intra-African Trade Research Articles

THE THREAT OF TRADE-BASED MONEY LAUNDERING TO THE AFRICAN CONTINENTAL FREE TRADE AREA*

Africa has dedicated considerable effort to establishing a Continental Free Trade Area to facilitate intra-African trade and deepen economic integration. However, the liberalisation and facilitation of trade on the continent would increase trade openness significantly in the markets for goods and services, thereby expanding the threat of trade-based money laundering (TBML) and undermining the potential benefits the agreement would bring to economic growth, industrialisation and sustainable development in Africa. This paper focuses on the threat of TBML to the African Continental Free Trade Area (AfCFTA), typically perpetrated through trade mis-invoicing as the main vehicle for illicit financial flows. It deduces that increases in the volume of trade across the continent potentially increase the vulnerability of the AfCFTA to TBML.

AfCFTA and Trade Facilitation in ECOWAS Borderless Region: Challenges and Prospects

This paper seeks to examine the establishment and ratification of the African Continental Free Trade Area Agreement (AfCFTA) as an endeavour on the part of the African Union to promote intra-African trade. The African socioeconomic development and industrial competitiveness is anticipated to increase as a result of the AfCFTA. The agreement is expected to link 1.3 billion people in 55 nations, with a $3.4 trillion global GDP. By 2035, it is projected to be able to save 30 million people from abject poverty. The AfCFTA will result in a significant liberalization of trade in products and services within Africa, making it simpler for business people to conduct international business and lowering trade costs. However, there are concerns that putting the agreement into practice successfully in a continent with limited capacity, uncompetitive industries, and reliable infrastructure will be difficult. The research relies on the secondary sources of data collection, which include the use of such materials as textbooks, journals, newspapers, magazines and internet sources. The paper analyses the political- economic dynamics and argues that the success of AfCFTA will be greatly influenced by a number of variables, including member states level of commitment, the availability of cutting-edge technology, technical capacity, and essential infrastructure, the transparency and accountability of processes, and how infractions and complaints are resolved.

Proposition for an AFCFTA-based Tax Dispute Court for the Timely Resolution of Commercial Tax Disputes

The African Continental Free Trade Area (AfCFTA) Agreement is promoted as a developmental game-changer set to foster an impressive growth in intra-African trade. Already, economic forecasts project that the successful implementation of the AfCFTA could boost intra-Africa trade and investments from the current 16 per cent to about 35 to 40 per cent by 2040. However, the success of the AfCFTA implementation is largely dependent on the willingness of its member states to carry out large-scale trade and investment reforms to reap the benefits of the free trade area. One area in dire need of reform is the tax dispute settlement mechanisms (TDSM) found in tax, trade and investment agreements. These mechanisms often act as technical barriers to the realisation of the AfCFTA objectives. This paper seeks to review the TDSM provisions contained in the tax, trade and investment agreements, including the newly drafted AfCFTA investment protocol. It also seeks to provide a comprehensive analysis of the challenges inherent in these instruments with the aim of offering solutions through a progressively binding AfCFTA tax court. The court will enhance the timely and equitable resolution of tax disputes in the AfCFTA and promote a more conducive environment for investment, trade and growth.

The world trade network: Country centrality and the intra-Africa trade

Global trade is based on a group of multifaceted interactions between nations that can be modeled as an incredibly dense network of intertwined agents. On the one hand, this network might favor the trade performance of countries, but on the other, it can also discourage international trade. In this article, we investigate whether and how much the structure of the trade network may explain for the performances of intra-African trade among certain African nations. We calculated the centrality indexes for the nations and applied them to regression analysis. We then employ a negative binomial regression framework with these indicators as target regressors. In doing so, we also compare the effects of different measures of centrality- specifically, the degree centrality measures and the clustering coefficient. Our findings suggest that, albeit boosting the degree centrality index tends to improve the trade flows inside Africa, on average, the intra-African trade flow was shown to be negatively impacted by the clustering coefficient, which is congruent with theory and our predictions.

