« A historic turning point full of promise for industries on condition that we prepare for it … »
The African Continental Free Trade Area (CAFTA) has entered its operational phase at the end of the 12th Extraordinary Summit of the African Union (AU) held in Niamey (Niger) this weekend. For Louis S. AMEDE, the Director General of the National Federation of Industries and Services of Côte d’Ivoire (FNISCI), the African market offers enormous opportunities to Ivorian industry but provided they prepare well. Interview.
Let’s go, the ZLECAf has entered its operational phase!
Exactly! And we could consider this a historic turning point. For it is a further step towards the constitution of the customs union prescribed by the « Abuja Treaty » of 1991, establishing the African Economic Community (ECA).
What reading does your organization and its members make of this evolution?
For the FNISCI, the construction of the ZLECAf opens up some good prospects whose capitalization requires real efforts. Indeed, it is full of opportunities, in the sense that it opens for the Ivorian economy and the industrial and service companies of Côte d’Ivoire – but also that of the whole subregion of West Africa. -, beautiful prospects for development. Côte d’Ivoire’s share of trade with other countries in the continent hovers around 30% of the country’s overall trade flows – almost double the continental average. This is to say if the Ivorian economy conceals, a priori, real potential to make the most of this large continental market under construction.
Realize this great potential, that’s the challenge. And requires for the country to be well prepared in terms of national strategy for implementing the ZLECAf, improving the productive capacities of companies, diversification and sophistication of our industrial offer, complementarity and coherence between commercial policies , industrial and financial … Of course, this is not just about the public authorities, the private sector itself must not lose sight of the fact that it will have to deal with much greater and wider competition, and thus reinforce its resources.
Thus, as much as it is accompanied by promise of multiple opportunities, the construction of this area of free trade African drains challenges. And the challenge for the continental private sector is to turn these challenges into more opportunities.
What is the interest of the ZLECAf
The main interest of the Continental Free Trade Area is that it will erase certain barriers to intra-African trade. It renders completely evanescent the various barriers that complicate trade between African countries by transforming the entire continent into a single market of 1.3 billion consumers for goods, services, capital …
The internal market, which is much larger than the size of this construction, has various advantages. At the macroeconomic level, the large size of this market is likely to act as a safety net for our economies against the ups and downs of international trade related to global volatility. At the microeconomic level, it opens up great opportunities for companies to expand their activities and improve their structural competitiveness. From a general point of view, the main outcome of this new step towards Africa’s economic integration is the increase in the volume of intra-African trade.
What concrete impact can the ZLECAf have for Ivorian industrial enterprises?
According to the Economic Commission for Africa (ECA), the integration of the continent into a single trade zone – elimination of tariffs on products originating from the continent – will increase, potentially, 52.3% of trade intra-African-which does not officially exceed 15% of the continent’s overall trade. This means that for Ivorian industrial companies, there are market shares to be won and new markets, previously unexplored, to be conquered.
Various studies have shown that in the current state of the customs systems operating on the continent, exporting from one country to another is much more expensive than exporting out of the continent. The difference in the additional customs duties to be paid is of the order of 6.1%. Thus, the elimination of tariff and non-tariff barriers and the free movement of persons and services resulting from the creation of the ZLECAf are likely, on the one hand, to strongly boost trade between the countries of the continent; on the other hand, to foster a general environment conducive to employment; and also to promote the development of regional value chains and improve the diversification of African economies.
You keep repeating that as much as the ZLECAf is rich in promise of opportunity, it also carries challenges.
Yes. It is very important to take it up. Because the general trend, and the politicians are having fun, is to highlight the strong potential for increased intra-African trade inherent in eliminating tariff and non-tariff barriers. But to capitalize on this great potential, you have to be well equipped. Clearly, it is not by remaining focused on the current base of their export – consisting mainly of fuels, minerals-metals-precious stones, agricultural raw materials of low value added and basic manufactured products – that African countries will significantly increase trade between them. What makes up the bulk of African imports are machinery and transport equipment, sophisticated manufactured products, basic foodstuffs and chemicals …
One of the most important challenges for dynamic economies with high growth potential, such as that of Côte d’Ivoire, is therefore the significant improvement in their offer, which means diversification, improvement and sophistication of the economy. supply of our industries and services businesses. Otherwise, since the ZLEAC leaves open the possibility for non-African third countries to access the vast continental market through the preferential agreements that bind them to the continent’s countries or community groups, the latter will make the most of this new construction.
Does this mean that free trade between the countries of the continent favored by the ZLECAf is not enough to boost the development of the continent?
It is clear that free trade alone is not enough to promote the continent’s economic development. It is essential to support, with respect, a country with high growth and development potential such as Côte d’Ivoire, an industrial policy generating (actually) added value in the agricultural, manufacturing, mining; a financial policy promoting innovative financing and facilitating trade finance; a commercial policy in line with industrial policy, an education and training ecosystem responding to industrial development and a strategy for the development of the tertiary sector.
On a general level, the multiplicity and inconvertibility between them of the currencies that prevail on the continent – which increase the costs of intra-African commercial transactions – pose the specific challenge of creating a compensation mechanism at the continent. Similarly, the on-going major shift in world trade, from trade in products to trade in tasks (services) poses the challenge of integrating trade in services into national, regional and continental export strategies.
After the Niamey summit, which launched the operational phase of the ZLECAf, do you see what’s next?
One can caricature by saying that the summit of Niamey closed the promotional phase of the ZLECAf in order to obtain all the signatures and ratifications necessary for its effective launch. Now begins the technical work and the hard part of the negotiations on the different liberalizations. The objectives of liberalization are 90% of the products over a period of 5 years to 10 years – according to the economic status of the countries – and 10% of protected products.
In this phase, at least three facts should not be overlooked: on the one hand, the uniqueness of the continental market is also synonymous with increased competition and, on the other hand, that the main driving forces for the intensification of intra-European trade -African expected from the ZLECAf will be the constant improvement of productive capacity, productivity and innovation – in order to gain competitiveness- and the permanent increase in the quality of products and the efficiency of services ; and, lastly, the need to capitalize on the achievements of the construction of sub-regional community groups.