Monthly Archives: May 2018

Ethiopia: Change must be genuine and quick

By Rafiq Raji, PhD
Twitter: @DrRafiqRaji

First impressions matter. I first happened on Nhlanhla Nene, South Africa’s second-time finance minister, some years ago now, at a Chatham House event in London. Former minister in the presidency, Jeff Radebe, was also present, as I recall. Mr Nene and selected ministers were there to take questions from economists, analysts and journalists on the state of their country’s affairs. Africans, often nostalgic about home, who are typical attendees of these Africa-focused events, were also in the audience. I am not sure now what question I asked Mr Nene. But I am almost certain it was a difficult one. As in my own case, my team members would be expecting the notes of the event, I was at the ready with my pen waiting for Mr Nene’s reply – there are usually a couple of questions taken at a time. Imagine my surprise when before answering mine, Mr Nene acknowledged me by name. We had never met before. Naturally, I was pleased. (It is a familiar trick by politicians, I know.) But since I was not the primary analyst for South Africa at my bank, he did not have to put in the effort. I would find out in due course that this was in line with his humble nature.

Smart choices
So yes, I was distraught by his unceremonious dismissal about a year later by the president of South Africa at the time, Jacob Zuma. It did not take long before the reasons why he was excused from the cabinet came to light. Unsurprisingly, Mr Nene got caught in the crosshairs of his erstwhile principal because he would not allow him have his way with the treasury. With the benefit of hindsight, it is now well-known the enormity of the forces he had to contend with. It is not unlikely Mr Zuma particularly took umbrage that someone who should expectedly be culturally inclined to his whims would be so bold. Momentarily, Mr Zuma appointed a replacement so evocative of his disdain for excellence, competence, and integrity that even he, whose unique resilience is without question, could not handle the backlash. Mr Desmond van Rooyen lasted just days as finance minister. His replacement was a former finance minister: Pravin Gordhan. Reports suggest Mr Nene was approached to take his job back but declined. He did himself a great service. Mr Gordan suffered grief upon grief working for Mr Zuma. In the end, the wily former president won what is certainly now a pyrrhic victory. Now, Mr Gordhan has been reappointed minister by President Cyril Ramaphosa; albeit to the probably now equally relevant public enterprises ministry. The drama between Mr Zuma and Mr Gordhan was a source of many columns, as I recall. Two prominent victims of Mr Zuma’s unusual ways, both former finance ministers under him, have made such an extraordinary comeback in relatively little time, that they can be nothing short of inspirational. They are humble, sound and well-respected by market participants. President Cyril Ramaphosa is smart to appoint them to his cabinet.

Same colour
The task before the new finance minister is huge. He inherits a budget that was presented about a week before his appointment. It is not the way he would have wanted to start. Not that he likely cares very much for credit. But a finance minister makes a mark by first setting out an agenda via the budget statement. No matter. He would get a chance later in the year, when hopefully, he would be in good stead and health to present the medium term bugdet policy statement. Even so, the 2018 budget is a good one; a remarkable turnaround by former finance minister Malusi Gigaba – whose “survival” and reassignment to the home affairs ministry is also instructive but not as inspiring – from what was a sloppy mid-term budget in October. In that less than remarkable proposition, Mr Gigaba was honest to a fault about the state of the country’s finances but not as creative or bold with the solutions to fix the problem. In February, he redeemed himself by making firm fiscal proposals that should plug the gaping 50 billion rand hole in the fiscus. Yes, an increase in the value-added tax is not exactly equitable. After all, the huge fiscal gap could be traced to the profligacy of the Zuma administration. What did emerge, though, was how who is president, matters; for some cadres of the ruling African National Congress (ANC) party, at least. Mr Gigaba was impressive under a better sheriff. This is one of the reasons why Mr Nene is a truly remarkable person: he will do the right thing no matter who the president is.

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South Africa: The Triumph of Nene

By Rafiq Raji, PhD
Twitter: @DrRafiqRaji

First impressions matter. I first happened on Nhlanhla Nene, South Africa’s second-time finance minister, some years ago now, at a Chatham House event in London. Former minister in the presidency, Jeff Radebe, was also present, as I recall. Mr Nene and selected ministers were there to take questions from economists, analysts and journalists on the state of their country’s affairs. Africans, often nostalgic about home, who are typical attendees of these Africa-focused events, were also in the audience. I am not sure now what question I asked Mr Nene. But I am almost certain it was a difficult one. As in my own case, my team members would be expecting the notes of the event, I was at the ready with my pen waiting for Mr Nene’s reply – there are usually a couple of questions taken at a time. Imagine my surprise when before answering mine, Mr Nene acknowledged me by name. We had never met before. Naturally, I was pleased. (It is a familiar trick by politicians, I know.) But since I was not the primary analyst for South Africa at my bank, he did not have to put in the effort. I would find out in due course that this was in line with his humble nature.