AFRICAN UNION (AU) REGIONAL INTEGRATION AGENDA AND SOCIO-ECONOMIC DEVELOPMENT IN WEST AFRICAN SUBREGION: A STUDY OF NIGERIA AND NIGER REPUBLIC

The Organization of African Unity (OAU) was transformed into the African Union (AU) in July year 2002, due to the resolution of African leaders to reposition the continental organization for better performance. This paper examines AU regional integration agenda and socio-economic development in West African sub-Region: a study of Nigeria and Niger Republic. The two countries share a common land boundary which covers over thousand kilometers. Historically speaking, they were both colonial creation of Britain and France respectively which was said to have born out of series of negations, treaties and conquests during the first decade of the 20thCentury. By 1960, the two countries got their political independence and have since exchange diplomatic missions and entered into various bilateral relations which border on trade, industry, culture, education and politics with a view to improving the socio-economic and political life of the citizenry. The duo established the Nigeria- Niger Joint Commission for cooperation in March, 1971 as a strategy towards promoting their socio-economic development. However, one of the perceived major problems to effective trade and integration in most Regional Economic Commissions is lack of political will. This is because most countries resist liberalization and tend toward protectionist policies to protect trade. Premised on this fact, how the AU hoped to effectively achieve its integration agenda particularly, as it affects Nigeria and Niger republic remains a serious challenge and a major concern for this paper. Methodologically, the paper adopted qualitative method that uses interview as instrument for data collection and this was supported with documents data. The findings from the results revealed that in terms of the impact of AU regional integration agenda on socio-economic development of Nigeria and Niger republic, there has been a lot of achievements. The two countries are said to be intertwined politically, religiously and socioculturally and any other forms one can think of. The findings from the results further identified major challenges confronting the AU in the integration of the two countries and Africa at large. These include; lack of political will; limited intra-African trade; funding problem; underdeveloped infrastructure etc. For better performance of the organization and the two countries, the paper recommended among others; the need for strong political will on the part of African leaders to turn policies and resolutions into actions at national levels

International Economic Law in an Era of Multiple Crises: Opportunities and Challenges for Africa in the wake of AFCFTA

Free trade agreements have been known to have numerous benefits, especially from an economic point of view. However, it has been argued that for them to be deemed successful, they ought to address challenges within the socioeconomic and by extension political environment, among others. The Africa Continental Free Trade Area (AfCFTA) was launched in 2018 and ratified in 2019. Regrettably, the AfCFTA arrived at a time when Africa was economically and politically unstable amid covid-19 prevalence; with conflict and economic insecurity have exacerbated the lack of development in the continent. The challenges for growth and opportunities on the continent come in many forms; but for the limitations of this paper on covid-19 and child’s rights as among the crisis facing AfCFTA within international economic law perspectives viz-a-viz the objectives of the AfCFTA to its future perspectives to respond to these different challenges. AfCFTA will create a single market for goods, services and movement of persons within the continent. The AfCFTA Agreement adds to the adoption in 2016 of a Pan-African Investment Code (PAIC) – the first continent-wide model investment agreement whose objective is to foster coherence and consistency regarding the rules and principles that govern investment protection, promotion and facilitation in Africa. This cross-border trade will grow as the continent reaps the benefits of closer regional cooperation. These increased cross-border trades could exacerbate ongoing challenges like child marriage, commercial sexual exploitation of children (CSEC), and child trafficking. Also, increased trade and the associated expansion of economic opportunities could push children out of school and into further engagement in child labour within an environment of poorly enforced child labour laws. The descriptive and analytical frameworks adopted for this paper consider pathways through which the AfCFTA had faced its challenges and opportunities abound. The descriptive approach was adopted in the covid-19 effects on AfCFTA while the analytical approach reviews the enforcement of domestic policies as well as international standards in determining the protection of girls, young women and children in AfCFTA trade activities participation. The findings observed that dueto limited child-care opportunities, some young women have to go to work with their children who are in turn (especially young girls) exposed to exploitation and sexual overtones. There is no uniform or strict enforcement of legislations regarding travelling with children across borders, and this can increase the threat of child trafficking as itis not easy to establish the parents of the child due to the absence of easily verifiable official documentation, except for Rwanda with strictly enforced legislations regarding travelling with children across the border. Despite these issues, the paper concludes that AfCFTA remains a significant and enhanced frameworks for deepening intra-African trade relations and maintaining political stabilities within the continent. It does show how African states navigated the covid-19 crisis and the opportunities of addressing child’s rights in the hope of contributing to the success of the AfCFTA. Finally, the paper asserts that Africa is ready for a free trade agreement by employing a qualitative research approach and reviewing current literature.

