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What’s Happening with Free Trade in Africa?

Free Trade in Africa
Free trade is currently a hot topic in Africa. Several countries have already signed a trade agreement that opens the continent to free internal trade and now the European Union is looking to connect with Africa and form an alliance between Europe and Africa. While these talks certainly seem like a good idea, the question of whether they ultimately help Africa’s poor remains unanswered.

A Move Toward Intra-African Trade Improvement

Early in 2018, many African leaders came together in Kigali, Rwanda, to establish the African Continental Free Trade Area (AfCFTA) with the goal of executing the agreement before January 2019. The deal would allow free movement of capital and business travelers. Ideally, it would give a chance for manufacturing sectors growth in many countries and lead to economic diversification.

AfCFTA will potentially cover the market of more than a billion people in African and will be one of the largest free trade areas ever established in the world. Its goal is to create one continental market for goods and services. AfCFTA should also “enhance competitiveness at the industry and enterprise level through the exploitation of opportunities for scale production, continental market access and better reallocation of resources.” The Economic Commission for Africa has calculated that this deal would increase intra-Africa trade by more than 50 percent through the elimination of trade barriers.

What Does External Free Trade in Africa Look Like Right Now?

Currently, Africa and Europe are committed to the Cotonou Agreement that, unless amended, expires in 2020. Signed at the turn of the millennium, this agreement covers the partnership between the E.U. and many developing countries in Africa, the Caribbean and the Pacific.

The Next Chapter for EU and Free Trade in Africa

European Commission Chief Jean-Claude Juncker stated that Africa does not need charity. He said that this continent needs true and fair partnerships. And Europe needs this partnership just as much. His recent State of the Union address called his colleagues to see Africa as Europe’s “twin.” He argued that the perspective of this continent as the one needing Europe’s help or charity was not only insulting but rather false.

Europe is beginning the process of replacing the Cotonou Agreement, focusing on Africa with the goal of a free trade agreement between E.U. and all Africa countries. A report from the European Commission argues for an Alliance for Sustainable Investment and Jobs. The report summarizes that this alliance is more than a financial plan and it represents a radical shift in the way these two continents work as partners toward a logic focused on Africa’s economic potential and the mobilization of the private sector.  This Alliance has 10 main actions in focus:

  1. Boosting strategic investments via blending and guarantees
  2. Supporting the opportunities for manufacturing and processing at the national and regional level
  3. Establishing sectoral groups of African and European public, private and financial operators and academia, under the Commissioner lead, to provide expertise, advice and recommendations
  4. Supporting education and skills development at the continental level
  5. Supporting skills development at the national level to match skills to strategic development choices for each country
  6. Strengthening the dialogue, cooperation and support on the investment and business climate
  7. Supporting the Africa Continental Free Trade Area
  8. Strengthening intra-African and E.U.-African trade in the long-term perspective of a continent-to-continent free trade agreement
  9. Supporting connectivity both intra-African and between the E.U. and Africa
  10. Mobilizing a substantial package of financial resources

This Alliance is estimated to create 10 million jobs over the next five years and hopes to strengthen the private sector as well. AfCFTA is crucial in achieving these goals. African Union’s High Representative Carlos Lopes said that AfCFTA should be the main instrument for a free trade agreement with the E.U. Currently, more than a third of Africa’s trade occurs with the European Union. Lowering costs and improving efficiencies would benefit everyone involved.

Poverty and Free Trade in Africa

Free trade agreements have many advantages and can lead to better lives of Africa’s poor population. However, they can also go in the opposite direction and take away jobs leaving unskilled workers with few options to support themselves and their families.

Free trade tends to increase a country’s economic growth, attracts foreign investors and leads to a transfer of expertise and technologies. It also leads to greater outsourcing, destruction of native cultures and can hurt local industries and firms.

Nigerian President Muhammadu Buhari is especially cautious when it comes to opening borders for trade. He has delayed (and may ultimately avoid) agreeing to AfCFTA because he fears that competition from other African nations will destroy local industries. The World Trade Organization meanwhile argues that free trade helps reduce poverty. In fact, their research found that trade liberalization is generally a strongly positive contributor to poverty alleviation since it allows people to exploit their productive potential, assists economic growth, curtails arbitrary policy interventions and helps to insulate against shocks.