Smart choices
So yes, I was distraught by his unceremonious dismissal about a year later by the president of South Africa at the time, Jacob Zuma. It did not take long before the reasons why he was excused from the cabinet came to light. Unsurprisingly, Mr Nene got caught in the crosshairs of his erstwhile principal because he would not allow him have his way with the treasury. With the benefit of hindsight, it is now well-known the enormity of the forces he had to contend with. It is not unlikely Mr Zuma particularly took umbrage that someone who should expectedly be culturally inclined to his whims would be so bold. Momentarily, Mr Zuma appointed a replacement so evocative of his disdain for excellence, competence, and integrity that even he, whose unique resilience is without question, could not handle the backlash. Mr Desmond van Rooyen lasted just days as finance minister. His replacement was a former finance minister: Pravin Gordhan. Reports suggest Mr Nene was approached to take his job back but declined. He did himself a great service. Mr Gordan suffered grief upon grief working for Mr Zuma. In the end, the wily former president won what is certainly now a pyrrhic victory. Now, Mr Gordhan has been reappointed minister by President Cyril Ramaphosa; albeit to the probably now equally relevant public enterprises ministry. The drama between Mr Zuma and Mr Gordhan was a source of many columns, as I recall. Two prominent victims of Mr Zuma’s unusual ways, both former finance ministers under him, have made such an extraordinary comeback in relatively little time, that they can be nothing short of inspirational. They are humble, sound and well-respected by market participants. President Cyril Ramaphosa is smart to appoint them to his cabinet.

Same colour
The task before the new finance minister is huge. He inherits a budget that was presented about a week before his appointment. It is not the way he would have wanted to start. Not that he likely cares very much for credit. But a finance minister makes a mark by first setting out an agenda via the budget statement. No matter. He would get a chance later in the year, when hopefully, he would be in good stead and health to present the medium term bugdet policy statement. Even so, the 2018 budget is a good one; a remarkable turnaround by former finance minister Malusi Gigaba – whose “survival” and reassignment to the home affairs ministry is also instructive but not as inspiring – from what was a sloppy mid-term budget in October. In that less than remarkable proposition, Mr Gigaba was honest to a fault about the state of the country’s finances but not as creative or bold with the solutions to fix the problem. In February, he redeemed himself by making firm fiscal proposals that should plug the gaping 50 billion rand hole in the fiscus. Yes, an increase in the value-added tax is not exactly equitable. After all, the huge fiscal gap could be traced to the profligacy of the Zuma administration. What did emerge, though, was how who is president, matters; for some cadres of the ruling African National Congress (ANC) party, at least. Mr Gigaba was impressive under a better sheriff. This is one of the reasons why Mr Nene is a truly remarkable person: he will do the right thing no matter who the president is.

Post-crisis transitions: Liberia and Sierra Leone

By Rafiq Raji, PhD
Twitter: @DrRafiqRaji

A number of African countries remain insecure. And no African country could be said to be totally secure. It is a matter of degree. A sudden change in circumstance has been known to spur protests that sometime get out of hand. These crises are sometimes occasioned by opportunists long searching for just the right moment to open old wounds, settle a score or achieve a political objective; with terrorism increasingly becoming the means of choice. (The current precarious security situation in Nigeria is a pertinent example.) Some crises or protests have been spurred by simpler things, however; like higher cost of living, in Tunisia and Sudan, for instance. A few years ago, it was the same reason that led to protests in Egypt and indeed Tunisia; which eventually toppled incumbent governments and replaced them with new ones. There was not so much of a revolution in Egypt, though. After electing an Islamist-oriented leadership, the Egyptian military stepped in. Now, the army chief who led the charge is president and up for “re-election”. Better progress was recorded in Tunisia. But judging from recent agitations, a more representative government has not been enough to assuage the angst of Tunisians about the hard times they face. Much earlier, countries like Sierra Leone, Liberia, Angola, Mozambique, and Ivory Coast suffered bouts of war and unrest of varying length and degree. Now they are mostly stable countries with elected or acceptable governments.

