Parliamentary group inquiry calls on new UK Government to create “prosperity partnership” with Africa based on development, trade and investment

An Inquiry Committee of distinguished British and African experts has today published a report examining the achievements of the UK’s Africa Free Trade Initiative (AFTi) five years after it was formally launched by David Cameron during his visits to South Africa and Nigeria in July 2011.

The Inquiry Committee – made up of Ali A. Mufuruki, Lord Stephen Green, Lord Paul Boateng, Ambassador Darlington Mwape and Professor Myles Wickstead – was established by the All-Party Parliamentary Group for Trade Out of Poverty earlier this year.

The Inquiry Committee gathered written evidence and held public hearings and other consultative events in the UK and Africa over a six month period, engaging over 60 experts, diplomats, business people and representatives from key multilateral organisations from the UK and across the African continent.

The report, Inquiry into the UK’s Africa Free Trade Initiative, states that:

1. The Africa Free Trade Initiative has been a success – supporting key African priorities, slashing trade costs, and delivering real gains for the continent and its trading partners. The report notes that AFTi has:

1. Cut tariffs and reduced red-tape for traders in Africa;

2. Streamlined border-crossings and customs procedures;

3. Upgraded key gateway ports and transport corridors;

4. Leveraged private sector investment into agribusiness, logistics and infrastructure for trade.

2. Recognising AFTi’s success and the need for faster, more inclusive economic growth, the new UK Government should re-boot its relationship with Africa to create a “prosperity partnership” based on development, trade and investment. The report states that a successor initiative to AFTi should be launched as the centre-piece of the UK’s economic policy agenda in Africa focused on increased support around:

1. Cutting trade costs and connecting markets;

2. Enhancing productive capacity;

3. Using trade to drive inclusive growth for poor women and men.

3. The Prime Minister should appoint a Special Envoy to lead the rebooting of the UK-Africa prosperity partnership, delivering in five key areas:

1. Better direction and co-ordination across UK Government Departments;

2. Closer dialogue between UK Ministers, African Governments, business and civil society on freeing up trade for all;

3. More synergy between the investment programmes delivered by the UK Government, the private sector and by international development partners;

4. Driving and scaling new, high-impact approaches that can transform opportunities from trade for ordinary Africans.

5. Stronger accountability for results and value for taxpayers’ money.

4. While Brexit poses short-term challenges, it also provides an opportunity for the UK to lead the world in structuring a pro-development trade policy with Africa that will genuinely boost growth, jobs and incomes of ordinary people. The report states that new trade agreements should support Africa’s own integration efforts, incorporating the best elements of EU, US, Canadian and other practices, ensuring that they become a model for other OECD countries to follow.

In its examination of AFTi to date, the report records a number of notable successes:

• An Electronic Single Window set up in Rwanda reduced the average time taken to clear imported goods through customs from 11 days to 1.5 days;

• The East African Community Single Customs Territory has helped improve efficiency of the Northern Corridor by reducing cargo transit times from Mombasa to Kampala from 18 days to 6 days;

• Modernisation at the Port Of Dar es Salaam in Tanzania has cut cargo dwell times from 11 days to 7 days, and vessel turnaround times by half;

• CDC financing for expansion of ports and rail connections in Southern Africa will expand capacity for trade and create 43,000 new jobs in Mozambique;

• The Grow Africa partnership has helped leverage $684m in new private sector investment into agribusinesses across 12 African countries;

• A new mega Free Trade Area was launched across East and Southern Africa last year, with negotiations now underway to extend this continent-wide.

Ali A. Mufuruki, Co-Chair of the Inquiry Committee, says:

“All African leaders are anxious to ensure that the UK Government moves quickly to prepare for possible disruptions of African trade to the UK. However, Brexit also presents a big prize – the opportunity for the UK to lead the world in structuring a pro-development trade policy with Africa, becoming a model for other OECD countries to follow.”

Lord Stephen Green, Co-Chair of the Inquiry Committee, says:

“The Africa Free Trade Initiative, which has been aligned with African priorities and supported African-led reforms, shows how effectively the UK and African countries can work together. Successful implementation of the WTO Trade Facilitation Agreement, which the UK and Africa actively championed together in Bali, has the potential to significantly reduce trade costs for poor countries. Twelve African countries have already ratified the Agreement – even outpacing Canada – and I expect this number to rise rapidly.”