The open trade comes with certain consequences, but many countries and many people have benefitted greatly from opening their borders to the free flow of goods and services. If Africa can ratify its internal trade agreement and then form a new alliance with the European Union, it could mean better jobs for the citizens of the continent and poverty reduction.

– Sarah Stanley

Photo: Flickr

How the Rapid Transit System in Lagos Helps Fight Poverty in Africa

Rapid Transit System in LagosNigeria has been the center of an African population boom, with its population doubling to nearly 200 million in the last 30 years. Lagos is in the center of this boom, recently hitting a population of 21 million people. In 2010 at a United Nations Forum, the director of the Lagos Metropolitan Area Transport Authority (LAMATA) proposed the idea of a rapid transit system to be built in Lagos. The goals of the rapid transit system in Lagos were to:

  • Spur economic growth
  • Decrease pollution
  • Decrease congestion and increase connections

Lagos is considered a megacity, meaning a city with a population of over 10 million. The population growth in Lagos is faster than that of London and New York put together, with an estimated increase of 500,000 people a year. This boom has placed a major strain on the city’s public transportation system. Traffic congestion is a massive problem in Lagos, as it can take hours to travel just a few kilometers. This gridlocked traffic also contributes heavily to air pollution.

As Lagos grows, so does the demand for more land for housing, industry and social services. This has caused Lagos to spread outward into rural areas. As the rural areas become more populated, more people will need reliable transit to get to work or into the city for commerce and other services.

In 2010, the director of LAMATA proposed the idea for a rapid transit system in Lagos. This system consists of various buses that can fit approximately 30 people, running day in and day out to ensure residents can get to work, shops and back. The buses are often overcrowded and the roads are in poor condition and unable to handle the sheer volume of public transit. While the introduction of a rapid bus transit system in 2010 made great strides toward increasing economic opportunity and increasing connections, the rapid population growth makes it inadequate in addressing congestion and air pollution.

Since 2014, Lagos has been undergoing a massive project to expand its rapid transit system, providing more options for the unique situation of a rapidly growing megacity. In addition to the multitude of busses, Lagos is constructing a light rail system to be developed by LAMATA. LAMATA has proposed seven light rail lines in the new network: red, blue, green, yellow, purple, brown and orange.

The trains Lagos will use in its rapid transit system are known as Electric Multiple Units (EMUs) and are free of carbon emissions. This will continue to aid Lagos in its efforts to reduce air pollution. Furthermore, the EMUs are much easier and more cost-effective to maintain than diesel locomotives. A plan to construct 35 pedestrian bridges over roads and high traffic areas will also work to decrease congestion.

Not only does this plan include the production of light rails and pedestrian bridges, but it also addresses other growing infrastructure needs in the megacity. Other infrastructure improvements as part of the project are stations, control and communication systems, workshop training facilities for train drivers and a drainage system.

Originally, the rapid transit system in Lagos was only capable of transporting 220,000 people both ways in a day. With this new project, a single line is projected to carry 400,000 passengers daily, with a total capacity of 700,000 passengers upon the completion of the light rail system. The interconnectedness of the rapid transit light rail system will work to spur economic growth.

Along with the construction of the EMU trains and stations, many jobs will need to be filled to maintain a stellar experience that continues to attract current private transportation users as well as meet the needs of Lagos residents relying on the rapid transit system. Jobs to be created include working for station operations, station maintenance, ticketing, cleaning, information services kiosks and centers for other public transit needs.

Lagos, Nigeria and the continent of Africa will continue to experience rapid population growth as nations continue to develop. The rapid transit system in Lagos has worked to connect rural areas to centers of commerce, decrease road congestion and decrease growing air pollution. With the addition of EMU train light rails to the rapid transit system, these advancements will only continue increasing the appeal of the megacity to the rest of the world.

– Kelilani Johnson

Photo: Flickr

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Kenyan Startup BRCK Works to Connect Africa

BRCKKenyan startup BRCK, which creates the BRCK wifi device, has recently secured $3 million in funding for their product, which could advance Internet connectivity in Africa.

The BRCK wifi device is a solar-powered modem designed to withstand harsh environments and work using limited sources of power and Internet connections. It is also unique in that it can hop between various types of connections including Ethernet, wifi and 3G or 4G.

The device has eight hours of battery life, which is crucial due to Africa’s frequent power outages. BRCK’s slogan is: “If it works in Africa, it will work anywhere,” according to TechCrunch.

