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AU must protect Africa’s strategic sectors from unfair competition if AfCFTA is to live up to its promise

While African states are ordered, by way of multilateral agency conditionalities, to withdraw from the economy and stop subsidizing their enterprises in the name of liberalisation, developed countries are doing the opposite in all economic sectors that are deemed strategic in the life of their nations
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The establishment of the African Continental Free Trade Area (AfCFTA) promises incalculable socio-economic opportunities and benefits for Africans. However, the prospect of removing trade barriers for made-in-Africa products within this newly created single market has raised concerns among some member states of the African Union (AU), mainly regarding how the economic competition between the states will be organized. While such concerns are worthy of consideration, the protection of Africa’s free trade area against unfair competition or predation from outside the union deserves even more attention. The reasons as to why this aspect is critical should be obvious.

It is imperative for Africa to avoid repeating at the continental level the mistakes made at the national levels during the imposition of the structural adjustment programmes in the 1980s. At the time, African states yielded to the pressure from western governments and financial institutions and agreed to substantially or fully withdraw from strategic sectors of the economy under the guise of liberalization, thereby reducing financial support to or shutting down state-owned enterprises. Needless to say, these West-inspired policies had negative effects on African economies.

For one thing, the privatisation to which African states agreed was undertaken in a way that reduced the participation of Africans in the economic development of their countries. Indeed, not only did the foreign investors that were – still are – favoured in this process outcompete African investors in terms of the opportunity to raise capital to begin with, but they were also granted economic incentives (land leases, lower taxes, monopoly rights, grants and preferential loans, etc.) that their African counterparts could only dream of in their own countries. In such a context, the requirement of removing subsidies to state-owned enterprises and opening up African economies to competition actually led to subsidizing foreign-owned corporations instead. This wasn’t – and still isn’t – fair competition at all.

For another, privatisation, in this case, meant that: 1) African natural resources and economic means of production were relinquished to the control of foreign investors; 2) African countries were denied revenue through tax exemptions and tax evasion; and 3) Africa’s economies were denied the multiplier effect they would have enjoyed if the revenue accrued by investors were reinvested on the continent instead of being repatriated. These issues were compounded by the failure of African states to create enough job opportunities for Africa’s youth, with the argument that foreign direct investment leads to job creation increasingly becoming a myth. Indeed, the problem of unemployment in Africa is directly traceable to the collapse of industrialisation, which is directly linked to the shift to privatisation and foreign direct investment instead of investing in the growth of domestic entrepreneurship. Obviously, the collapse of state parastatals did not lead to the growth of Africa’s private sector and the creation of jobs as envisaged; African leaders rather gave away Africa’s resources to external players, with almost nothing to show for it. Clearly, if today’s leaders are serious about reaping the benefits the AfCFTA promises, these self-sabotaging practices must be reconsidered.

Moreover, the non-participation of the state in critical sectors of the economy meant that African economies could not benefit from research and innovation supported by state financial muscles. Instead, Africans were deceived into thinking that the private sector should lead research and innovation efforts – an idea that does not stand up to scrutiny when one looks closely at how things are done in most developed countries. As underscored by Mariana Mazuccato in her book The Entrepreneurial State: Debunking Public vs. Private Sector Myths, “Every major technological change in recent years traces most of its funding back to the state”.  As an example of this, Mazuccato notes that “The National Institutes of Health have spent almost a trillion dollars since their founding on the research that created both the pharmaceutical and the biotech sectors–with venture capitalists only entering biotech once the red carpet was laid down in the 1980s.”

Mazuccato’s observation can also be made for communication and software technologies which are dominated by US private corporations working on the foundation laid by trillions of dollars of public funds spent on research by the Department of Defense (DoD). In the same vein, smaller enterprises and startups are, from time to time, invited to participate in innovative projects funded by the DoD. In fact, such is the grip on this sector – and at the global level – of US-based corporations, which has resulted in mounting calls for the EU to create a few publicly supported large corporations for greater scientific and technological opportunities to challenge the US’s dominance.