Nigeria’s Foreign Policy, Regional Obligations and Constant Order Closures

Colonialism destroyed Africa’s long-standing intra-African trade. Hence, at independence there was a move for regional integration to diversify Africa’s economy.Nigeria had been at the driving seat of Africa’s regional integration. In West Africa, Nigeria pioneered the formation of the Economic Community of West African States (ECOWAS) in 1975. Though Africa has 21.2% of the global landmass and 13.7% of world population, its share of global economic activities is a meagre 2.6%. Its intratrade is 12%, paralleled to an average of 53.5% in other regions of the world. However, Nigeria over time has engaged in anti-trade policies like border closure, the latest being on 20 August 2019, three months after signing the African Continental Free Trade Agreement (AfCFTA). This has caused ripples within Nigeria, West Africa and Africa at large. This study interrogates Nigeria’s constant border closures, with questions on whether it is in Nigeria’s national interest and if its objective were achieved? The study uses the Regional Leader Role framework of analysis, a sub-set of National Role theory (NRC). The study is a qualitative and non-experimental study and is based on the single case ex-post-facto (after-the-fact) design. Documentary method of data collection is used. The study concludes that Nigeria with over 1,499 illegal land routes into the country, cannot even ‘close’ its border, hence border closure is a lose-lose policy for Nigeria and recommends collaborative actions with her neighbours, the strengthening of border and ports infrastructures as the way forward.

Murky trade waters: Regional tariff commitments and non-tariff measures in Africa

In several African regions, economic integration has successfully reduced tariff protection by freezing the opportunity to raise applied tariffs against fellow integration partners above those promised. We examine whether these regional tariff commitments have come at the expense of adverse side-effects on the prevalence of non-tariff trade barriers. Comparing the effects of applied tariff overhangs – the difference between MFN bound tariffs and effectively applied tariffs – towards all vis-à-vis African trading partners on SPS and TBT notifications of 35 African WTO members from 2001-2017, we find no general relationship between tariff overhangs and import regulation in our preferred model setting. Larger tariff overhangs specific to intra-African trade relations, however, increase the probability of SPS measures and TBT and thereby contrast with the common assumption of the former functioning as a flexible policy valve. We see the nature of Africa’s formal trade relations as an explanation for these findings. While regional tariff commitments have not only significantly moved African countries away from multilateral commitments, they have also sharply reduced their tariff policy space within Africa, thus seemingly leaving regulatory policy as one of the few legitimate options to level the playing field with the by far closest market competitors.

Regional integration in Africa: Proposals for an Africa-wide payment system

Regional integration remains a priority in Africa. Fuelled by the call of Pan-African leaders including Kwame Nkrumah and the recognition of the potential within the continent to transform intra-African trade and achieve global competitiveness, the Africa Continental Free Trade Agreement (AfCFTA) was conceived. The African Union, in collaboration with the Africa Export-Import Bank (AFREXIM), has accordingly proposed the Pan-African Payment Settlement System (PAPSS). This system is expected to facilitate crossborder financial flows in local currencies and in real-time across the region, address the multiplicity and inconvertibility of currencies, reduce transaction costs, and decrease the use of correspondent banks. The authors analyse the necessity of getting this system right, alluding to the theory of developmental regionalism. The article concludes with recommendations that could make this unified payment system formidable enough to enable direct and seamless transactions between Amari in Addis and Wale in Lagos.

Designing Preferential Rules of Origin for the AfCFTA: Addressing Pre-Existing Challenges at the Regional Level

African countries are still negotiating the RoO for AfCFTA. Rules of Origin (RoO), a mechanism for determining the economic nationality of a product, are an essential part of international trade due to their use in the enforcement of preferential treatment of goods. AfCFTA member states seek to build upon RoO under their existing RECs. However, the design and implementation of RoO under the various RECs are seen as one of the obstacles to intra-Africa trade. This article examines the RoO of Africa’s key RECs, namely the EAC, COMESA, ECOWAS, SADC and the TFTA, with a view to drawing out lessons, the drawbacks that need to be addressed or avoided, and shaping the RoO of the AfCFTA to enhance the achievement of its objective of promoting intra-African trade.

English

This study examines the level of linkage between Nigeria and some selected African countries on one hand and the linkages between economic growth, inflation, and unemployment on the other hand, in these economies. The study covers the period between 2000 and 2019. The study aims to first measure the economic distance between Nigeria and these countries using the approach proposed by Mazurek. Second, the degree of spillovers was characterized between Nigeria and these countries, using a VAR-based spillover index method proposed by Diebold and Yilmaz. The main finding of the study is that the selected African economies are quite economically dispersed, and the level of cross-border spillover is negligible. This would suggest that growth in one economy has not been influenced by the growth in the other economies in the region. Given this, the study recommends that policies that will improve intra-African trade should be formulated. Such policies should incorporate a trade-by-barter-like framework, where Africa can demand what it produces and produce what it demands. Essentially, much more attention should be paid to the supply side of the market than the demand side following the Says law that increasing production will naturally result in proportionate increase in demand. To achieve this, enabling environment should be created to engender technological innovations while improving human and capital infrastructures.   Key words: African, development, economic distance, growth, spillovers.

