Home|[in] focus|BRICS and the AFCFTA- Potential for industrialisation and inclusive development
Categories: [in] focus

by Ashraf Patel

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Categories: [in] focus

by Ashraf Patel

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The UN Declaration of the Right to Development (RtD) recognizes that development requires a favourable economic environment at the international level (Article 10). This has remained the basis for the right to development (RtD). Since 1966, the RtD has gone through an evolution, from being a new concept, to being well acknowledged and then routinely included in the United Nations resolutions and outcomes of international conferences and fora.

In this context, the evolution of the AUs  African Continental Free Trade Agreement (AFCFTA)  seeks to create a single market, deepening the economic integration of the continent; establish a liberalized market through multiple rounds of negotiations; aid the movement of capital and people, facilitating investment; move towards the establishment of a future continental customs union; and achieve sustainable and inclusive socio-economic development, gender equality, and structural transformations within member states. Infrastructure inadequacy, however, remains a major obstacle to Africa’s economic growth, development, and productivity. It is estimated that poor infrastructure cuts national economic growth by two percent annually and productivity by a staggering forty percent.

Industrialisation has been on the United Nations (UN), African Union (AU), and UNECA agenda for the past two decades. According to J Matola (2022)

“Africa remains the least industrialized continent. The industrial sector in Sub-Saharan Africa (SSA) contributes less than 28% of the region’s gross domestic product (GDP), which is lower than other low-income regions in the world. Data from the World Bank’s World Development Indicators shows that in 2019 SSA’s industrial output stood at $194 billion – much less than other low-income regions, such as South Asia ($491.6 billion) and Latin America and the Caribbean ($762 billion)

Among the key constraints facing most Sub-Saharan economies are poor infrastructure, weak institutions, the primary sector as a key driver of economic activity, a business-unfriendly environment; limited capacity in innovation, science and technology; highly fragmented markets with trade barriers; a lack of comparative advantage in industrial products; and unfavourable macroeconomic conditions.

Is the AU and the AFCFTA putting the proverbial ‘cart before the horse’?

Generally the AFCFTA first two years of focus has had a decidedly FDI business-investment agenda, and has yet to conclude the foundational agreements on trade, rules of origin and agriculture- the foundations of any trade agreement. Meanwhile the AFCFTA is moving headlong with the ‘services agenda’ through the Roadmap  on services, investment, environmental services and IP, the level of complexity expands, and will have grave implications for lack of support for agriculture and  industrial development. The second round of negotiations is ongoing and will cover the remaining services sectors such as business, distribution, education, environmental health and related social services and the recreational, cultural and sports services. As per the Roadmap, this round of negotiations is due to be completed in 2023.

Meanwhile the AU is deliberating on the digital trade agenda with its focus on e-commerce, which overlaps with many areas of law such as consumer protection, data protection, intellectual property rights, competition policy and tax-related issues, amongst others. The negotiators of the AfCFTA must determine how in-depth to regulate these issues within the E-commerce Protocol. Another important aspect for consideration is the regulation of online dispute settlement. The use of e-commerce channels and platforms varies from country to country. There is the additional complication that Phases II and III of the negotiations have now been merged into one. However, the Protocols on Women and the Youth and on Digital Trade are not mentioned in Article 8(2) of the Agreement, and labour formations are marginalised.

The danger of a fragmented AFCFTA regime will have to be addressed and a solution be agreed before these negotiations are concluded and can reverse social gains, as well as ensure decidedly FDI investment regime and erode the social agenda, that is crucial for the attainment of the UN SDGs.

Furthermore, ongoing and complex relations and bi-lateral treaties AGOA and EU EPA’s negotiations have a myriad of challenges, many getting caught up in geopolitical headwinds. The case of the poultry industry in South Africa, which is being destroyed due to excessive dumping – as well as punitive trade and tariff policies by Agribusiness in the US, EU and Brazil, The passing of the Inflation Reduction Act IRA 2022 in the US,  as well as the EU’s proposed Carbon Border Mechanism (CBM) signals the rise of protectionist policies, meaning it will be more difficult for developing nations and their businesses  to access markets in the US and EU.

BRICS nations and enabling an inclusive AFCFTA

In the current, fractured multilateral order, new modes of trade wars are having negative  spillovers for many African nations. In this milieu, the BRICS bloc – and its new members   offer new scope and platforms for equitable trade, as well as industrial development and inclusive growth and export opportunities- the engine room for job creation.

All BRICS countries have major relations with African countries and the BRICS bloc of countries, with 31.5% of global gross domestic product (GDP), has overtaken the G7 [advanced economies bloc], with 30%, mainly owing to the growth of China, which has contributed 30% of global growth over the past ten years,

The expansion of BRICS membership is a solid step toward that goal and is highly consistent with the theme of South Africa’s chairship this year. South Africa can  use its position as the 2023 chair of the Brazil, Russia, India, China and South Africa (BRICS) multilateral bloc to advance the interests of African States, under the theme of ‘BRICS  and Africa: partnership for mutually accelerated growth, sustainable development and inclusive multilateralism’.

In 2022, amid the Covid-19 pandemic, BRICS countries came together to promote joint development through, for instance, the BRICS Initiative on Trade and Investment for Sustainable Development, the Digital Economy Partnership Framework, the space cooperation mechanism, and the BRICS Vaccine R&D Centre, which  are innovative models for exclusive development.

Today, as multilateral mechanisms such as the APEC, NAFTA, and G20 face greater challenges ranging from debt relief measures to global tax agreements, and financial (in)stability, an expanded BRICS could play a unique role in promoting global development and cooperation, especially among emerging markets and developing countries, advancing the AFCFTA on a sustainable path, and contributing to the building of a global community of peace and development.

 

Mr. Ashraf Patel is the digital data and economy associate at the IGD. His research is also supported by the National Institute for Humanities and Social Sciences (NIHSS) and the South African BRICS Think Tank (SABTT). Mr. Patel’s views do not necessarily reflect those of the IGD

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