Lord Paul Boateng, one of the Inquiry Committee members, says:

“Women play a critical but too often undervalued role in Africa's economy. This report highlights the potential of a successor to the UK’s excellent Africa Free Trade Initiative to strengthen the position of women as agents of Africa's development. African women as farmers and traders stand to benefit from the implementation of the report’s recommendations, furthering the UK’s longstanding commitment to gender empowerment across the globe.”

Professor Myles Wickstead, one of the Inquiry Committee members, says:

“The international community recognises the role of trade as a pathway out of poverty, most notably through Goal 8 of the Sustainable Development Goals which specifically demands an increase in Aid for Trade. The Africa Free Trade Initiative provides us with a solid blueprint for supporting trade and points us clearly in direction we need to take”.

Rt Hon Peter Lilley MP, Co-Chair of the All-Party Parliamentary Group for Trade Out of Poverty, which established the Inquiry Committee, says:

“The Africa Free Trade Initiative has been one of the UK’s outstanding development initiatives of recent years – supporting key African priorities, slashing trade costs, and delivering real gains for the continent and its trading partners. The new UK government should take forward these successes and create a new “prosperity partnership” with Africa – based on development, trade and investment – that will help the continent to trade its way out of poverty.”

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Executive Summary

The UK coalition Government of 2010-2015 launched the Africa Free Trade Initiative (AFTi) in 2011 to help African countries to integrate into the world trade system, focusing on political, financial and technical support to boost trade between African countries, and trade of African countries with the world. To mark the fifth anniversary of AFTi the All-Party Parliamentary Group on Trade out of Poverty (APPG-TOP) appointed an Inquiry Committee of distinguished experts to review the achievements of AFTi so far, advise on whether there is a case for a successor-initiative – an “AFTi II” – and if so, what its targets should be and how it would work. The Inquiry, which was provided with secretarial support by the Saana Institute, gathered written evidence and held public hearings and other consultative events in the UK and Africa between April and July 2016.

A core element in the development strategies of African countries’ is progressive regional integration, with the end-objective of establishing an African Economic Community (AEC) which would bring together the 30 various regional economic blocs and associations in Africa, as set out in the African Union (AU) Plan for Boosting intra-African Trade (BIAT). These objectives were recognised by the UK Government in the White Paper on Trade and Investment for Growth of 2011 and in the launch of AFTi by the Prime Minister in South Africa and Nigeria in July that year.

AFTi programmes have focused on cutting tariffs, harmonizing regional trade arrangements, improving both hard and soft trade infrastructure and cutting red tape through modernizing customs systems, procedures and facilities. Assistance has been provided both to individual African governments and to regional economic communities (RECs). Most progress has been achieved by UK support in East and Southern Africa, particularly in the East African Community (EAC) and through technical and policy support for negotiations for the Common Market for Eastern and Southern Africa (COMESA)-EAC-Southern African Development Community (SADC) Tripartite Free Trade Area (TFTA), whose three basic pillars are market integration, industrial development and infrastructure development. The TFTA aims to liberalise 100% of tariff lines between the parties and to set up a single mechanism to eliminate non-tariff barriers. Phase II of TFTA negotiations, planned to start in the second half of 2016, will extend among other issues to trade in services, intellectual property rights and cross-border investment. This work now has also to be seen in the context of negotiations, formally launched in June 2015, for an AU Continental Free Trade Area (CFTA).

AFTi has made significant progress in supporting better trade facilitation among African countries, including assisting the introduction of improved border and customs clearance procedures in some countries and supporting the ratification of, and notifying commitments under, the World Trade Organisation (WTO) Trade Facilitation Agreement (TFA). Recognizing that infrastructure development is a long-term process, AFTi has helped to facilitate coordination and reduce investment-related costs between governments and stakeholders across borders. It has also leveraged private sector investment funding from Development Finance Institutions (DFIs).

Despite the progress in improving trade conditions in Africa that has been achieved since 2011 by African governments, regional organizations, international institutions and bilateral programmes such as AFTi, sustained effort needs to be put into freeing up trade in Africa and boosting the competitiveness of African countries, and growth. This includes more work to reduce tariffs and non-tariff-barriers (NTBs), including effective implementation of trade agreements especially the WTO TFA, determined work to reduce and streamline border clearance procedures, and negotiation of a credible and wide-ranging CFTA.

