India is the World’s largest movie producer.
We’ve all heard of Bollywood, right?
But let me ask you a question…
what’s the SECOND largest movie producer?
What comes after India?
… The answer is NIGERIA.
Yes, I’m sure almost nobody guessed that right.
But, my dear viewers, so-called NOLLYWOOD produces many more titles a year than Hollywood
itself.
But, of course, nobody knows this because Africa is the forgotten continent.
African politics and economics hardly appear in the newspapers.
And this is why we can say that Africans are witnessing a silent miracle.
Until the 2000s, this region seemed completely doomed.
But since the beginning of the new century, Africans have tripled their income.
Countries like Ethiopia are growing at a 10% growth rate year after year.
And I know what you’re gonna tell me!
Come on Simon!
These are just statistics.
Is life really changing for the average African?
Look… if you’re expecting to see skyscrapers and caravans of BMWs on the streets of Nairobi,
then, yes, you’re going to be disappointed.
We’re not there, yet.
In fact, there are still regions of the continent stuck in extreme poverty.
That would be the case in the People’s Republic of Congo and the Central African Republic.
But other regions are improving.
For example, Addis Ababa, the Ethiopian capital, is starting to get some supermarkets!
This might seem like a very trivial thing to you.
But it’s a giant step if you remember that 30 years ago, the whole country was going
through one of the worst famines in history.
But wait a minute because there is more!
We are starting to see how African companies are expanding internationally.
For example, Ethiopian airlines or M-PESA, a mobile phone payment platform.
So now you might wonder…
Why is Africa growing like this?
What has changed in the continent?
The answer is clear: PEACE.
You see, the first requirement for a country to develop is for it not to have wars.
After that, we can discuss political systems, tax policies or whatever.
But a society that lives on a battlefield can hardly prosper.
But now things are starting to change… is that true, Xander?
Absolutely, Simon!
For decades, Africa was a really violent continent: wars for independence, tribal clashes and
even genocide.
Today, however, the conflicts are less frequent.
In the year 1990, an average of 45 per 100.000 africans died in conflicts.
Today, this figure has dropped to 8 per 100.000.
And, of course, this has helped trade and foreign investment, especially with China.
Nevertheless, as we said before, there is still a lot of work to be done.
Africa is far from being a prosperous region.
They need to take the next step.
And what is that?
Well, that would be industrialization.
So far, Africa remains a rural continent.
Except for a few exceptions, everything you can buy in Africa is a raw material.
And it’s hard to grow a modern economy based on agriculture and mining.
So, this the context in which this news takes place.
The Largest Free Trade Deal in Nearly a Quarter-Century Seeks to Make Africa a Single Market
Yes, you heard that right.
The goal of this treaty is to make an African version of the European Single Market, which
was the seed for what we know today as the European Union.
Since May 30th 2019, this treaty has been a reality.
We’re talking about 52 countries who have signed it.
In fact, only Benin, Nigeria and Eritrea have refused to enter the so called AfCFTA or just
CFTA.
So now the question is…
Can this treaty change things… or is it just a bunch of nice words?
Can a free trade agreement really improve lives in Africa?
And, why doesn’t Nigeria, the country with the largest African economy, want to sign
it?
Today we are going to answer all of these questions but, before we do, let’s take
a look back at the history.
NO MARKET, NO INDUSTRY When we talk about Africa, we should remember
one thing: 55 countries and 1,3 billion people.
We shouldn’t really talk about Africa like it’s a country.
Then again, there is one thing that most of the African countries have in common: their
colonial past.
Most of these nations have been independent for less than 50 years.
And, believe me, they still maintain their bonds with their previous colonizers.
In many ways, the idea of independence is pretty much a delusion.
Look, in a normal country, the main trading partner is that country’s neighbours.
America trades with Mexico and Canada, France trades with Germany, Germany trades with The
Netherlands… but African countries are different animals in this regard.
For example…
Ivory Coast is neighbours Ghana and Liberia.
But who is Ivory Coast’s main trading partner?
No!
It’s not their neighbours.
Their main Trading partner is The Netherlands and…
France which, surprise, surprise, it is its former colonizer.
And of course, this trend is changing but not in the way you might expect.
If you’ve been following VisualPolitik for a long time, you already know that China has
been increasing its sway in Africa over the past several years.
And not only are the Asians playing a role here!
Just look at this news!
China’s coming slowdown opens doors to expanding African trade with India
But not only that!
In the last 15 years, trade with Africa has tripled with other countries like Turkey and
Indonesia.
Today, Asia represents 45% of the African foreign trade.
Europe is 30%.
So, as you can see, there’s only a little share for the inter african trade.
And I know what you’re thinking now!
So what?
Don’t we live in a globalized economy?
What’s the problem with Trading with Asia or Europe?
Well… it is a problem.
Think about it… what does Europe or Asia buy from Africa?
Yes, you guessed it: raw materials like oil, gas, gold, uranium… in other words, everything
except manufactured goods.
And there is a reason for this.
Let’s look at an example.
Rwanda Motorcycle Company was born in 2017.
They manufacture low cost motorbikes.
Would you buy one of those?
Probably not.
Their bikes are no match for a Suzuki or a Honda.
So no Asian or European country would go for a Rwandan model when they could have a Japanese
or American one.
So… where could Rwandan motorcycles find a market?
Of course, in other African countries!
In fact, Africa is a great place for them because there are almost no competitors.
If you live in Congo, good luck finding a BMW shop to buy a bike from.
So in many countries, these Rwandan entrepreneurs have a big blue ocean of market opportunities
to exploit.
