44 African nations sign pact establishing free trade area

The African Heads of States and Governments pose during African Union (AU) Summit for the agreement to establish the African Continental Free Trade Area in Kigali, Rwanda, on March 21, 2018. (AFP)
Updated 21 March 2018
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44 African nations sign pact establishing free trade area

KIGALI, Rwanda: Forty-four African countries have signed an agreement establishing a free trade area seen as vital to the continent’s economic development, the head of the African Union said Wednesday.
The creation of a free trade area — billed as the world’s largest in terms of participating countries — comes after two years of negotiations, and is one of the AU’s flagship projects for greater African integration.
“The agreement establishing the CFTA (African Continental Free Trade Area) was signed by 44 countries,” said Moussa Faki Mahamat, chairman of the AU commission.
However, the agreement will still have to be ratified at a national level, and is only due to come into force in 180 days.
Nigeria is notably absent from the signatories after President Muhammadu Buhari pulled out of this week’s launch in Rwanda saying he needed more time for consultations at home.
One of Africa’s largest markets, Nigeria hesitated after objections from business leaders and unions — a sign that getting the deal through scores of national parliaments may face several hurdles.
“Some countries have reservations and have not finalized their national consultations. But we shall have another summit in Mauritania in July where we expect countries with reservations to also sign,” said Albert Muchanga, the AU Commissioner for Trade and Industry.
However other economic powerhouses South Africa, Kenya, Morocco, Egypt, Ethiopia and Algeria — known for strict protectionist policies restricting imports and exports — did sign the deal.
If all 55 African Union members eventually sign up, it will create a bloc with a cumulative GDP of $2.5 trillion (2 trillion euros) and cover a market of 1.2 billion people.
Currently, African countries only do about 16 percent of their business with each other, the smallest amount of intra-regional trade compared to Latin America, Asia, North America and Europe.
And with average tariffs of 6.1 percent, businesses currently pay higher tariffs when they export within Africa than when they export outside it, according to the AU.
“If we remove customs and duties by 2022, the level of intra-African trade will increase by 60 percent, which is very, very significant,” Muchanga told AFP in an interview before the summit.
Proponents of the deal argue that African economies on their own are too small to support economic diversification and industrialization on their own and will benefit from having a unified platform to negotiate trade deals with wealthier nations.
The “CFTA will make Africa one of the largest economies in the world and enhance its capacity to interact on equal terms with other international economic blocs,” said Faki in a speech before the signing ceremony.
“The world is changing, and changing at a great speed. International competition is fierce. It leaves no room for the weak.”
However, critics highlight a dearth of roads and other infrastructure linking different African nations, as well as the fact that many countries do not manufacture goods their neighbors may want to import, as challenges to the deal.
Sola Afolabi, a Nigeria-based international trade consultant, told AFP the fact already-existing regional trade blocs were not working, should be a red flag.
“If there is no reward for compliance and there is no punishment for non-compliance, then it is going to be a very nice agreement without any teeth or any legs,” he said.
Faki acknowledged that Africans “have seen so many proclamations remain a dead letter, so many commitments without practical execution that they have come to doubt the strength of our commitment.”
He urged for a break in this trend, calling for a deal that “must confound those who, outside Africa, continue to think — with barely-concealed condescension — that our decisions will never materialize.”
The CFTA is a key part of the AU’s long-term development plan Agenda 2063, which calls for easing trade and travel across the continent.
At its most recent summit in Ethiopia in January, AU member states agreed to a common air transport market that could drive down airfares, as well as plans for visa-free travel for Africans across the continent.
Also on Wednesday, 27 countries signed the protocol agreeing to the free movement of persons across the continent.


No need for more talks over draft budget: Lebanon finance minister

Updated 21 May 2019
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No need for more talks over draft budget: Lebanon finance minister

  • Lebanon’s proposed austerity budget may please international lenders but it could enrage sectors of society
  • Lebanon has one of the world’s heaviest public debt burdens at 150 percent of GDP

BEIRUT: Lebanon’s finance minister said on Tuesday there was no need for more talks over the 2019 draft budget, seen as a vital test of the government’s will to reform, although the foreign minister signalled the debate may go on.
The cabinet says the budget will reduce the deficit to 7.6% of gross domestic product (GDP) from last year’s 11.2%. Lebanon has one of the world’s heaviest public debt burdens at 150% of GDP.
“There is no longer need for too much talking or anything that calls for delay. I have presented all the numbers in their final form,” Finance Minister Ali Hassan Khalil said.
But Foreign Minister Gebran Bassil suggested the debate may go on, telling reporters: “The budget is done when it’s done.”
While Lebanon has dragged its feet on reforms for years, its sectarian leaders appear more serious this time, warning of a catastrophe if there is no serious action. Their plans have triggered protests and strikes by state workers and army retirees worried about their pensions.
President Michel Aoun on Tuesday repeated his call for Lebanese to sacrifice “a little“: “(If) we want to hold onto all privileges without sacrifice, we will lose them all.”
“We import from abroad, we don’t produce anything ... So what we did was necessary and the citizens won’t realize its importance until after they feel its positive results soon,” Aoun said, noting Lebanon’s $80 billion debt mountain.
A draft of the budget seen by Reuters included a three-year freeze on all forms of hiring and a cap on bonus and overtime benefits.
It also includes a 2% levy on imports including refined oil products and excluding medicine and primary inputs for agriculture and industry, said Youssef Finianos, minister of public works and transport.
“DEVIL IN THE DETAIL“
Marwan Mikhael, head of research at Blominvest Bank, said investors would welcome the additional efforts in the latest draft to cut the deficit.
“There will be some who claim it is not good because they were hit by the decline in spending or increased taxes, but it should be well viewed by the international community,” he said.
Jason Tuvey, senior emerging markets economist at Capital Economics, said: “The numbers will be of some comfort to investors, but the devil will be in the detail.”
“Even if the authorities do manage to rein in the deficit, it probably won’t be enough to stabilize the debt ratio and some form of restructuring looks increasingly likely over the next couple of years,” Tuvey said.
The government said in January it was committed to paying all maturing debt and interest payments on the predetermined dates.
Lebanon’s main expenses are a bloated public sector, interest payments on public debt and transfers to the loss-making power generator, for which a reform plan was approved in April. The state is riddled with corruption and waste.
Serious reforms should help Lebanon tap into some $11 billion of project financing pledged at a Paris donors’ conference last year.
Once approved by cabinet, the draft budget must be debated and passed by parliament. While no specific timetable is in place for those steps, Aoun has previously said he wants the budget approved by parliament by the end of May.
On Monday, veterans fearing cuts to their pensions and benefits burned tires outside the parliament building where the cabinet met. Police used water cannon to drive them back.