Good progress
Liberia had its first peaceful transfer of power from one democratically elected president to another in January 2018. Sierra Leoneans go to the polls on 7 March to elect a new president, as incumbent leader Ernest Bai Koroma completes his maximum two terms in office. Angola has a new head of state, Joao Lourenco, after a four-decade rule by Jose Eduardo dos Santos. Mr Lourenco has proved to be his own man less than a year into his rule. He removed erstwhile powerful scions of the dos Santos family from influential positions at the state oil company and sovereign wealth fund. Initial fears that an assertive Lourenco would meet with resistance from entrenched beneficiaries of the dos Santos era have proved to be misplaced. The response to the ongoing reforms in Angola have been positive within and outside the country. In Ivory Coast, another transition looms as President Alassane Ouattara concludes his final term in office. Last time there was a transition, it ended in civil war; as former president, Laurent Ggagbo, refused to accept his election defeat. The costs of that civil war remain. Rebels loyal to Mr Ouattara that were inducted into the military have been incorrigibly mutinous, for instance.

Peacekeeping, justice and democracy
Clearly, some post-crisis transitions have been better than others. Two stand out, though: Sierra Leone and Liberia. There was a time when the stability that currently prevails in these two countries was thought unthinkable. So how and why did they succeed? Sustained international support, a diminished male population from past civil wars and health epidemics, and memories of the negative consequences of conflict are some of the reasons why. Interventions by the international community in Liberia and Sierra Leone endured due to circumstances; albeit unfortunately so. The United Nations Mission in Sierra Leone (UNAMSIL) lasted for six years; from 1999 to 2006. That for Liberia, the United Nations Mission in Liberia (UNMIL), is scheduled to withdraw by end-March this year; about fifteen years after it was established in September 2003. The UN missions were presaged by West African peacekeeping efforts. In 1990, the Economic Community of West African States (ECOWAS) established the Economic Community of West African States Monitoring Group (ECOMOG) to restore peace in then war-ravaged Liberia. Seven years after, ECOMOG was similarly deployed to Sierra Leone to quell another civil war. These international efforts, which were not devoid of controversy, contributed a great deal to the relatively successful democratic dispensations in both countries thus far. Removing former Liberian president, Charles Taylor – a key antagonist in both wars – from the scene has certainly been beneficial; albeit more relevant for the Liberian case than that for Sierra Leone. A substantially reduced male population on the back of these murderous civil wars meant either democracy or autocracy prevailed depending on the post-conflict dynamics. When the key players in the civil wars were prosecuted, the reduced testosterone count allowed democracy to thrive. When the “victors” of these wars were left to their own devices, autocracy prevailed; like in Rwanda and Angola.

Salone decides
And in Liberia and Sierra Leone, just when the peace seemed to have endured irrevocably, disaster struck again. The ebola epidemic between December 2013 and January 2016 took more than eleven thousand lives; mostly in the two countries but also in Guinea and a few in Nigeria, Mali and Senegal. Despite these troubles, Liberia conducted a successful poll in late 2017 and made its first civilian-to-civilian transition in early 2018. Sierra Leone, which would be conducting its first post-Ebola presidential election in early March, may prove similarly successful; largely a 3-way race between Julius Maada Bio of the Sierra Leone People’s Party (SLPP), former UN under-secretary-general Kandeh Kolleh Yumkella of the National Grand Coalition and foreign minister Samura Kamara of the ruling All People’s Congress (APC) party candidate. Despite the not too stellar record of outgoing President Koroma, Mr Kamara, who has the overt backing of the main foreign benefactor of the state (China), is still expected to win; albeit likely by a slim margin. Mr Yumkella is one to watch, though. (I wrote a piece on the Sierra Leone polls for the March 2018 edition of African Business magazine; available at newsstands.)