“Most of the organizations working to increase access to the Internet in Africa are dealing with it at the infrastructure level, with satellites or undersea cable, with mobile phone towers — and even balloons and drones,” said BRCK CEO Erik Hersman to CNN. “BRCK deals with the last meter of Internet connectivity in the bus stops and kiosks, homes and schools of Africa.”

The African-led company has sold over 2,500 devices in 54 countries since 2013. Most of their sales have been in India. The $3 million the company has secured comes from the TED organization and former AOL executives Jean and Steve Case, CNN reports.

“A lot of this funding is earmarked to grow our footprint, distribution and team around BRCK Education across the continent and globally,” said Hersman to CNN.

The majority of the 410 million school children in Africa do not have access to the Internet, which is something that the startup hopes to solve with its education program. The initiative works to provide remote schools with digital materials. Its ‘Kio Kit’ includes 40 water-resistant tablets, 40 earphones and a plug to provide wireless charging.

Schoolmaster Pastor George Njenga, who uses BRCK Education in his classrooms, told CNN, “This technology is a great help not only for the teachers but also the students, who are really learning a lot.”

With continued innovation, funding and expansion, BRCK has the potential to increase Internet connectivity across Africa and other largely unconnected parts of the world.

– Kaitlyn Arford

Sources: Tech Crunch, CNN, BRCK
Photo: CNN

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Aliko Dangote is Paving the Road to Success in Africa

Dangote
Aliko Dangote is known not only as the wealthiest person in Africa but also as the continent’s largest donor. This year, Dangote appeared in Forbes business magazine’s list of the most powerful people on the planet. Dangote is known for utilizing the rich agricultural land of his native country, Nigeria, to generate profits.

In 1981, Dangote founded the Dangote Group, a conglomerate offering products ranging from flour and salt to cement. The cement sector of the Dangote Group has operations in Nigeria and 14 other African countries, and Dangote Cement is the only Nigerian company on the Forbes Global 2000 Companies.

Despite his success, Dangote’s critics accuse him of using his political connections with African leaders to ban imports from his competitors. In 2012, only five percent of Dangote Cement was publicly traded.

However, Dangote claims the primary purpose behind his business strategies was and is to use Africa’s resources to bring money to Africa. This type of business approach is called “backward integration,” a process wherein a country uses its own production to replace imports.

Nigeria’s abundance of limestone provides the country with easy access to concrete. This concrete, Dangote argues, could improve Nigeria’s roads. In September of this year, Dangote urged the federal government to consider concrete roads in lieu of bitumen roads claiming that the concrete is cheaper and more durable.

In addition, concrete roads supposedly require less maintenance and upkeep. The concrete road discussion is being rigorously debated among members of the Nigeria Economic Summit Group (NESG).

Of course, in most parts of the world, accessible roads are vital to transportation. Nigeria has the largest road network in West Africa and the second largest south of the Sahara. Whether or not the discussion is about concrete roads, improving a country’s infrastructure is pivotal to both broadening its economy and increasing its opportunities for advancement.

– Dana McLemore

Sources: Economist, Forbes, Reuters, The News Nigeria, Vanguard Newspapers
Photo: Wikimedia

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Development in Africa According to the UN

africa economic development commodity industrialization un
A new report from the United Nations Economic Commission for Africa (ECA) and the African Union says the key to long-term development in Africa is commodity-based industrialization. The study collected data mostly from nine African countries and the continent’s five sub-regions. Those countries are Algeria, Cameroon, Egypt, Ethiopia, Ghana, Kenya, Nigeria, South Africa and Zambia.

The report urges African nations to take advantage of their abundance of natural resources by using a commodity-based industrialization strategy. Each nation should frame its own specific policy for commodity-based industrialization so that it can direct its own development.  This is necessary to address poverty and gender disparities, youth unemployment, and other challenges African nations faces. The report states that “massive industrialization based on commodities in Africa is imperative, possible, and beneficial.”

Instead of African nations shipping raw materials to foreign nations to make commodities which are of higher value, the report recommends adding value to raw materials locally. Not only does this increase the profit to African nations but also fosters diversification of technological capabilities, an expansion of an advantageous skills base, and deepened industrial infrastructures in individual countries.

Case studies were prepared for Algeria, Cameroon, Egypt, Ethiopia, Ghana, Kenya, Nigeria, South Africa and Zambia.

– Essee Oruma

Source: UN News Centre