It is also important to build up the participation of African countries and enterprises in both global and regional value chains, and to move progressively away from the current situation where African countries are overwhelmingly exporters of primary products to a greater engagement in higher value-added products. As essential groundwork for this, Africa’s massive infrastructure deficit needs to be tackled, especially in the transport and power sectors, through public sector investment an multi-sectoral partnerships with large players such as the World Bank Group and the African Development Bank (AfDB) who have already committed massive resources to infrastructure development. It is also necessary to accept that returns on infrastructure investment in Africa need to be calculated over a longer timescale. Similarly, much work is needed to improve practices and yields in agriculture across Africa; and to improve Africa’s involvement in the digital economy, taking advantage of the unprecedented acceleration in mobile technology usage in African countries. Finally, in the interests of the pan-African economy determined efforts are needed to regularise the massive proportion of cross-border trade which is informal and essentially unregulated, to improve and safeguard the position of women in all aspects of trade, particularly across borders, and to create decent job opportunities for the massively increasing population of young people.

The vote in the UK’s referendum on leaving the European Union (EU) has both immediate and longer-term implications for trade with African countries, which export varying quantities of different goods to various countries in the EU including Britain. Post-”Brexit”, some categories of trade will be affected, although how and to what extent is as yet unclear. Where African countries are engaged in global supply chains (for example for cut flowers) involving rapid transhipment between distribution depots in the UK and other EU countries, trade could be disrupted. Macro- economic effects in Europe such as a deceleration in economic growth in the UK could affect demand.

Withdrawal from the EU may of course open up possibilities for the UK to take a more specific and targeted approach to its trade relations with Africa aligned with the Sustainable Development Goals (SDGs), to work to reduce protectionism, particularly as regards technical barriers in areas like agriculture, and to design new trade agreements that would be development-friendly and potentially more liberal. Our report discusses a number of potential models for the UK’s future trade stance with developing countries in Africa, whilst recognizing that it is too soon to come to any conclusion on this issue. We do however stress the importance of the Government providing assurance to African leaders and investors at the earliest opportunity of the UK’s intentions with regard to the effective continuation (or otherwise) of the current preferential trade agreements and GSP schemes immediately upon the UK’s withdrawal from the EU in order to avoid an interruption in the UK’s trade relations with Africa.

We conclude, on the basis of the evidence submitted to our Inquiry, that a successor to AFTi would be widely welcomed in Africa and that the UK should continue to be a champion for freeing up trade and boosting capacity and competitiveness in Africa as part of a long term strategy for prosperity and economic development. We believe that the case for this is strengthened even further by the prospect of the UK’s departure from the European Union, where the potential implications for Africa must be faced positively and there is an opportunity for an even deeper partnership between the UK and Africa on trade, investment and development.

We accordingly recommend that technical, financial and political support should be provided to African countries on the basis of three “pillars”, namely cutting trade costs and connecting markets; enhancing productive capacity; and using trade to drive inclusive growth in African countries. Building on the successes and lessons since 2011, a successor to AFTi should see an intensification of UK AfT engagement in East, Southern and West Africa. There should also be a concerted effort to build on existing strong delivery platforms that are performing well and can be scaled up quickly with support from the UK and other like-minded investors, such as TMEA, PIDG and AgDevCo.

In taking forward an “AFTi II”, the Government should work with African partners towards a “smart regional integration” approach, and establish a leadership rôle to be carried out by an AFTi Special Envoy appointed by the Prime Minister to deliver better direction and coordination both within the Government and with external parties. Our report specifies rôles for the AFTi Special Envoy, essentially to strengthen dialogue between UK Ministers and African governments, and on the basis of standing advisory consultations, to stimulate better synergy between the programmes delivered by the UK Government and by international development partners.

Under each of the above three pillars several detailed practical objectives are proposed, together with tentative targets and timelines for their achievement, for example completion by 2025 of Single Window clearance systems in a suggested 5 African countries, together with a suggested two regional customs inter-connectivity projects, and establishment of NTB elimination schemes in 12 countries by 2018. Our recommendations also specify actions to implement the “smart regional integration” approach including policy alignment with the African Union’s action plan for boosting intra-African trade, targeting investment on countries where realistic plans and strong political commitment are in place, and working with African institutions to improve data collection and analysis. An AFTi knowledge platform should be set up in order to share with interested parties the lessons learnt and knowledge gained from AFTi initiatives, including an annual stakeholder conference and publication of annual reports.

Finally, we also see an important role for the APPG on Trade Out of Poverty to play in continuing to make the case for a successor to AFTi with the new Government, to work with its network of partners to track the delivery of an “AFTi II” over its implementation period, and to champion the importance of the UK’s work on boosting trade and integration across Africa for sustainable and inclusive development.