Optimizing Intermodal Transport and Hub Location Problem for ECOWAS in the Context of Improving Intra-African Trade

Trade within Africa is at an all-time low, with a lack of an optimal intermodal transportation network and a high cost of business serving as a deterrent to trade. This research studies Intra-African Trade within ECOWAS using a hierarchical spatial aggregation process to identify 27 nodes. Distance-based weighted centrality measures employed TOPSIS to model a ranked node centrality of Economic Community of West African States (ECOWAS) intermodal transport of railway, road, and waterway networks. The ten highest-ranking nodes identified from the mixed-integer linear program adopted as candidate hubs, thus selecting Ibeshe ferry terminal in Lagos and Tema Harbour in Accra for waterway; Thies, Ibadan, Conakry, Monrovia and Thies for railway; and Thies and Ibadan for road. We conclude with sensitivity analysis and a discussion of management implications for ECOWAS. This paper demonstrated that a limited number of transshipment hubs would encourage interregional trade and cut point-to-point transportation costs and lead to economic growth and development.

Beyond Banks: A Case for Interagency Collaboration to Combat Trade-based Money Laundering in Africa

Abstract Regulation regarding trade-based money laundering (TBML) has focused mainly on documentary trade financing arrangements, which are bank intermediated. Yet, African countries predominantly employ alternative forms of trade financing models that span beyond banks’ usual purview. These alternative models are supported by many actors across the supply chain that are not holistically supervised given the fragmented regulatory framework at the global and domestic levels. In contending that TBML significantly undermines intra-African trade and therefore amounts to a non-tariff barrier (NTB) to trade, this article challenges the need for globally transplanted solutions to address TBML. Rather, it argues for the introduction of new approach: a country focused experimental legislation that facilitates inter-agency collaboration beyond banks. This approach would ensure a homegrown, responsive, and legitimate framework that encompasses currently un-supervised actors. It contends that if the experimental legislation works at a country level, it may then be cascaded to the African Union level for contextual adaptability across other African countries.

Cross-border retail payments in the Tripartite Area in support of the African Continental Free Trade Agreement

Cross-border payments initiatives are rapidly proliferating on the African continent. Both banks and non-bank financial institutions are working to extend digital financial services to support the growing demand for the transfer of funds across borders, including remittances, which provide a lifeline for vulnerable households such as those supported by working migrants. This article provides insight on the concept of a cross-border retail payments scheme for credit transfers within a geographical area of the African continent known as the Tripartite Free Trade Area. The paper elaborates on how such a scheme can be utilised to guide the delivery of payments in a manner that is cost-effective, rapid and transparent. This proposed scheme is in line with the G20 Roadmap for Interoperable Payments and would also support the vision of the African Continental Free Trade Area to enhance intra-African trade.

A sustainable future for Africa through continental free trade and agricultural development.

Developing and integrating agricultural markets may be key to addressing Africa's sustainability challenges. By modelling trade costs from farm gate to potential import markets across eight African regions, we investigate the impact of individual components of continental free trade and the complementary role of domestic agricultural development through increased market access for farmers and agricultural intensification. We find that free trade would increase intra-African agricultural trade sixfold by 2030 but-since it does not address local supply constraints-outside food imports and undernourishment would reduce only marginally. Agricultural development could almost eliminate undernourishment in Africa by 2050 at only a small cost of increased global greenhouse gas emissions. While continental free trade will be enabled in Africa through the African Continental Free Trade Area, aligning this with local agricultural development policies is crucial to increase intra-African trade gains, promote food security and achieve climate objectives.

Dynamic Estimation of a Traditional Import Demand Function for Botswana

This article estimates the import demand function for Botswana, which is rated among the fastest-growing countries in Sub-Saharan Africa. Using the autoregressive distributed lag (ARDL) approach to cointegration, the study finds that Botswana’s import demand is inelastic to the changes in import prices, both in the short run and in the long run, which resembles the import demand behavior in other fast-growing economies. The inelastic response of the import demand to import price is not surprising for a country that mainly imports diamonds, fuel, and machinery, all essential items for export production and economic development. The study further confirms that structural instabilities have a significant negative impact on Botswana’s import demand, which is an element that the policymakers must pay attention to. Considering the recent developments in the African continent, which include the recent ratification of the African Continental Free Trade Area (AfCFTA), this study suggests that policymakers in Botswana should revisit the country’s import policy and determine how Botswana’s imports can be positioned in a way that could benefit the sought-after intra-African trade.