Also published in my BusinessDay Nigeria newspaper column (Tuesdays). See link viz. http://www.businessdayonline.com/post-crisis-transitions-Liberia-Sierra-leone/

Tillerson in Africa

By Rafiq Raji, PhD
Twitter: @DrRafiqRaji

Hours before American secretary of state Rex Tillerson was scheduled to land in Nairobi, the Kenyan capital, President Uhuru Kenyatta and his main political rival, Raila Odinga, held a press conference in which they vowed to mend fences and work together. This was the first time they would meet since a bitter election dispute that started almost 7 months ago. Hitherto, Mr Tillerson’s 5-nation Africa trip, which started this week, was written off as one focused on security and not necessarily concerned with other cogent issues germane to helping Africa move ahead. The five countries Mr Tillerson is visiting, Ethiopia, Djibouti, Kenya, Chad and Nigeria, have been grappling with one security issue or the other. Even so, African countries would also be interested in knowing whether they need worry about a negative surprise from the Donald Trump administration in regard of American trade policy; in light of its recent import tariffs on aluminium and steel. How much of a factor Mr Tillerson’s imminent arrival in Kenya was in getting President Kenyatta and Mr Odinga together remains to be seen. But after their public reconciliation today, all the negative headlines about Kenya, most of which were related to their caustic political standoff, have become largely irrelevant. They said the right words. And their body language suggested they were being sincere. Needless to say, it is a very positive development. Of course, there remains the issue of the worrying indebtedness of the Kenyan fiscal authorities and so on.

Look beyond security
Mr Tillerson’s visit is also opportune for Ethiopia, currently in transition and under a suspect state of emergency, as prime minister Hailemariam Desalegn takes a bow. The American foreign minister did not pull his punches upon arrival there, asserting that what Ethiopia needed at this time was a freer society. How much of an impact his words would have also remains to be seen. But judging from recent political developments, the ruling Tigray elite have little choice but to allow for a more representative government. And considering Ethiopia is still largely aid-dependent, Mr Tillerson’s remarks could be differential. The American foreign minister is also expected in Abuja in a few days. It would be the most high profile visit by an American official to Nigeria in recent times. Nigerians, who were more than a tad disappointed that former American president Barack Obama did not deem it fit to stop by, would nonetheless be looking forward to Mr Tillerson’s visit. Incidentally, he would be arriving at a time when the recent abduction of more than hundred school girls in Dapchi, northeastern Nigeria, is still fresh in their memories. I suppose they would want to ask him if America made an offer of assistance to the Muhammadu Buhari adminstration like it did the Goodluck Jonathan government for the Chibok girls. Other African countries would love to get a sense of American policy on their issues as well. South Africans have been a little taken aback for not being on Mr Tillerson’s itinerary, for instance. The American view of the new Cyril Ramaphosa administration’s land expropriation without compensation policy is one some nervous market participants would be interested in. When asked about the matter at a conference call ahead of Mr Tillerson’s trip, acting assistant secretary of state for African affairs Donald Yamamoto did not give a definite view.

Competing for influence
In light of the foregoing, there is a risk of overestimating the influence of the Americans in Africa. They are not as important as they once were. Mr Tillerson has certainly shown a realism in this regard. In fact, the focus of his first speech in Addis Ababa was preponderantly focused on China’s now enviable hold on the continent. He mentions the growing indebtedness of African countries to China, in particular; cautioning them not to sell their sovereignty away. Coming from the Americans, who through the International Monetary Fund (IMF), were once similarly overbearing on African politics and policy, and perhaps still are, it seemed a little uncanny. But it speaks to the concern of the Americans about the Chinese. Already, the Americans plan to clarify from China in a meeting scheduled for the spring what their operational military goals in Africa are. That meeting, if it holds, would likely be dominated by Chinese military activities in Djibouti. In February, Djibouti terminated its contract with Dubai’s DP World for the management of Doraleh Container Terminal at the Djibouti port. American intelligence has it on good standing that the Chinese, who already have a military base in the country, would likely be gifted the port; with potentially “significant” consequences for American military operations in the country. Incidentally, Mr Tillerson’s Africa trip coincided with a similar one by Russian foreign minister Sergey Lavrov. While in Ethiopia, Mr Lavrov and Mr Tillerson stayed in the same hotel but did not meet. Before arriving in Addis Ababa, Mr Lavrov was in Harare to meet President Emmerson Mnangagwa to agree military and mineral deals. The Americans have more than the Chinese to worry about, it seems.

