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10.07.2019 Feature Article

The African Continental Free Trade Area (afcfta): Why Ghana Was Selected To Host The Secretariat.

The African Continental Free Trade Area (afcfta): Why Ghana Was Selected To Host The Secretariat.

The Leadership of the African Union on July 5, 2019, accepted Ghana’s bid to host the Secretariat of the African Continental Free Trade Area (AfCFTA) Agreement. In this Article, I delve into the factors that might have influenced this choice.

INTRODUCTION

On 30 May 2019, the historic African Continental Free Trade Agreement (AfCFTA) officially entered into force, a year after it was officially launched in Kigali, the capital of Rwanda. In terms of the number of participating countries, the AfCFTA has become the world’s largest free trade area since the formation of the World Trade Organization. The AfCFTA is bringing together all 55-member states of the African Union covering a market of more than 1.2 billion people, including a growing middle class, and a combined gross domestic product (GDP) of more than US$3.4 trillion.[1]The AfCFTA is meant to lay the foundation for the establishment of a continental customs union, which will advance regional economic integration on the continent.

This ambitious endeavour by the African Union needs commendation and it shows the kind of wind that is blowing in terms of the new waves in the clamour for African Integration and Pan Africanism. This initiative would require an efficient and very well-organized secretariat to play the key role of coordinating affairs and ensuring the smooth implementation of the all-important Free Trade Agreement. In this article, I wish to do an analysis of the factors that led to the decision to select Accra, as the host of this important initiative.

The AfCFTA is bringing together all 55-member states of the African Union covering a market of more than 1.2 billion people, and a combined gross domestic product (GDP) of more than US$3.4 trillion.

But before that, let me turn my attention briefly to some of the potential benefits of the single market to the African Continent, especially, its youths. These benefits are in terms of economic growth, industrialization and job creation.

  1. It must be said that the creation of the single market promises enormous benefits to the African economies and the potential economic benefits are clear and supported by trade theory, which posits that a continent-wide free trade area would lead to specialisation among African countries in goods in which they have a comparative advantage, thus improving efficiency in the use of productive resources and increasing output. (Saygili et al. 2017).
  2. The AfCFTA is also likely to lead to a shift in the technology frontier as well as improvement in productivity spillovers within African countries that will result from trade creation. The AfCFTA ultimately aims to boost the economic performance of African countries in ways that enhance welfare as well. UNCTAD estimates welfare gain to rise by $10.7 billion, 0.66% increase in GDP and 0.82% in total employment growth.
  3. The potential benefits of the AfCFTA Agreement not only in terms of growth, diversification of sources of growth and exports, development of global value chain, but also in terms of integration of African countries into the global economy. A complete tariff removal coupled with a significant reduction in nontariff barriers could lift economic growth and raise the volume of exports and imports while significantly improving the terms of trade across Africa.
  4. An integrated African market is also likely to see the enhanced flow of foreign direct investment (FDI) and could shift FDI from natural resources to industry and manufacturing as investors seek to take advantage of increased market size.
  5. Tariff removal and cost reduction under the free trade arrangement will also reduce production costs and induce economies of scale which spurs higher domestic production and investment into different sectors of the economy. The removal of these barriers can also spur domestic production and increase the value chain integration of export products. Thus, creating scale in production and investment. (Afriximbank African Trade Report 2018)
  6. In concrete terms the AfCFTA mean that African businesses, traders and consumers will no longer pay tariffs on a large variety of goods that they trade between African countries; traders constrained by non-tariff barriers, including overly burdensome customs procedures or excessive paperwork, will have a mechanism through which to seek the removal of such burdens.
  7. United Nations Conference on Trade and Development (UNCTAD) estimates that Intra-African trade in agricultural and food products would increase by US$ 5.7 billion (53.3 per cent over the baseline), with services rising by US$ 1 billion (31.9 per cent over the baseline). Overall, intra-African trade would rise from 10.2 per cent of total trade in 2010 to 15.5 per cent by 2022
  8. The AfCFTA is also is expected to create more jobs, bring in investments and diversify the economies. Perhaps most importantly, AfCFTA will also produce more jobs for Africa’s bulging youth population. By promoting more labour-intensive trade, AfCFTA creates more employment.