Trade liberalisation in Kenya: A modelling linkage for wheat and maize

Kenya has become a driving force of trade integration at the regional and continental level, albeit that this process is still incomplete. Kenya was the first nation, along with Ghana, to ratify the African Continental Free Trade Area (AfCFTA) agreement in May 2018, as it was already engaged with its main trading partners. Trade policy can generate mixed effects across the economy and within the agricultural sector, reflecting differences between markets and commodities. In this paper we argue that a mix of modelling approaches is preferable in order to capture the complexities of these changes. A dynamic-recursive computable general equilibrium model provides broad sectoral and macro-economic effects, which are then incorporated into a partial equilibrium framework for a detailed analysis at the sector level. We demonstrate this using the maize and wheat markets in Kenya as examples. Combining the output of each modelling approach allows the analysis to explicitly include certain characteristics of single markets, particularly regional trade relationships and differences in pricing structure that would be missed by using a single approach in isolation. It shows that further intra-African trade liberalisation will affect wheat markets more than maize in Kenya but, given the low initial tariff levels, the ultimate effects will remain fairly small.

Opportunities for Gender Equality in the African Continental Free Trade Area: Drawing Lessons from COMESA

Abstract The African Continental Free Trade Area (AfCFTA), which has been signed by 54 out of the 55 African countries, seeks to create a single continental market for goods and services and facilitate the free movement of people on the continent, thereby boosting and enhancing the competitiveness of intra-African trade. However, while the Agreement Establishing the AfCFTA, under Article 3 (e), emphasises that one of the general objectives of the AfCFTA is to promote gender equality, experiences in other African Regional Economic Communities (RECs) FTAs have proven that gender and gender equality have not been adequately mainstreamed in implementing Free Trade Areas which has resulted in gender inequalities in international trade and commerce. Consequently, the majority of women have been left marginalised in trade and faced with serious challenges in accessing opportunities created by regional trade agreements. This paper sought to examine the potential of the AfCFTA to promote gender equality in Africa through the promotion of intra-African trade opportunities. Using secondary data sources, it drew from the experiences of the Common Market for Eastern and Southern Africa (COMESA) in mainstreaming gender in regional trade to proffer recommendations for the AfCFTA. The concepts of gender equality, gender mainstreaming and trade liberalisation were utilised for conceptual analysis. Recommendations of the research are key in presenting possible options for implementing gender-sensitive measures and strategic interventions that address the differentiated implications of the AfCFTA on both men and women such that the AfCFTA delivers more transformative, inclusive and sustainable economic growth and development in Africa.

Intra-Africa immigrant entrepreneurship for intra-African trade and economic development

Purpose: This paper aims to conceptualize intra-Africa immigrant entrepreneurship and provide evidence of its impact on intra-African trade and economic development. Immigrant entrepreneurship is often regarded as a key driver of international trade and economic development around the world; yet very little is known about intra-Africa immigrant entrepreneurship and its role in intra-African trade and economic development in Africa. Methodology: This paper applied a systematic review of literature methodology to provide insights into the role of intra-Africa immigrant entrepreneurship on trade and economic development of both host and home countries. Recommendations on how intra-Africa immigrant entrepreneurship can be used to promote intra-African trade and economic development are reviewed. Results: Policy guidelines that may increase the positive impact of immigrant entrepreneurs within the context of intra-African trade include immigration policies that attract high impact entrepreneurs, non-discriminatory support for high impact immigrant entrepreneurs as well as policies to strengthen the role of free trade agreements such as the African Continental Free Trade Area (AfCFTA). Conclusion: We conclude that African regional integration to promote intra-Africa immigrant entrepreneurship development is a conduit for Africa’s long-term and sustainable economic development. Evidence of the positive impact of intra-Africa immigrant entrepreneurship on intra-African trade and economic development is scant. At the same time, the notions of intra-Africa immigrant entrepreneurship are not well documented in the literature. This paper provides arguments for the promotion of intra-Africa immigrant entrepreneurship as a tool to increase intra-African trade and economic development.

Intra-African Trade and Spatial Dependence: Revisiting Africa Intra-Trade Determinants with a Spatial Structural Gravity Model

The objective of our paper is to revisit African intra-trade determinants once taking into account potential spatial spillover effect due to the third country dependence. Recently, several studies have shown the importance of taking into account the spatial effect. We examined total exports flows, industrial trade flows and agricultural trade flows of 40 countries in 2002-2018 and we detected a positive spatial autocorrelation and the Spatial Autoregressive gravity model is identified as an appropriate way to model the spatial dependence. The results show that distance doesn’t affect agricultural products trade, institutional factors of destination country and neighboring countries affect intra-African trade. Except SADC area, intra-African trade is largely dominated by agricultural products. To reduce poverty through trade intensification, the regional integration process in Africa must grant an important place to industrialization policies, conflict resolution and strengthening cooperation.