Nigeria: MTN listing must be truly local

By Rafiq Raji, PhD
Twitter: @DrRafiqRaji

I participated in an interesting debate on Twitter this weekend past. In a sharp departure from my usual approach to using the micro blogging site, I reacted almost instinctively to a post by a well-respected business journalist about the upcoming MTN listing on the Nigerian Stock Exchange (NSE). He had it on good authority that all four financial advisers chosen by the South African telecoms firm for the transaction are South African companies. (Pardon the tautology; but you likely see the point.) My view was that the Securities and Exchange Commission (SEC) can and should intervene. Otherwise, what is the whole point of the exercise? (MTN was “advised” to list on the local exchange.) The opposing views, well-informed ones, I might add, were that such an intervention would be an anomaly. Even if the advisers are foreign-owned, are they not properly licensed to operate in Nigeria, one of the grandees in Nigerian (and indeed African) finance wondered. I took the point. But did MTN even ask for issuing house proposals from indigenous houses? Since the journalist relied on sources, I will leave that question in the air. But he did add that MTN “asked local houses to send proposals to bid for…stock brokerage only…” (Note my use of “indigenous” and not “local”. By the former, I mean an issuing house or advisory firm set up and operated by Nigerians. The journalist’s use of “local” means “indigenous”, though. So from here on, if you happen on “the grandee”“the journalist”“local” and “indigenous”, you know what I mean.)

Free market intervention
After mulling the issue a little bit, I came to the firm view that SEC should insist on a sizeable local content for the MTN issuance. And “local” must be truly local. Naturally, such an interventionist approach would not sit well with most market participants. Another well-informed participant in the debate reacted with wry humour if not sarcasm (not in a bad way): “I thought we operated…a free market? Perhaps government should also legislate how the book-running and roadshow [should be] conducted and proportional share allocations as well.” Yes, the globalist grandee agreed. But then I added that even as America and Europe are supposedly free markets, when a mergers and acquisitions (M&A) transaction borders on national security or involves strategic sectors or differential technologies, they do intervene or block it outrightly. I cited the recent example of American regulators blocking the US$580 million acquisition bid for a semiconductor company by a Chinese fund. Another example is the blocking of the US$1.2 billion sale of MoneyGram to Jack Ma of Alibaba by US regulators. France also recently blocked the takeover of the Toulouse airport by a Chinese firm.

Practice and law
A rebuttal to my point was that blocking a deal and choosing advisers are two different things. True. But I was not suggesting that the SEC choose the advisers but that the unique nature of the MTN transaction requires that indigenous firms be part of the “cream” (advisory and underwriting) and not just the “crumbs” (brokerage, placement agency, etc.) of the process. Relegating indigenous firms to just brokerage and placement agency was almost disdainful, I thought. (Of course, this is speaking hypothetically; since MTN has not revealed the full details of those it has mandated for the transaction.) Besides, shouldn’t a local content policy apply to all industries? Investment banking is an industry too. And even as the SEC may not necessarily have legal standing (as yet, at least) to compel MTN to include indigenous advisers in its proposed NSE listing, couldn’t it “advise” the firm to include them? My drift here, as I stated then, is that if indigenous advisory firms are not given due consideration on these mega deals, only the foreign-backed local firms would secure them. After all, they have better expertise, wider networks and deeper pockets. Even so, the rhetoric relevance of my examples could be stronger. (The grandee is a skilled debater.) So, I conceded the point. Not for long.

Local content is global
In China, a global law firm would not be able to do legal “work without partnering with a Chinese firm”, goes one article by the Financial Times in February (“Chinese M&A boom provides slim pickings for global law firms”); this was the closest example I could quickly find on how a local content policy could also be germane for the advisory business. What did the Chinese do? I will quote the FT article freely: “Non-Chinese lawyers are not allowed to practice mainland law, although they can provide informal advice. [And] recruiting Chinese lawyers into global firms does not solve the problem as they have to give up their local licenses.” Of course, financial advisory comes with some peculiarities; some mandates involve not just advice but underwriting as well, for instance. Even so, a local content policy is by its very nature interventionist. It is designed to ensure that compliance is not a choice but a necessity. In Nigeria, “local content” tends to be associated with the oil and gas industry. (I will leave the story about how foreign players in that industry circumvent local content requirments for another day; but maybe you should ask your friends there how much they really learn on those long stays at head office abroad.) I assert “local content” is relevant for the financial advisory business in Nigeria (and elsewhere) as well. We are all too quick to note China’s success. But surely, they did not achieve it by taking things easy. They persuaded, cajoled, and spied to get ahead. And when they had it in their power to force their will, they did not hesitate to wield it. Nigerian authorities asked MTN to list on the local exchange. They must also ensure that the process is truly local. (By the way, the debate is still on.)

