Africa’s economic integration: implications for Nigeria’s local economy
By Tunde Animasaun
The quest by the President of Dangote Group, Aliko Dangote and prominent African entrepreneurs and political leaders to promote economic integration between African countries, in line with AU’s desire for a continental free trade has begun to bear tangible fruits.
A recent report released by Boston Consulting Group (BGL), a global consulting conglomerate with offices in more than 90 cities in 50 countries, indicates that African businesses are achieving the much desired economic integration of Africa at a tremendous speed. The report identified 85 companies 46 of which are headquartered in Africa and are active in the financial, consumer and retail, industrial goods, technology, and logistics sectors, among others. These African pioneers come from 18 countries on the continent. South Africa has the largest number with 32 coming from that country. This is followed by Morocco with 10. Kenya and Nigeria are home to six each and four are from Egypt. Côte d’Ivoire, Mauritius, Tanzania, and Tunisia have two each.
Dangote Group led the Nigerian pack. Others are Globacom, Guaranty Trust Bank, Jumia, Nigerian Breweries Plc and United Bank for Africa.
According to the report, amidst daunting challenges like market fragmentation, poor internet penetration, inaccessibility, geographical, trade and economic barriers, “economic integration in Africa is not only taking place, but also gathering speed. We see more signs of this progress with each passing month, quarter, and year. The primary drivers come from within the continent, led by African business. Africa invests more in Africa, Africa trades more with Africa, and Africans travel more to Africa.
The report identified four statistics covering foreign direct investment, goods trade, Mergers and Acquisition, and people as providing insight into the key advances witnessed. Between 2006–2007 and 2015–2016, the average annual amount of African foreign direct investment—money that African companies invested in African countries—nearly tripled, from $3.7 billion to $10 billion. Over the same period, the average number of yearly intraregional Mergers and Acquisitions deals jumped from 238 to 418, with African-led transactions representing more than half of all African deals in 2015. Meanwhile, average annual intra-African exports increased from $41 billion to $65 billion. And the average annual number of African tourists (Africans traveling in Africa) rose from 19 million to 30 million. African tourists made up more than half of all tourists on the continent in 2015–2016.”
Analysing the growth, the report said that African companies have grown fast, thanks to four competitive advantages that they have carefully cultivated. These are: Focus—a full commitment to Africa; Field—on-the-ground experience and proximity to decision makers; Facts—a superior grasp of data and information relevant to local markets and Flexibility—the ability to make quick decisions and navigate informal business environments
In the past decade, African companies have used these advantages to expand not only within their home markets but to other parts of the continent as well, a trend that has accelerated in the past few years. In the process, they are spearheading economic integration. On average, the top 30 African companies now have operations in 16 African countries, up from an average of only 8 in 2008. In effect, these companies are expanding into one additional African country every year.
This tremendous turn of events is by no means a happenstance. It should be recalled that in 2017, AfroChampions Club which was co-chaired by Aliko Dangote and Thabo Mbeki, former president of South Africa, was launched with prominent African leaders and top entrepreneurs across the continent promising to work effectively together towards integrating their economies to enable free trade among its members.
Speaking at the launch, Aliko Dangote, said the Afrochampions Initiative is for African businesses to cater to African needs to accelerate development in the continent and create more jobs to tackle unemployment of youths in the continent. He acknowledged that it is the first time that leaders from Africa’s multinational companies will meet, not to discuss their sector and ad-hoc investment opportunities, but to exchange views on Africa’s transformation and on what contributions they may make.
He said, “We have to agree to trade among ourselves. By the time we start trading among ourselves, there will be enormous progress in terms of job creation and poverty reduction. We only have 18 per cent of intra-trade while other people are doing 82 per cent. We hope to increase our percentage of intra-trade to 50 in order to create more jobs for the youths.
“My ambition is to work with my colleagues to make the AfroChampions Club a unique platform on which we, as African business leaders, can overcome our differences and speak with one voice, to foster reforms facilitating trade between our states with investments in strategic projects and synergies between our countries.
“We can accelerate the economic integration of our continent probably faster than other regions of the world before us, because unlike Europe or Asia, we have an asset; this feeling of being as much citizens of our countries as well as Africa as a whole at the same time.”
The organisers said, “We have a pan African approach and we want to help create synergies between African economies so that each of them plays a unique role in the continent, as a regional hub, as a center of expertise for some key sectors, as a gateway for international investments, as an industrial centre of excellence.
“Africa’s current population of 1.2 billion (16 percent of the world’s population) is expected to grow to 3.8 billion by 2100 – accounting for 49 percent of the world population. By 2034, the working-age population is expected to hit 1.1 billion, larger than that of either China or India.”
“We do have to change the dynamics in a way that is more favourable to Africa and Africans because as Africa’s biggest multinationals, we owe a duty towards our communities, towards the next generation of young men and women who now want to become Pan-African entrepreneurs”.
Economic integration is not an alien idea to African discourse. In fact, from the time of the Organisation of African Unity (OUA) to African Union, (AU) Pan Africanism, politically and more importantly, economically, has always been one of the serious agenda.
