, however, seeks to show how China’s Belt and Road Initiative (BRI) has become a key ingredient of AfCFTA, without which success of the program would be hard to guarantee. 

The Case For Intra-African Trade

Africa, amongst all the continents in the World, has the lowest intra-continental trade. According to UNCTAD, Africa’s intra-continental trade stood at 15%, compared to 59% in Asia and 69% in Europe. We cannot underrate the positive impact of a free trade area, given the continent’s existential problems of unemployment, underdevelopment, and perennial conflicts. The UN estimates that AfCFTA would be the largest free trade area in the world worth about $2.5 trillion. 

One of the major fuels of insecurity on the continent is unemployment. Many unemployed youths are easy prey for people who are intent on fomenting discontent. All they have to do is deceive these idle youth with cash. This has been particularly the case for Boko Haram in Nigeria’s north. To prevent this, millions of employment opportunities must be created for Africa’s teeming unemployed youth. AfCFTA is expected to stimulate huge cross-border people-to-people interaction across Africa. The resultant economic boom will create shared prosperity for all. This is revolutionary in the sense that, African people at the base will derive benefits directly without going through red tape.

How Feasible Is The AfCFTA? 

First, there is a huge void to fill when we talk about Africa’s infrastructure and communications system. Before AfCFTA will take root, Africa needs more ports, old ones expanded, the stretches of international roads doubled, if not tripled. The bridges constructed. There is a need for new airports to cater for the expected increase in air traffic. Old rail lines must be rehabilitated and extended. New rail paths need to be put through the vast savannah, the Sahara, and the deep rain forests.  

Bridging this gap would not come easy. Africa does not have the capacity to finance the immediate construction of infrastructural project that will bridge this gap. To avoid default or reverting hundreds of millions into poverty, African leaders are pushing for debt restructuring and cancellation to combat the economic impact of COVID-19. Emergency liquidity injections would be directed to the most pressing needs, which happen to be consumptive in nature. Infrastructure development is neglected; however, the success of the AfCFTA largely depends on it. 

Are African countries going to be trading raw materials amongst each other under the AfCFTA? Intra-Africa trade has not been stimulated enough, in part because there is a paucity of tradable goods. The majority of Africa’s imports are manufactured goods, yet few African countries manufacture goods for export. Africa’s share of foreign direct investment disproportionately goes to the extractive industry, starving the manufacturing sector of the needed capital for growth. Investors also shy away from Africa’s manufacturing sector because of the poor state of the continent’s infrastructure, both hard and soft. Herein lies the relevance of China’s BRI.

BRI Could Bridge The Widening Infrastructural Gap

The Belt and Road Initiative is a grand transcontinental infrastructural program that seeks to connect China with the rest of the world. In an article by Jonathan E. William published on the website of Center for Strategic and International Studies, estimates for the BRI ranged from $1- 8 trillion.  Under the BRI, Africa forms part of the Maritime Silk Road. So far, 44 African countries have signed up for the BRI. 

In Kenya, the $3 billion Mombasa – Nairobi Standard Gauge Railway (SGR) is a BRI project. Mozambique got its share of the BRI through the $785 million Maputo to Katembe Bridge. As part of the BRI, China’s state-owned Sino-Hydro constructed a $1.7 billion 600MW Hydroelectric Dam at Karuma, Uganda. In Ethiopia, China built the Hawassa Industrial park and the 153MW Adama II wind farm. Nigeria’s decrepit colonial railway stretching from Lagos in the south to Kano in the north is being modernized by China. China is also building railways to connect the cities on the south, and others connecting the middle parts like the Capital Abuja to the north. In Ghana, Sinohydro is delivering the first $2 billion of the huge $19 billion bauxite-Infrastructure deal signed in 2018. The list is countless. A new ultra-modern $10 billion port in Tanzania’s Bagamoyo is set to be built from scratch by the Chinese.   

China’s BRI is providing an invaluable contribution to Africa’s development, by way of developing the continent’s infrastructure. If the current pace of work were maintained, Africa will address a significant chunk of its infrastructural deficit in no time. 

BRI Could Help AfCFTA Succeed, But Is Africa Prepared?

China is coming in stronger in Africa. Coronavirus has slowed down the pace of construction works, but the challenge will not last.  There are challenges facing the BRI, but it is uncharacteristic of the Chinese to back down, almost a decade into the program. The railway connecting Lagos to Kano, for instance, could cater for much of the transportation needs of local traders in West Africa under the AfCFTA, giving the size of Nigeria’s market. It could also serve as the gateway for Nigerian exports into markets of surrounding countries like Niger, Cameroon, and Benin.  China-funded roads and railways in Ghana would make access to Ghanaian markets cheaper and easier. Likewise, Ghanaian traders will have it easier to access markets of surrounding nations like Burkina Faso, Cote D’Ivoire, and Togo. 

Kenya’s SGR was originally planned to stretch from the port city of Mombasa to the Lake Region of Kisumu, on the border with Uganda, Rwanda, and South Sudan. This means more business, employment, and prosperity for people living in this region. Chinese investment in renewal energy sources in Africa by building Uganda’s Karuma Hydro-electric Dam and others is vital for industries. The special economic enclaves in Nigeria, Ethiopia, and elsewhere built by China will attract more investors into Africa’s manufacturing sectors. 

By helping to link Africa together, the BRI has unquestionably become a vital ingredient for the success of the AfCFTA.  The problem is African countries do not look ready. Nigeria and South Africa, two of Africa’s largest economies, due to some reason, developed cold feet for the program. Amid the uncertainty of Nigeria’s ratification of the AfCFTA, Abuja sent a wrong message across Africa when it closed down its land borders to goods coming from neighboring countries. Ghanaian traders who were stranded at the borders spurred calls for retaliatory measures against Nigeria. This obviously could have landed West African Countries in a nasty tit-for-tat, which could easily have undone the progress chalked under the AfCFTA. 

In a very big blow to the sustainability of BRI and the success of the AfCFTA, Kenya’s SGR is operating a loss. Though 2020 and 2019 revenues from the SGR were a huge improvement over those recorded in 2018, it still falls short of the threshold needed to pay back the Chinese loan on time. Kenya must ensure that Afristar, the SGR’s operator, adopts best management practices to maximize SGR’s profit and to avoid default on the payment of the loans. Failure to do so will have a cascading effect on Chinese lending attitudes elsewhere in Africa. 

To take advantage of the BRI to make the AfCFTA work, African leaders must demonstrate the political will to commit to AfCFTA; otherwise, BRI projects may become loss-making ventures. African leaders must also ensure efficient management of BRI projects to make them sustainable.

What do you think? How can Africa leverage BRI to further enhance the AfCFTA? Let us know in the comments.

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