The irony here is that while African states are ordered, by way of multilateral agency conditionalities, to withdraw from the economy and stop subsidizing their enterprises in the name of liberalisation, developed countries are doing the opposite in all economic sectors that are deemed strategic in the life of their nations. Hence, unless Africa does the same for its own strategic sectors that member states of the AU ought to collectively protect, support and fund, the single market that we aim to create will be dominated by foreign corporations. This situation will again suffocate African infant industries and businesses, while these foreign corporations would, as ever, repatriate their benefits home – capital flight.

What then are Africa’s strategic economic sectors? One can think of three main categories, namely telecommunications and transport, food and agriculture, energy and natural resources. The Covid-19 pandemic has forced Africa to face the reality of its own vulnerability with regard to the manufacturing (or lack thereof) of medical equipment, drugs and vaccines. It is hoped that the Russia-Ukraine war is another eye-opening experience that will awaken African leaders to our other vulnerabilities – the dangers hanging on the continent should the powers that be in the global order become openly hostile and decide for some reason to exert pressure on Africa. This is not a remote possibility.

Food and energy are vital to the survival of any nation, let alone a continent of 1.3 billion people, and so are communications and transport. Already, the current global food crisis has been weaponised to pressure Africa into taking sides in the conflict, and while Europeans have quietly lifted bans on Russian coal, African countries who intended to buy Russian oil are threatened with sanctions by the US.

On telecommunication infrastructure, for instance, in March 2022, one could note with concern Ukraine’s request to ICANN (the internet governing body) to shut down Russian internet domains. Although this request was not granted, it raises questions as to what would happen if Africa was the target of such technological warfare tactics. The fact being that Africa is ill-equipped to deal with such threats to our security, whether individually or collectively as countries.

The same can be said about our transport networks. For maritime trade, Africa still relies on foreign-owned companies for its exportation and importation with no African country among the top 35 ship-owning nations as of 2017. As for air transport, despite the presence of multiple national air carriers, Africa has still not attained full coverage as some connections between African countries require going through Europe or the Middle East before coming back to Africa. The transport and telecommunications conundrum has to be addressed as a priority if Africans are to fully take advantage of their single market.

One way to address these challenges is for African countries to collectively support African enterprises that have demonstrated expertise and potential for strong growth in their domain and, through consolidation, turn them into stronger entities able to compete with the world’s best.

There are precedents for such endeavours. The Airbus-Boeing 17 years dispute between the EU and the US provides a case in point on how state support for strategic sectors is paramount if African companies are to grow and compete on the global stage. It is worth noting how Airbus was registered as a European rather than a French national corporation and how it benefited from EU collective support in the form of subsidies, something that can be replicated for Africa’s best companies in strategic sectors. In a similar fashion, the current economic war led by the US against the Chinese Huawei in the race for 5G technologies is another example of how states protect their own industries against external competition, even under false pretences.

In fact, even in the area of agriculture and food production, we ought to keep in mind that the EU, China and the US (three major economic entities) all subsidise their farmers, making it impossible for African farmers to compete with their cheap agricultural products.

All of this is to say that it would defy logic if the Africa Union did not protect our single market and the economies of its members like other economic entities do for their people and member states. What’s good for the goose ought to be good for the gander. However, for the African Union to be effective, African states ought to have a comprehensive approach to security and diplomacy that are coherent with the defence of their shared interests, at least on these matters of strategic importance.

The stakes are high. Failure to protect our single market and our economies will mean that Africa’s single airspace will be dominated by foreign air carriers; our single market will be flooded by foreign agricultural products dumped on our shores by foreign-owned ships; our access to critical information (even internet itself) and our ability to communicate will depend on the whims of a company based in the US, etc…the list of impending catastrophes could go on and on. If this isn’t scary, I don’t know what is. In other words, a comprehensive approach to African security and diplomacy is needed if any of the important initiatives such as AfCFTA are to transform the continent and its people.

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