Also published in my BusinessDay Nigeria newspaper column (Tuesdays). See link viz. http://www.businessdayonline.com/mtn-listing-must-truly-local/

Nigeria: Much ado about a red carpet

By Rafiq Raji, PhD
Twitter: @DrRafiqRaji

What was Muhammadu Buhari, the Nigerian president, supposed to do when he disembarked from his helicopter in Dapchi, the town of the most recent kidnapping of schoolgirls in northeastern Nigeria? Pray tell, should he have deliberately walked on the green grass or sandy grounds just so he would not be accused of needless pageantry on the occasion and venue of such a sad event? We need to be reasonable. The outcry about the great matter might be beneficial in the long run, though. Now the protocol office would know to ponder whether the optics of an arrangement would serve the best interests of their principal or indeed their functions; after all protocol officers are expected to be intelligent folks. A president should not be expected to have time for such little things. At least, not if he or she is doing the job we elected him or her to do. The other criticism about how President Buhari said his handling of this most recent kidnapping is better than his predecessor’s handling of that of the Chibok girls, is, however, justified. The comparison was tacky and unnecessary. It was a mistake. And yes, those who say what is needed from the president at this time is action and not sympathy certainly have a point. I shall choose not to belabour the point of Mr Buhari’s unusual timing and choice of venue for throwing a jibe at his predecessor. That said, I certainly do not buy the story by the presidency that Mr Buhari needed to properly digest the security reports about the incidents before heading to Dapchi and elsewhere. Let me be clear. The president cannot visit every place there is a terrorist incident or kidnapping. But the abduction of schoolgirls, especially in northern Nigeria, is so sensitive that there should not have been the slightest hesitation about getting “the eagle” in the air momentarily after the news. That is the past now.

Smell a rat
During the now ill-fated trip of outgoing American secretary of state Rex Tillerson to Abuja last week – the reason I suspect Mr Buhari kept checking his watch whilst at Dapchi, who he was scheduled to meet a few hours later – the president revealed negotiations were ongoing to rescue the Dapchi girls. When asked whether the Americans were helping, Mr Tillerson gave a scripted generalist answer. My interpretation is that the Nigerian security forces are handling the matter with little or no help from the Americans. By the way, there is usually at least one surveillance satellite ahead of key hotspot countries at any time; any of which could belong to one of the major superpowers, who as could be discerned by the supposed coincidental visits of the Russian and American foreign ministers to Africa recently and the American concerns about the rivalling Chinese influence on the continent, keep a very close eye on activities on the ground here regularly. The problem is that even if the Americans and others were able to follow the trail of the kidnappers, without Nigerian forces on the ground at the time of the event, there was likely little else that could have been done. Which is why the withdrawal of troops from Dapchi just before the sad incident is suspect. It is, however, hugely unlikely, that the truth would ever be revealed. But of course now, the military would get all the funds it needs and terrorists would get to beef up their coffers with public revenue from likely ransom payments to rescue the girls.

Extraordinary measures needed
When you ponder these events, you almost get miffed that Nigerian authorities seem hesitant to declare marauding herdsmen terrorists, who despite recent presidential visits to the sites of their mayhem, continue to maim and kill with seeming impunity. What is the difficulty? In fact, it is believed the hate speech legislation being considered by the Nigerian parliament is in part motivated by elite concerns about the demonisation of Fulanis around the killings by herdsmen. True, the legislation is not particularly novel in these parts. South Africa, another African country, is considering one. But to ascribe the punishment of death to speech is heavy-handed. Never mind that there are already ample existing laws on libel and incitement. And even as it is likely that criminals have been taking advantage of killings by supposedly Fulani herdsmen to cloak their own heinous acts, there is yet to be any culprit captured by the police or security services in regard of these killings that is not Fulani. Besides, there is evidence, from the letter written to the Benue State governor, to media utterances by principals of the association of cattle owners and herders, to suggest that these dastardly acts are organised and the culprits easily identifiable if there is the will to apprehend them. The reason it is important to declare the herdsmen perpetrating these heinous crimes as terrorists, that is, apart from the fact that what they are doing is in fact terrorism, is that it enables the authorities to take extraordinary measures in law that quicken apprehension and prosecution. The president’s gentlemanly approach is not working.

Intra-African trade: On the AfCFTA

By Rafiq Raji, PhD
Twitter: @DrRafiqRaji

My column this week is an abridged version of the article I wrote for the March 2018 issue of African Business magazine on the AfCTA, which African heads of state are scheduled to sign in Kigali, Rwanda, on 21 March 2018. The complete version, with comments by experienced executives and analysts, can be found in the magazine (available at newsstands).

