Gerhard Erasmus, tralac Associate, comments on the importance of development funding in order to bring about lasting improvements in economic governance

tralac participated recently in a discussion about future official development assistance matters (see the agenda for the Inquiry into the UK’s Africa Free Trade initiative). This offered an opportunity to reflect on the changing context of this debate, the expectations of donors, the role of recipients, and the identification of priority areas.

We firmly believe in the need for and the beneficial role for continued development assistance; while recognising the validity of domestic political considerations such as demands for transparency, concerns about corruption, evidence showing progress, impact and value for tax payers’ money. We also believe that trade and regional integration should remain on the list of priority areas for donors; as confirmed by the recently adopted Sustainable Development Goals (SDG). The SDG agenda looks at the big picture; from poverty reduction to climate change, renewable energy and managing resources sustainably. Trade and regional integration remain on this particular agenda; and for good reasons.

Important lessons have been learned about designing development funding in order to bring about lasting improvements in governance at national and regional levels, about the importance of hard and soft infrastructure, the involvement of the private sector (including SMEs and women), suitable industrialization projects, and trade facilitation in particular. These areas offer many opportunities for “smart” interventions. One example can be cited: It has been argued that it is unfair to expect African Governments to become involved in supply chain solutions while the same is not expected from developed states. However, there are examples of African success stories; such as the establishment of abattoirs for the export of beef and laboratories for ensuring that fish destined for first world markets complies with SPS standards. In these instances producers, governments and donors have worked together and have achieved tangible results. Opportunities for the exportation of value added products do exist. The justification for investment in Africa is not only about growing consumer markets.

The recent commodity boom has generated some expectations about dramatic advances around the “Africa rising” concept and has inspired initiatives such as the launch of the negotiations to conclude the Continental Free Trade Area (CFTA) for boosting intra-Africa trade. The latter is a necessary initiative and should be supported; provided the negotiations are structured in a manner which will bring about meaningful change and will target contemporary needs. One of the first challenges to be met by the CFTA negotiators will be to translate the several objectives in the CFTA Framework into a work plan of achievable outcomes, to sequence negotiations correctly, and to start with those issues which are within reach of what is politically and practically feasible.

We are, for example, of the opinion that should the CFTA negotiations be dominated by a traditional trade in goods agenda (starting with tariff offers in order to form a traditional Free Trade Area (FTA)), the process will, like the Tripartite FTA (TFTA), get bogged down in drawn-out and complicated negotiations. Tariff concessions, the configurations of states, with extensive carve outs for sensitive goods, the concomitant use of rules of origin to protect domestic producers, and overlapping REC membership patterns pose major obstacles. This is not the key agenda. African governments have a diminishing appetite for tariff concessions; while dominant economies play a vital role in shaping regional integration agendas. We need smarter agendas for regional integration and trade negotiations. Regulatory reforms in vital services areas should figure prominently; recognising the direct link between services and the ability to produce goods competitively, including for global markets. Boosting the capacity to produce tradeable goods and services is about comprehensive challenges to exploit intra-African as well as global opportunities.

The commodity boom of recent years is over, although there will be new opportunities as the international economy picks up again. It has to be admitted that recent opportunities to restructure domestic economies in Africa and to address long-term development needs by improving infrastructure and putting urgent domestic reforms in place have not been used in an optimal manner. There is an important lesson to be learned. It is a sad state of affairs if the second biggest African exporter of oil now has to request assistance from the International Monetary Fund in order to tackle serious balance of payments problems and to allow it to finance the importation of food and essential consumer goods.

There will not be a big bang moment for African regional integration and economic development. Change will come about in an incremental fashion and through well-designed interventions to improve rules-based governance at home and in regional structures. tralac remains convinced of the need for capacity building which is linked to programmes and activities for improving the adoption of better policies and legislative frameworks; implementing trade and integration agreements more effectively; providing legal remedies and certainty to investors and firms; and for developing community law based jurisprudence through regional tribunals. These initiatives should speak to each other. The capacity of organizations such as tralac and others working in these areas to design and execute suitable projects depends on the continued involvement of committed donors. They are entitled to full disclosure about how their funds are spent. They should be involved in the pursuit of transparency and efficiency. This challenging journey has to continue.

Tell us what you think.