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BRICS and AfCFTA – a recipe for industrialisation and inclusive development

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Picture: Phando Jikelo/African News Agency (ANA)/Taken on April 26, 2023 – Deputy Minister of International Relations and Co-operation, Candith Mashego-Dlamini, hosts the 9th session of the meeting of BRICS Deputy Ministers and Special Envoys responsible for the Middle East and North Africa, in Cape Town, South Africa. In the current, fractured multilateral order with new modes of trade wars, are having negative spillovers for many African nations. In this milieu, the BRICS bloc – and its new members – offers new scope and platforms for equitable trade, as well as industrial development and inclusive growth, the writer says.

By Ashraf Patel

The United Nations (UN) Declaration of the Right to Development (RtD) recognises that development requires a favourable economic environment at the international level (Article 10). This has remained the basis for the RtD.

Since 1966, the RtD has gone through an evolution, from being a new concept, to being well acknowledged and then routinely included in the United Nations resolutions and outcomes of international conferences and fora.

In this context, the evolution of the African Union’s (AU’s) Africa Comprehensive Free Trade Agreement (AfCFTA) seeks to create a single market, deepening the economic integration of the Continent; establish a liberalised market through multiple rounds of negotiations; aid the movement of capital and people, facilitating investment; move towards the establishment of a future continental customs union; and achieve sustainable and inclusive socio-economic development, gender equality, and structural transformations within member states.

Infrastructure inadequacy, however, remains a major obstacle to Africa’s economic growth, development, and productivity. It is estimated that poor infrastructure cuts national economic growth by two percent annually and productivity by a staggering forty percent.

Industrialisation has been on the UN, the AU and UNECA agendas for the past two decades.

“Africa remains the least industrialised Continent. The industrial sector in Sub-Saharan Africa (SSA) contributes less than 28 percent of the region’s gross domestic product (GDP), which is lower than other low-income regions in the world. Data from the World Bank’s World Development Indicators shows that in 2019 SSA’s industrial output stood at $194 billion – much less than other low-income regions, such as South Asia ($491.6 billion) and Latin America and the Caribbean ($762 billion) – J Matola (2022)

Among the key constraints facing most sub-Saharan economies are poor infrastructure, weak institutions, the primary sector as a key driver of economic activity, a business-unfriendly environment; limited capacity in innovation, science and technology; highly fragmented markets with trade barriers; a lack of comparative advantage in industrial products; and unfavourable macroeconomic conditions

Are the AU and AfCFTA putting the proverbial ‘cart before the horse’?

Generally, the AfCFTA first two years of focus has had a decidedly FDI business-investment agenda, and has yet to conclude the foundational agreements on trade, rules of origin and agriculture – the foundations of any trade agreement.

Meanwhile the AfCFTA is moving headlong with the ‘services agenda’ through the Roadmap on services, investment, environmental services and IP, the level of complexity expands, and will have grave implications for lack of support for agriculture and industrial development.

The second round of negotiations is ongoing and will cover the remaining services sectors business, distribution, education, environmental health and related social services and the recreational, cultural and sports services. As per the Roadmap, this round of negotiations is due to be completed in 2023.

Meanwhile the AU is deliberating on the Digital trade agenda with its focus on e-commerce is that it overlaps with many areas of law such as consumer protection, data protection, intellectual property rights, competition policy and tax-related issues, amongst others.

The negotiators of the AfCFTA must determine how in-depth to regulate these issues within the E-commerce Protocol. Another important aspect for consideration is the regulation of online dispute settlement. The use of e-commerce channels and platforms varies from country to country. There is the additional complication that Phases II and III of the negotiations have now been merged into one. However, the Protocols on Women and the Youth and on Digital Trade are not mentioned in Article 8(2) of the Agreement, and labour formations are marginalised.

The danger of a fragmented AfCFTA regime will have to be addressed and a solution be agreed before these negotiations are concluded and can reverse social gains, as well as ensure decidedly FDI investment regime and erose the social agenda, that is crucial for the attainment of the UN SDGs.

Furthermore, ongoing and complex relations and bi-lateral treaties AGOA and EU EPA’s negotiations have a myriad of challenges, many getting caught up in geopolitical headwinds.

The case of the poultry industry in South Africa, which is being destroyed due to excessive dumping – as well as punitive trade and tariff policies by Agribusiness in the US, EU and Brazil, the passing of the Inflation Reduction Act IRA 2022 in the US, as well as the EU’s proposed Carbon Border Mechanism CBM signals the rise of protectionist policies, meaning it will be more difficult for developing nations and their businesses to access markets in the US and EU.

BRICS nations and enabling an inclusive AfCFTA

The current, fractured multilateral order, with new modes of trade wars, is having negative spillovers for many African nations. In this milieu, the BRICS bloc (and its new members), offers new scope and platforms for equitable trade, as well as industrial development and inclusive growth and export opportunities – the engine room for job creation.

All BRICS countries have major relations with African countries and the BRICS bloc of countries, with 31.5 percent of global gross domestic product (GDP), has overtaken the G7 [advanced economies bloc], with 30 percent, mainly owing to the growth of China, which has contributed 30 percent of global growth over the past ten years.

The expansion of BRICS membership is a solid step toward that goal and is highly consistent with the theme of South Africa’s chairship this year. South Africa can use its position as the 2023 chair of BRICS multilateral bloc to advance the interests of African States, under the theme of ‘BRICS and Africa partnership for mutually accelerated growth, sustainable development and multilateralism’.

In 2022, amid the Covid-19 pandemic, BRICS countries came together to promote joint development through, for instance, the BRICS Initiative on Trade and Investment for Sustainable Development, the Digital Economy Partnership Framework, the space cooperation mechanism, and the BRICS Vaccine R&D Centre are innovative models for exclusive development.

The theme for South Africa’s 2023 BRICS chairship is: BRICS and Africa: Partnership for Mutually Accelerated Growth, Sustainable Development, and Inclusive Multilateralism

Today, as multilateral mechanisms such as the APEC, NAFTA, and G20 face greater challenges ranging from debt relief measures to global tax agreements, and financial (in)stability, an expanded BRICS could play an unique role in promoting global development and cooperation, especially among emerging markets and developing countries, advancing the AfCFTA on a sustainable path. and contributing to building a global community of peace and development.

Ashraf Patel is a digital economy associate at the Institute For Global Dialogue (IGD).