After about two years since the signing of the Sharm-el-Sheikh Tripartite Free Trade Area (TFTA) agreement in June 2015, which brought together member states of the Southern African Development Community (SADC), East African Community (EAC) and Common Market for Eastern and Southern Africa (COMESA), trade ministers from all of Africa’s 55 countries, including those of the Economic Community of West African States (ECOWAS) which already have a Common External Tariff, met in Niamey, the Nigerien capital, in early December last year to agree final terms for the African Union’s Continental Free Trade Area (CFTA). They made some good progress; by and large. A formal signing of the trade deal by heads of state is expected in March. There are still a few pending issues, though. They are yet to agree on tariffs on all goods, for instance. But on services, they successfully closed the book.

Intra-African trade recovers
The objective of the CFTA is primarily to engender more intra-African trade; currently 15 percent of the continent’s total merchandise trade. When compared with intra-regional trade in other continents – 67 percent in Europe, 58 percent in Asia and 48 percent in North America – this is quite low. Efforts, thus far, at improving the low trade interactions within the continent, have not been quite effective, clearly. There are signs of improvement, though. According to most recent data from Cairo-based African Export-Import Bank (Afreximbank), intra-African trade grew by 8 percent in the first nine months of 2017; with Guinea, Ethiopia, Burkina Faso, Equatorial Guinea, and Sierra Leone in the lead. This is definitely better than the marginal 0.6 percent growth to US$156.94 billion recorded in 2016. Even so, there is still much road to cover before intra-African trade recovers to the 2013 peak level of US$174.9 billion. And as recent as 2015, intra-African trade growth was almost 9 percent. Afreximbank attributes the latest recovery to rising commodity prices, “improved regional trade across regional economic communities and some countries’ increased focus on promoting intra-African trade”. There is beginning to be a paradigm shift it seems.

One big step but…
Otherwise, it could be rightly averred that after the typical jamboree around continental initiatives like the CFTA, the various heads of government could again probably just go back to their capitals and do whatever they like. Things could be different, this time around, though: the need for improved intra-regional trade relations is now almost existential. With additive manufacturing, automation and other fourth industrial revolution innovations likely keeping developed economies at an insurmountable advantage yet again, African manufactures would probably only thrive in the future if they are traded within the continent. And since it is only by trading more with each other that this could be achieved, African governments would need to ensure hassle-free market access for African-made goods. This is the underlying motivation behind the CFTA.

Challenges remain, however. Negotiations on such important issues like intellectual property rights, some tariffs, what constitutes proper competitive behaviour and so on, are still pending. Besides, there is the bigger issue of how African countries would extricate themselves for constraining bilateral and multilateral trade agreements with developed economies, which at first glance, seem beneficial to African countries, but on further scrutiny, would be found to be ultimately detrimental to their long-term industrial development. The European Union’s Economic Partnership Agreements (EPAs) are top among them. Considering the likelihood that African-made goods would ever be as competitive as foreign ones is quite slim, African countries would in addition to trading more with each other also need to exclude outsiders with as much zeal; for a while, at least.

Disunity elsewhere
Should the CFTA vision be realised, intra-African trade could increase by at least 50 percent over the next five years, some estimate. A market of more than 1.2 billion people with a combined GDP of $2.2 trillion is a far stronger bulwark against limiting external trade forces than the tiny ones that inevitably get overwhelmed in negotiations with humongous countries – even as stand-alone economies – like America, Britain and China. Incidentally, even these countries who already trade a great deal within their respective continents, are becoming increasingly isolationist. So, just as African countries are beginning to find trade unity, previously globalist and more integrated ones abroad are beginning to flirt with insularity.

Actions speak louder 
In any case, the trade barriers that really require attention on the continent would barely surface in negotiations or be amenable to them. For instance, infrastructure, the financing deficit (US$93 billion per annum) or terrible state of which, add to logistical costs and retail prices, is one of the reasons why African goods are not competitive. Non-tariff barriers like that would require not just collaboration between African governments but a sense of initiative by each of them. And even as the raison d’etre of the CFTA is palpable, would there be similar enthusiasm in implementing it?

Also published in my BusinessDay Nigeria newspaper column (Tuesdays). See link viz. http://businessdayonline.com/intra-african-trade-afcfta/