IS THER A NEED FOR ANY CAUTION????

While the AfCFTA provides an opportunity for Africa to boost intra-African trade and accelerate the process of structural transformation to reduce the vulnerability of its economies to external shocks, the implementation of the agreement will be complex given the large number, diverse nature and different stages of economic development of Member States. Perhaps the point above explains why some of the countries and of course big economies such as Nigeria, South Africa, and Egypt were reluctant to fully commit themselves to this agreement. We may revisit these fears in the subsequent epistles but what can be said is that the potential benefits of the AfCFTA, most notably in terms of intra-African trade and value chain effects, can be realized even more easily if policy measures are taken to ensure that pre-emptive shock diffusers and subsequent shock absorbers for net intra-African trade losers are effectively implemented.

7102019105711 h40o2s6fey graph1

22 Countries were needed as the required threshold to bring the agreement into force. source: https://www.tralac.org/resources/infographic/13795-status-of-afcfta-ratification.html

Why Ghana?

Haven’t spoken about the benefits, let me turn my attention to the issue under discussion. Let me say that it has been my fervent hope and the expectation just as it is for every African, especially the youths, that this landmark agreement is implemented and in good faith by all African countries. This invariably requires a lot of commitment and dedication as well as leadership to direct affairs and manage the implementation processes. This is where the siting of the Secretariat becomes crucial. The building is only as strong as its foundation.

Whilst this article which initially had sought to assess Ghana’s chances of hosting the Secretariat of the AfCFTA was under peer review, an announcement was made on July 5, 2019, that indeed Ghana had been proposed as the country to Host the Secretariat of the AfCFTA. So I decided to do a postmortem analysis of the factors that might have influenced the decision to select Ghana, one of the few known countries who had previously shown intent and desire to host Secretariat of the AfCFTA.

Sometime on 10 May 2018, Ghana and Kenya became the first countries to deposit the instruments of ratification of the AfCFTA with the African Union Commission, kick-starting the processes. The rest of the signing processes are shown in the chart below. But what Ghana did obviously shows the kind of proactive and desire to ensure that historic agreement kick-started. It only showed the level of enthusiasm and commitment of the country towards the continental agenda.

7102019105711 j5eq27t2gb graph2

Counties which have ratified the AfCFTA Agreement

https://www.tralac.org/resources/infographic/13795-status-of-afcfta-ratification.html

Now let me turn my attention to assess why Ghana was chosen among the other contenders as host of the AfCFTA. What made Ghana an outstanding candidate to host the Secretariat of the AfCFTA?

To say that Ghana has been a giant pillar in the African Integration agenda or has played a significant role in Pan Africanism is akin to speaking in a cliché term. The contributions of Ghana, the first country South of the Sahara to gain independence, towards African integration and Pan Africanism is beyond debate. Indeed, it was not surprising that it was the first country to sign and ratify the AfCFTA. However, it is significant to note that despite its prominent role in promoting African Integration, not a single institution or agency of the AU has been located or sited in the country. It was only a matter of time that Ghana hosted an AU institution or Agency.

Many will agree with me (of course some will definitely disagree) that Ghana is among some of the most stable and secure countries on the planet. Ghana boasts of being the gateway to the African Continent and many refer to the country as a model to many countries around the world.

