The Vice President, Professor Yemi Osinbajo, has estimated the value of informal trade in the African Continent to be in the region $93 billion yearly.
Osinbajo, who stated this yesterday in a message delivered at a roundtable on industrialisation in Africa with the theme: Positioning African Industries for Economic Transformation and Continental Free Trade, organised by the Manufacturers Association of Nigeria (MAN) to celebrate its Golden Jubilee, said while the African Continental Free Trade Area (AfCFTA) offers limitless opportunities for the industrialisation of Africa, authorities across the continent must take the right policy actions to actualise them, pointing out that such actions include the protection of local industries and improving value chains.
He said part of the guiding principle in preparing industries for AfCFTA, is “ease of payments across borders and implementation of the protocols on free movement of persons.” The VP said in the pre-recorded message that “it is particularly important to rapidly operationalise the effort by Afreximbank to establish a Pan-African Payments and Settlement Platform, saying this will go a long way in creating the desired continental payments system and also in facilitating cross-border informal trade which he put at about $93 billion per annum.
Osinbajo underscored the importance of the AfCFTA as the fulcrum for Africa’s development. As he put it: AfCFTA is indispensable if industrial development is to take off in Africa because it offers wider markets and economies of scale which are essential for manufacturing to be competitive. “We must take policy actions to create an environment in which businesses can thrive.
To start with, we must adopt the right type of macroeconomic and industrial policies,” he said.
Osinbajo said It is important for African governments to provide a stable macroeconomic environment which avoids and smoothen out volatility in prices, sharp deteriorations in the current account and budget deficits and rapid accumulation in debt burdens,” saying to boost manufacturing and industrialisation,, policies like tariffs, quotas, subsidies and non-tariff barriers which protect our infant industries must be in place so that they can create jobs and enable learning, which to him “are vital.”
He stressed the need for “well negotiated rules of origin,” saying they “are important in the context of the free trade agreements as they are key to preventing trans-shipment and the deflection of trade. Without them, he argued, “firms from non-state parties could set up simple labelling operations in one member State with a view to shipping already finished products to another member State without really adding any value.”
He said it is important for MAN to involve itself in an advisory capacity to government negotiators “as we go further into the rules of origin negotiations (these rules negotiations have, of course, started), but I think as we go on, we should get more contributions and advise from MAN. Our manufacturers must also strive to become competitive after a clearly specified time period so that they can withstand the ever present danger of stiff competition from imports. In other words, while our manufacturing industries must be nurtured and supported, they cannot remain infants forever,” the VP added.
Emphasising the point about enhancing industrial competitiveness, Prof. Osinbajo noted that “one of the ways to increase the competitiveness of African industries is to develop and deepen regional value chains wherein production systems starting from conception and design right through to supply of raw materials, processing, transport, storage, marketing and sales take place within our countries and continent.” Citing examples of Nigeria and South Africa, the VP explained thus: “when we export commodities to the rest of the world, we are also exporting jobs and the positive spillover effects such as learning that come with manufacturing are lost.
“Happily, we are already beginning to see some green shoots emerging in this regard as Nigerian fertiliser blenders obtain phosphates from Morocco for blending with urea produced in our petrochemical plants. Similarly, South African car manufacturers already buy leather for car seats from Botswana. We however need much more of such activities. He said there are a number of other things that need to be put in place quite quickly “if we are to see the kind of manufacturing activity that we desire. First of all, we need to develop a strong infrastructural base. Extensive, cheap and affordable infrastructure is vital for the success of our economies. “We must build a network of roads, bridges and rail that will facilitate the movement of goods and people just as we build the electricity plants to power our factories and the broadband networks that lubricate modern business. It would also be essential in the interim to develop sites with dedicated infrastructural and regulatory structures like Special Economic Zones and Shared Facilities for small businesses.”
– The Nation