This explains why, despite African countries trading so little with each other, most of
the things they trade are manufactured goods.
In other words: if Africa wants to have industry, they need to trade with each other more.
So what’s the problem here?
The problem is that things in Africa are never easy and trade… is harder than anything.
There are lots of tariffs and bureaucracy that makes it almost impossible for local
companies to cross borders.
If you want to send your Rwandan motorbike to neighbouring Congo, you’ll have to pay
tariffs of up to 20%.
But you’ll also have to bribe the guard at Customs.
Otherwise, your merch could be waiting there for months.
Add to this the insecurity, the gangs and the warlords that are still present in many
regions.
Don’t forget that, just a few years ago, many of these countries were killing each
other’s citizens.
So again, a bike manufacturer in Rwanda can hardly survive with as small and poor a market
as the local one.
If they want to survive, they need to expand to their neighbours.
In other words, protectionism is making it almost impossible for Africa to develop.
But pay attention now, because this might change.
THE AFRICAN UNION ‘Blood Diamond’ is a Hollywood movie that
talks about how we can end up killing each other just for some precious minerals.
The conclusion of this movie is that the West just wants Africa’s resources.
Nothing more.
Presented with this situation, many might think that Africans can’t get themselves
together and they need a good old Western helping hand.
But, of course, this is VisualPolitik.
You know we think differently…
“Africa’s story has been written by others; we need to own our problems and solutions
and write our story”—Paul Kagame Paul Kagame is the Rwandan president.
In this video we told you about his light side and his dark side.
His model country is Singapore so, you can imagine that he’s not a big fan of democracy
or human rights.
But, from an economic point of view, he has become an African champion for prosperity.
The thing is, apart from governing Rwanda, Kagame is also the president of the African
Union.
This organization was created in 2001, inspired by the European Union.
Their big dream is to turn Africa into a single market, just like Europe is.
And, so far, it seems like they’re achieving their goal.
Africa's free trade area comes into force as Gambia ratification
Yes, my dear viewers: it’s the CFTA I mentioned earlier in the video, the African Continental
Free Trade Agreement.
Their ultimate goal is to have a common currency for the whole continent.
Something similar to the Euro, but in Africa.
We might have to wait 15 to 20 years to witness that, but they are trying hard.
But, OK, OK, hold on just a minute because not everything is sunshine and rainbows.
As we always say, the devil is in the details.
You see, in this world we have free trade agreements and… “free trade agreements”.
An example of the latter would be MERCOSUR.
Mercosur was born in order to create a free trade area in South America.
Has it worked?
The answer is no.
The countries who signed this document were not willing to cede sovereignty.
Nobody was willing to remove tariffs and let their local companies compete with foreign
ones.
The Mercosur treaty is full of exceptions.
Yes, it has nice words in it but when you look at the reality, you realize the trade
between its members hasn’t increased really.
Something similar could happen with this African free trade area.
For example, the main African economies: South Africa and Nigeria, are not big fans of this.
South Africa signed it at the last minute but Nigeria… well… this is what Nigeria
said.
CFTA: I won’t allow Nigeria to be dumping ground —Muhammadu Buhari, President of Nigeria
Basically, many governments are reluctant to lose control of the small industries they
already have.
Besides, their main income is what they collect in tariffs.
Don’t forget that, in a country like Nigeria, there is no big and regulated job market so
it’s hard to collect income tax.
In most cases, African governments get their money from the only thing they can control:
foreign trade.
But there is more to this!
This CFTA treaty generates as many doubts as hopes.
You see, a treaty like this usually takes decades to negotiate.
This one was done in just 4 years.
And, in their desire to have as many countries as possible, they’ve left lots of things
off of the negotiating table.
The final document is vague and generic.
It doesn’t say anything clear about competition clauses, investments or intellectual property
rights.
There is no list of what goods you can trade freely and which ones will be protected.
In theory, they have committed to removing tariffs on 90% of the products over the next
decade.
But, of course… governments can push the most important goods inside of that 10%.
So, if you only liberalize trade on the goods that you don’t actually sell… then you
won’t have real free trade.
But hold on a second because there are many more problems!
Of course, the CFTA would be wonderful as a way to incentivize the emergence of new
industries.
But… so far, Africa relies heavily on agriculture.
And what do African farmers think?
Well… many of them are not exactly happy.
Smugglers Thrive as Nigeria Tries to Keep Foreign Rice Away
n this case, Nigeria is afraid of neighbouring Benin.
Benin has become a big importer of Thai rice.
Apparently, Thai rice is high quality and affordable.
If Nigeria suddenly opens trade with Benin, its local rice producers might have a hard
time.
And this is where the big time dilemma comes in.
Should we risk the agriculture that we already have in exchange for would-be brand new industries…
or do we leave everything as it is?
And this is the real debate.
According to the United Nations, if the CFTA turns out the way it was meant to, inter African
trade could grow 52% in the year 2022.
This is only 3 years after the year that we made this video.
But, of course, if the member countries keep adding exceptions and mistrusting each other,
we could end up with a Mercosur kind of thing.
In other words, our friends from the Rwandan Motorcycle Company would keep struggling to
open markets elsewhere.
And… remember, with no market there is no industry at all.
So the question now goes to you…
Do you think the CFTA will go in a European Union-like direction… or will it go with
a more Mercosur-like style?
Should Nigeria sign it?
Will we witness the industrialization of the African continent?
Please, leave your answers in the comment section below.
Also, visit our friends from reconsider media.com, the podcast that provided the vocals in this
episode that were not mine.
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