This article attracted some attention from IPS news. I was interviewed, electronically, with a view to elaborating on some of the arguments. The IPS article covered a fairly wide terrain, and is available here. Some of my views were reflected in the piece, but as is the nature of these things much was left out. My original replies to the questions I was sent are reproduced at the end of the original article below.
Much of the discussions at the World Economic Forum’s annual Africa gathering in Cape Town this year focused on infrastructure development and regional economic integration. Both are critical agendas for the sub-continent, although beyond the usual platitudes it was difficult to discern much in the way of genuinely new ideas.
One old idea that may resurface into popular discourse in future, concerns South Africa – Nigeria trade relations: negotiating a free trade agreement (FTA) between the two African giants.
At the official level broader bilateral relations have been on a downward drift in recent years, a trajectory capped by Nigeria’s opposition to South Africa’s successful backing of Nkosazani Dlamini-Zuma’s candidacy for the African Union Commission Chair position.
Just before the WEF summit, South Africa and Nigerian business met under the auspices of the binational commission. Discussions seem to have been relatively fruitful, to judge from subsequent media reports and corridor discussions at the WEF in Cape Town. For example, the Nigerian government reportedly wants to learn from South Africa’s experience in promoting domestic manufacturing of cars, while the two countries agreed to address a major irritant in commercial relations by regularising visa application processes. There was even some honesty in discussions, if Aliko Dangote’s critique of South Africa’s black economic empowerment laws is anything to go by.
So with bilaterals relations seemingly back on a healthier trajectory, why not cement them by negotiating an FTA? From a South African perspective the logic is compelling. Nigeria is now one of the largest investment destinations for South African companies. Where they go, some degree of exports are bound to follow. With Nigeria’s economic growth trajectory looking good, by contrast with South Africa’s anemic domestic growth, it is likely outward FDI flows from South Africa into Nigeria will intensify. An FTA would solidify the budding investment partnership by cementing South African access to Nigerian markets, placing our companies on a sound competitive footing relative to a broadening array of emerging markets looking to access the African growth story.
What about Nigerian motivations? Currently the Nigerian economy lacks diversification, relying on oil as its major export. Yet there are reasons to be optimistic about future prospects. Finance, for example, is growing in leaps and bounds. Most importantly, under finance Minister Ngozi Nkonjo Oweala, economic reforms across the board are gathering pace. Some of my corridor discussions in Cape Town supported this proposition. Crucially, an FTA with South Africa would buttress and extend the reform process, introducing much needed competition into a domestic political economy fraught with insider relationships.
At the same time the mooted FTA would send a serious signal to the rest of the continent that economic integration is moving beyond the rhetorical, to the meaningful. Moreover, it would pressure other countries to knuckle down and compete with the sub-regional giants.
Those concerned about ‘excessive competition’ that could be unleashed through a strengthened regional integration impulse, such as South African Finance Minister Pravin Gordhan, can take comfort from two factors. First, really sensitive products can be carved out of FTA arrangements. This concerns two categories of goods: those where import-competing interests would be forced to compete through import liberalization; and those which play a substantial role in buttressing state coffers owing to the duties they attract. Clearly these would have to be carefully handled. Second, most exports from the sub-continent leave the sub-continent since they are primarily commodities destined for more sophisticated economies. This means direct intra-African competition over goods markets is sharply limited, beyond a few key regional economies such as South Africa and Nigeria.
So what are we waiting for? Let negotiations commence…!
Q & A with IPS