In 1963, Kwame Nkrumah, the first President of Ghana, and one of Africa’s leading lights in the fight against colonialism, lamented the fact that African countries did not trade with each other, but rather sold raw materials to the rest of the world. “Africa must unite!” Nkrumah said. Now, more than fifty years later, Nkrumah’s dream may come true.
Earlier this year African leaders gathered in Kigali, Rwanda, to sign the Kigali Declaration, on the establishment of a continent-wide free trade zone, the African Continental Free Trade Area (AfCFTA). The goal is to create a “single continental market for goods and services, with free movement of business persons and investments.” The agreement requires that tariffs must be removed on 90% of goods. By 2030 the free trade area is expected to be a single market of 1.7 billion people, with a gross domestic product of $2.5 trillion.
Why is this agreement necessary? It is because African countries still do relatively little trade between each other, partly because of high tariffs. In 2016 African countries exported more to Europe and Asia than to each other – only 20% of African trade is internal.
African countries do relatively little trade between each other – only 20% of African trade is internal.
Of the 55 African Union countries, only 11 have not signed. Zambia is one of these countries yet to sign.
So, should Zambia sign the AfCFTA? There are strong reasons to suggest we should. Firstly, a free trade area which stimulates trade between African countries, could help economies diversify by moving away from primary industries. Why is this? Most intra-African trade is in finished products (such as processed agricultural goods) or services, such as banking. More trade between African countries should boost these sectors and reduce the excessive reliance of many African countries on commodity exports.
Secondly, free trade agreements in other parts of the world have been shown to broadly boost the economies of participating countries. Evidence from the North American Free Trade Agreement (NAFTA), between Mexico, the United States, and Canada shows that the agreement is broadly positive for each of the three countries. Furthermore, signs from Latin America shows that those countries which have followed free trade policies, as opposed to those retreating behind protectionist walls, have enjoyed higher rates of economic growth and development.
What could also boost trade is making it easier to cross borders through improving transport infrastructure and making border posts more efficient. Unfortunately, Zambia’s record on this is mixed. There are long waiting times at two important Zambian border posts – Kasumbalesa with the Democratic Republic of Congo (DRC) and Chirundi, on the Zimbabwean border. Waiting times at both posts can be long – trucks at Kasumbalesa have been known to wait for weeks (especially on the DRC side), which adds to transport costs. These costs are often passed on to consumers making goods more expensive. However, it is not all doom and gloom. It is hoped that the current initiative between Zambia and Botswana at the border crossing at Kazungula, in southern Zambia, will be a success. The two countries are working together by building a bridge to replace the ferry at the Kazungula border post. The $200 million project is expected to be completed next year and should significantly reduce transit times at the border, especially if a “one-stop border” post is introduced.
There is clear evidence that the freer an economy the higher its levels of economic growth. This applies to small and large countries, as well as developing and developed states. Zambia could make its economy freer by reducing government red tape and making it easier for Zambians to start businesses. At the same time, free trade is an inherent part of creating a freer economy – and Zambia is no exception. But, the country must do more than simply making it easier to move across borders, it must also make it easy to trade across borders. This requires a diferent approach to the one currently being pursued. Placing restrictions on the importation of petroleum products and enacting coercive regulations for the transportation of bulk cargo, for example, stifle trade and are contrary to the continental Agreement’s aspirations.
Realising the dream of Kwame Nkrumah and uniting Africa (at least in terms of free trade) will make the continent and its people richer. It is something to work towards and Zambia should be part of it.
See also: Unblocking Zambia’s transport arteries