For instance, “the 18th Ordinary Session of the Assembly of Heads of State and Government of the African Union, held in Addis Ababa, Ethiopia in January 2012, adopted a decision to establish a Continental Free Trade Area (CFTA) by an indicative date of 2017. The Summit also endorsed the Action Plan on Boosting Intra-Africa Trade (BIAT) which identifies seven clusters: trade policy, trade facilitation, productive capacity, trade related infrastructure, trade finance, trade information, and factor market integration. The CFTA will bring together fifty-four African countries with a combined population of more than one billion people and a combined gross domestic product of more than US $3.4 trillion.
The objectives of the CFTA are: to create a single continental market for goods and services, with free movement of business persons and investments, and thus pave the way for accelerating the establishment of the Continental Customs Union and the African customs union; to expand intra African trade through better harmonization and coordination of trade liberalization and facilitation regimes and instruments across Regional Economic Communities and across Africa in general; to resolve the challenges of multiple and overlapping memberships and expedite the regional and continental integration processes and to enhance competitiveness at the industry and enterprise level through exploiting opportunities for scale production, continental market access and better reallocation of resources.
It is instructive that the AfroChampions Club was launched in 2017, the targeted year for the take-off of the CFTA. Analysts have established a nexus between this, the AfroChampions Club and the recent development in Kigali, Rwanda where 44 African countries finally endorsed the take-off of the African Continental Free Trade Area agreement. Africa, it seems is set to launch itself to be competitive in the global economic space.
One great drawback to this however is the absence in Kigali of the two biggest economies in Africa, Nigeria and South Africa, the home countries of the two co-Chairs of AfroChampions Club.
Efforts have been made to analyse the implications of the refusal of Nigeria to sign the agreement in March. While many including Chief Olusegun Obasanjo has flayed the president for ditching the Kigali conference at the last minute, others have applauded him for uncommon courage to act in the interest of the Nigerian economy.
However, given the views of labour and the organised private sector, especially the manufacturing sector of the economy, the time may not be right for such a move. The NLC National President, Comrade Ayuba Wabba in a press statement described signing the agreement as “extremely dangerous”. He hinged his argument on the possible effect such agreement will have on the Nigerian economy.
“We are more worried by the probable outcome of this policy initiative if it is given life because of its crippling effect on the local businesses and attendant effects on jobs.
“We find it confounding that at a time nations, including the United States are resorting to protectionism in defence of their local businesses and protection of jobs, we have the audacity to want to fling open our doors, windows and roof tops.
“We have no doubt this policy initiative will spell the death knell of the Nigerian economy, he said.
Stakeholders in the aviation subsector have also cried out and warned that Nigeria should not endorse the CFTA agreement. According to them, the policy will compound the already stifling operation environment. if foreign airlines could schedule local flights in Nigeria without any need to employ local staff or pay taxes, local operators will be run out of business as they would not be able to compete against their foreign counterparts who have greater access to much cheaper lines of credit to run their operations.
The Manufacturers’ Association of Nigeria MAN) has also leant its voice to the rejection of the AfCTA until issues of market access and enforcement of rules of origin are addressed. MAN also decried the poor preparations and lack of consultations by the government. The President of MAN, Dr. Frank Jacobs, said that to forestall the reversal the gains made in the manufacturing sector over the years, Nigeria should not succumb to the pressure by the European Union to sign the EU-ECOWAS Economic Partnership Agreement (EPA) in the current form, as well as the African Continental Free Trade Area (AfCFTA).
“The signing of the African Continental Free Trade Area (AfCFTA) … may have the unintended consequence of opening up our economy to foreign products, through the back door and exposing our relatively disadvantaged productive sectors to unmanageable pressure. There is the need for proper and adequate consultations with critical stakeholders to mitigate this imminent onslaught ahead the of the implementation phase.”
Undoubtedly, having a common market in Africa has the potential of bringing together 1.2 billion people with a combined Gross Domestic Product of more than $2tn and increase the intra-Africa trade value by up to 52 per cent as reported by the United Nations Economic Commission for Africa; however, Nigeria can least afford to discountenance the likely negative effect the implementation of the Africa Free Trade Agreement can have on the local economy especially at this time when a lot of resources have been committed to building the economic base to launch the country into economic prosperity.
Indeed, Nigeria’s efforts at food security through the comprehensive and broad based agricultural initiatives; policies aimed at improving manufacturing and our capacity to produce and the Nigerian automotive policy aimed indigenous production of automobiles can all be jeopardised by a single stroke of the pen if we do not diligently study and ascertain the interpretation and implication of every clause of the agreement.
President Buhari’s refusal to sigh the Kigali agreement may not be pan-African but it is indeed patriotic! Of what use is signing an agreement when the needed economic conditions like adequate power, access to cheap capital with one-digit interest and improved ease of doing business index are not in place.
Opening up Nigeria’s vast market to the continent in addition to the already existing World Trade Agreement, without these in place is akin to economic hara-kiri.
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