  • Politically, over the last two and half decades, Ghana has enjoyed increasingly stable and deepening democratic governance. Seven successive and successful elections have strengthened the effectiveness of key national institutions, enhanced investor confidence and anchored the economy in an environment for positive growth. It is ranked as the most stable political environment within the West African sub-region and fifth in Africa, Ghana has established democratic institutions and systems to ensure good governance and rule of law in the country – AfricaBenchmark Country Report (ABCR, 2017). It has one of the best judicial systems in the world measured by rule of law, World Justice Projects (WJP) Rule of Law Index 2017-2018. And the 5th most peaceful country in Africa, Global Peace Index 2018. Ghana ranked Africa’s freest country when it comes to the press, coming in at 23 internationally out of a total of 180 countries. Mo Ibrahim Index of African Governance of African Governance (IIAG 2018) ranks Ghana as #6 overall in Africa in governance, #5 in Africa for Human development #6 for Safety and Rule of Law.
  • Economically, Ghana is one of the most favourable countries for investments and tourism both from the continent and outside. Today, Ghana is not only the best place for doing business in West Africa but the fastest growing economy in the world according to the World Bank’s Ease of Doing Business Report 2019 and IMF projections. The country has developed into an established business destination for investors seeking a conducive business environment, committed and progressive government-private sector participation, political stability, transparent regulations, and a dynamic private sector ready for partnerships. Ghana is the best destination in Sub-Saharan Africa according to T Kearney Global Services Location Index (GSLI) 2017,the #2 FDI destination in West Africa & #7 in Sub-Saharan Africa (EY Attractiveness Survey 2018), the most competitive economy in the West African sub-region and #10 in Sub Saharan Africa, (World Economic Forum Global Competitiveness Index 2018). It is also the most resilient economy in West Africa, (African Attractiveness Index 2018).Ranked 2nd largest cocoa producer in the world, Ghana is also Africa’s biggest gold miner, according to the latest report, unseating South Africa.
  • Geographically, Ghana is closer than any other country to the center of the planet. It takes an average of 8 hours of flying time to Europe and the Americas. World Population Review (WPR) It has a robust network of academic institutions as well as good. Ghana has a relatively stable electricity and decent internet infrastructure. Sometime last year, Google established its first innovation Hub in Accra, the capital of Ghana. Google probably, however, has different reasons for choosing Ghana, and Jeff Dean tried to explain that it was because of the reasons mentioned above that made Ghana to be the choice for the tech giants.

What more?

  • Diplomatically, as one of the most peaceful countries in the world (3rd in Africa) with respect for diversity and human rights. Ghana has developed very good and friendly relations with its neighbours and with all other African countries over the years. Ghana Ranks as the 7th most Opened Country according to the Visa Openness Index 2018 by offering either free visa or visa on arrival to citizens of all African countries, except one.

The significance of all these is that The AfCFTA Secretariat requires such kind of openness and receptibility, zeal and enthusiasm as well as commitment to make it work towards the ultimate goal of delivering the free trade area, possible. It needs such kind of drive, commitment and the persistence in every support for the agenda of African Integration and Pan Africanism.

I strongly believe that Ghana has all it takes to host and manage the AfCFTA most especially in the current circumstances where the continental big guns are shying away from accepting responsibilities, in a situation where the big economies are not showing much commitment and enthusiasm, you needed a country that understands the fundamentals of Pan Africanism and African Integration and is ready to stand up and shoulder the responsibility therein. In such a situation, Ghana was undoubtedly, the best option.

Ghana has demonstrated over the years to provide significant leadership and influence in the quest for African Integration and has held on to the touch of Pan Africanism since its early days. With the kind of commitment shown, this country deserves to be the destination of the Secretariat. The secretariat needs to be in a place of history that will remind the entire continent the journey we have traversed so far and run with that impetus. Ghana is definitely the best fit for this purpose – a place where Pan Africanism was born and nurtured.

In conclusion, as someone passionate about African Integration, I join millions of people who share in this dream to only hope that these beautiful initiatives do not turn out to be like the numerous past agreements that have been agreed upon, and have only appeared to have been done so on paper, leaving them to gather dust. It is the responsibility of well-meaning Africans to press home the need for their respective governments to sign and implement this laudable initiative. We (the youths) have the ultimate responsibility, to monitor the process closely and demand accountability where necessary.

About the Author:

Dominic Offei is a Pan African University and ECOWAS Scholar. His Research Interests includes; Governance, Regional Integration, Global Governance, and International Relations. Email: [email protected] Facebook: https://www.facebook.com/offeidominic

Dominic Offei 
Dominic Offei , © 2019

This author has authored 1 publications on Modern Ghana. Author column: DominicOffei 

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