Is free trade a silver bullet for African prosperity?

Victor Hugo said in Les Miserables ''There is nothing like a dream to create the future".

For many years, a free-trade area from Cairo to Cape Town, from Lagos to Nairobi has been seen as a silver bullet, a panacea, even a ''no-brainer''. 

For many years, it's been just that, a dream.

The African Continental Free Trade Area (CFTA) would in fact be the largest free-trade agreement since the creation of the World Trade Organisation (WTO). The CFTA would bring together all African countries – comprising 1.2 billion people and a combined GDP of over $3.4 trillion – under a single continental market for goods and services, including free movement of businesspeople and investments, and expansion of intra-African trade.

By 2030 the market size is expected to clock 1.7 billion people with over $6.7 trillion of cumulative consumer and business spending (that’s if all African countries have joined the free trade area by then).

By 2100, it is predicted that about 40 percent of all humans and nearly half of all children in the world will be African – one of the fastest and most radical demographic changes in history.

Of course, that demographic dividend is a binary twin-sided thing, it could metastasise into a demographic terminator (as it did for ‘Beautiful’ Blaise Compaore on the streets of Ouagadougou).

African governments are increasingly seized of the existential challenge of creating jobs for Africa and Africans. The common refrain today across the continent is ''you cannot eat GDP''. Even in the GOGO decade of growth from 2004-2014, trickledown was diluted and the rising GDP tide created hardly a ripple on the ground. In fact, in the last 2 years, per capita income has gone into reverse.

What we also know is that Africa currently has the lowest percentage of intra-regional trade in the world at 18 percent, compared with 70 in Europe, 55 in North America, 45 in Asia, and 35 in Latin America. This speaks to the fact that in many respects, Africa is better connected to the rest of the world than it is to, and with, itself.

Studies have shown that by creating a pan-African market, intra-Africa trade could increase by about 52 percent by 2022. UNCTAD predicts this can increase to 22 per cent by 2022 with the improvement of trade facilitation measures, especially transportation linkages and customs clearance for intra-African trade.

I estimate that creating a truly free market across the continent would add up to 2 percent to Africa wide GDP growth and is therefore definitely a prize worth chasing.

Africans are entrepreneurial. Everywhere you care to turn you will find markets and a single market will surely be an elixir for that entrepreneurial spirit.

The choir sang “Let’s get together”, to the rhythm of Bob Marley, as a succession of African leaders from the African Union signed a continent-wide free-trade agreement in Kigali on March 21st. Forty-four out of fifty-five countries put pen to paper. and fittingly in Kigali. President Kagame, the host of the AU Summit, and a preeminent Pan-African Free Trade Evangelist said,“Some horses decided to drink the water. Others have excuses and they end up dying of thirst”.

He was of course referring to Nigeria and South Africa [who together represent 50 percent of Sub-Sahara Africa GDP] both of whom bailed and opted out of putting their signature to paper.

President Kagame, who trades in momentum, declared the meeting a success (notwithstanding the absence of Nigeria and South Africa) and talked of establishing the free trade bloc within 18 months.

The devil is in the details, of course. If execution were in the hands of Kagame, then I would be ''limit long'' on the CFTA. However, its in the hands of 44 (but hopefully 55) stakeholders, many of whom will need to snap a feedback loop. You might recall the following comment by Hillary Clinton, “It means doing things that are going to run afoul of special interests and government bureaucrats and businesses that already have a lock on a market”.

And this is the point, there are a lot of interests which operate ''rentier'' style across our continent and in many cases they bankroll governments. It will take a revolution to unseat them, but unseat them Africa must. The battle will soon be joined.

The United Nations Economic Commission for Africa notes, “The CFTA could increase trade between African countries by as much as $35 billion, an increase of more than 50 percent from current levels”.

What’s more, it will make Africa the world’s largest free-trade area in terms of member states. The only way to improve the current dismal levels of regional trade is to disrupt all the existing barriers on the demand and supply sides that limit its rapid increase.

According to Oby Ezekwesili, former vice-president of the World Bank’s Africa division only a single market model has the enormous potential to deliver such a massive scale of disruption and, ultimately, place Africa on the route to economic prosperity.