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Africa: Leaders must right free trade deal

Africa: Leaders must right free trade deal

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The postponement of the trading date for the African Continental Free Trade Area (AfCFTA) due to the disruptions caused by Covid-19 epidemic gives leaders time to iron out contentious issues.

The African Heads of State Summit that was to give AfCFTA’s commencement date had been expected to take place this month in South Africa but has been rescheduled to next year, according to Secretary General Wamkele Mene.

One of the contentious issues that African leaders have to contend with is the expected emergence of global value chains across the continent.
Evidence from divided global value chains where one side provides intermediate goods and labour while the other provides expertise and final goods demonstrates that the gains are uneven, to put it mildly.

his happens because as countries become increasingly integrated into global value chain processes, rich countries reap the benefits while the poor ones suffer detrimental consequences on jobs and wages.
This paradox is often referred to as winners and losers of the global value chains and is often compensated among European countries by the growth of new skilled jobs.

Mitigate effects
European governments usually offer employees who lose their jobs unemployment insurance and other social safety nets to mitigate the negative effect of outsourcing on employment.
Contrary to what happens in Europe and America, African countries offer nothing to displaced workers and to those who cannot find jobs because the industries producing the bulk of their consumer goods are located overseas — usually in Europe and now increasingly in India and China. Even within Africa, its participation in global value chains is largely driven by Northern and Southern African countries, which make up to 78 per cent of the continent’s total value chain trade.

Although this is attributed to the presence of natural resources and export specialisation, a little digging reveals that this is only part of the story. It has yet to be explained, for example, why the bulk of British investments still flow to South Africa despite its economy growing by about 0.8 per cent, while the rest of the continent has 27 of the world’s 50 fastest-growing economies.
A closer look at Kenya reveals that while the country has on average been growing at close to six per cent, it attracts only two per cent of Britain’s investment in Africa.
These disparities cause a lot of unease on the continent and are the underlying reason countries do not trade enough with each other.

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