Sindiso Ngwenya, Secretary-General of the Common Market for Eastern and Southern Africa (COMESA), has been perhaps the continent’s staunchest champion of expanding free trade across Africa. He reflects on the progress made so far, and industrialisation throughout the continent. In an interview earlier this year, you appeared frustrated that only eight countries have ratified the Continental Free Trade Area (CFTA) two years on from the historic tripartite agreement.
What’s holding the others back?
The current status is as follows: 20 out of 26 countries have signed the Tripartite FTA Agreement, and two have ratified it. What has been holding back the process was that some annexes were still being negotiated. Now these are done. The countries should now proceed with ratification. Fourteen ratifications are required for the Agreement to enter force.
You also mentioned that there should be penalties for those holding others back; do you still stand by this?
In light of the expected economic welfare benefits from the Tripartite FTA, and the political unity of Africa resulting from the Agreement, all countries should be on board. Governments should be held accountable. They should explain to their stakeholders why they are not taking the expected action, with the obvious democratic consequences of not promoting prosperity for the people.
What will the CFTA mean in real terms? Businesses still complain of the excessive cost of moving goods across borders – in terms of paperwork and tariffs and other charges. The free movement of goods and services is still only theoretical. What can we expect from the CFTA?
The Tripartite (TFTA) Agreement is a single regulatory regime across half of Africa, covering a combined GDP of $1.3 trillion and a combined population of 625 million. The single trade regime covers all areas of trade – elimination of trade barriers, rules of origin, customs cooperation, trade facilitation, technical and health standards, safeguards, and settlement of disputes.
It should be noted that these tripartite level initiatives will address the problem of multiple membership by removing conflicting regimes among the three regional organisations (COMESA, East African Community and the Southern African Development Community). Also, the TFTA is complemented by programmes for industrialisation and infrastructure development, which will address production constraints and transportation bottlenecks.
You once said that we, as Africans, are unkind to ourselves as Africans but kind to others. What do you mean by that?
Across a range of areas, Africans treat non-Africans far better than they treat other Africans. Foreign investors get better incentives and better treatment than national or regional investors.
Those carrying non-African passports can move more easily in Africa than those carrying African passports, into most of the countries. These political and economic anomalies should be corrected. Indeed, we are already seeing countries like Seychelles, Mauritius and Rwanda remove entry visa restrictions.
Should we encourage ‘regional champions’?
Regional integration has a principle called ‘variable geometry’, which allows those countries that are ready, to move ahead and those not ready to join later. Champions are therefore very much in order. It is a practical way of charting ahead, so that the countries that are ready can reap the benefits without being held back by the slow or reluctant ones.
Can you tell us about the Common Investment Area’?
The Draft Agreement to establish the COMESA Common Investment Area has not been signed by any country for a long time. We have however moved fast to review and improve its provisions. It is expected that the next Meeting of Ministers this November will consider and adopt it. It projects COMESA as a region open for business and investment, a friendly investment destination.
Remember that Africa has the highest returns on investment in the world, and consumer and business-to-business trade is already at $3.9 trillion and will rise to $5 trillion within the next eight years. Industrialisation is again l’ordre du jour, with talk of wage growth in China leading to the delocalisation of millions of jobs from China to new manufacturing hubs.
Can Africa capitalise on this trend?
Industrialisation will support the social and economic structural transformation of Africa. Creating jobs, especially for the youth, is an utmost public policy priority. Jobless growth over the last two decades led to upheavals such as the Arab Spring, showing that poverty remains a menace.
Therefore, industrialisation is an absolute priority. With 85m jobs expected to relocate out of China, there is an opportunity for Africa to tap these jobs through industrialisation programmes.
We are already seeing good examples of such interventions in Ethiopia, such as with the use of special economic zones or industrial parks. Especially in the leather sector, Ethiopia is producing global brands; which shows that industrialisation initiatives have good prospects, supported by regional and global markets. COMESA alone has an untapped market potential of $82.4 billion, waiting to be used to create jobs and support industrialisation.
There will be some winners and losers from this – what will distinguish the winners from the losers?
Countries that put in place appropriate investment and business-friendly environments, and which facilitate trade, will be obvious winners. Those that don’t will lose out on the opportunity of a century. There is a belief that greater automation will mean that most of these manufacturing jobs will be eroded, leaving only a fraction of those that exist today.
What is your take on what they call the 4th industrial revolution?
Eras of civilisation since the Stone Age have been marked by advances in technology. New technologies have ushered in new epochs and disrupted existing economic orders.
The lesson over the centuries has been to harness and productively employ new technologies. The Internet of Things meets consumer needs and therefore there is a market for these new technologies. With such a market, bold and brave entrepreneurs will seek to supply it, on the basis of market forces. The labour market must therefore adjust.
There is a need for the new skills of managing and using robotics and sensors. Education systems should put a premium on analytical and complex organisational and management skills. Teaching of STEM subjects should be prioritised to create the skills for creating, operating, maintaining and servicing these sophisticated machines. It would make economic sense, with increased productivity, to have such skill-sets in the labour market.
Does this create a new opportunity for us in Africa?
Vast new opportunities are created for leapfrogging. While old economies will be grappling with replacing old technology and installed machinery and factory lines, Africa will have the latecomer’s advantages of moving straight into the state-of-the-art capital and production techniques and technology. However, Africa must have the supportive framework in place in terms of the investment framework, its skills, training and basic education provision, and regional markets.
Intra-African trade still remains below the global par, struggling to rise above 15%. We know what is needed; why isn’t it happening?
It all requires political will and champions. Regional organisations like COMESA are taking the lead.
Are you worried by a rise of populism and talk of protectionism amongst advanced economies?
Populism is now on the wane. Emmanuel Macron of France was elected on a pro-globalisation and pro-EU ticket. The UK on the whole regrets Brexit. So, it is not such a worry. But globalisation must result in decent jobs and incomes, and structural transformation.
Are you worried that countries may have over-extended themselves during the good times, in terms of foreign debts?
Africa needs to make the best of boom times, which has not always been the case.
Any regrets over your work so far? Maybe things you should have pushed or fought harder for?
Yes. Perhaps I should have ensured that member states domesticate the strategies and policies that are embedded in the COMESA Treaty instead of making new decisions which they have not implemented for the benefit of COMESA.
Sindiso Ngwenya will be speaking at the Africa 2017 Forum taking place in Sharm El Sheikh from 8-9 December.