BRI and the implementation of the African Continental Free Trade Area
Occasional paper 6/2020
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Author: Daryl Swanepoel
MPA, BPAHons, ND: Co. Admin
Abstract
The geo-political and geo-economic landscape has over the last decade witnessed quite dramatic shifts in political alignment and regional economic integration architecture. One such realignment relates to Africa’s relationship with China. The Forum for China Africa Cooperation (FOCAC) establishes a strategic partnership between the two sides in areas such as politics, economics, international affairs and development.
Simultaneously, China has introduced the Belt & Road Initiative (BRI) with similar purpose albeit within a wider geographic area that covers large swathes of Asia, Europe, Africa and Latin America. To add to the complexity, China and South Africa form part of the Brazil, Russia, India, China, South Africa grouping (BRICS), with the same objectives at its core. Moreover, the recent coming into force of the African Continental Free Trade Area (AfCFTA) will impact the way in which future dialogue and negotiations will be conducted between Africa and other international bodies, including those which are the subject of this analysis.
This paper firstly questions the impact of the multiplication of institutions on the coordination of programmes envisaged by each of the ‘blocs’. It ponders the effect of such proliferation on the harmonising and synchronisation of agreed to programmes.
The paper then also touches on the impact that COVID-19 has had on global supply chains. It suggests that the pandemic has laid bare flaws in its current design; and that it has highlighted the need for adjusted thinking as it relates to the way forward for strategic cooperation within the geo-economic trade blocs.
And lastly, it examines what the implications are for the overlapping institutional mandates resulting from the establishment of the AfCFTA, and what bearing it implies for the relationships between Africa, BRICS, and the BRI.
It concludes that greater FOCAC/BRICS/BRI programmatic coordination will be required within a new post-COVID-19 order. It identifies the need for the establishment of novel institutional coordination. It weighs up re-shoring versus globalisation and concludes that the right blend ought to be found that can help boost self-sufficiency without turning away from globalisation.
It closes with a recommendation that the secretariats of BRICS, FOCAC, the BRI and the AfCFTA consider further structured interrogation and dialogue to determine the merits of the arguments made for the introduction of greater institutional coordination between these bodies. The China-Africa Think Tanks Forum could, the paper suggests, be the ideal body to undertake such research.
Abbreviations
AfCFTA African Continental Free Trade Area
AU African Union
BRI Belt and Road Initiative
BRICS Brazil Russia India South Africa
FOCAC Forum for China Africa Cooperation
FTA Free Trade Area
1. Introduction
Two significant China-driven global geo-political and geo-economic re-alignment initiatives affecting the African continent are playing themselves out simultaneously. On the one hand, there is the Forum for China Africa Cooperation (FOCAC), which aims to coordinate, in a mutually beneficial manner, China and Africa’s global political, economic, social and international interests. On the other, there is the Belt and Road Initiative (BRI), that aims to integrate, for similar purposes, a broader geo-political constituency that includes large swathes of Asia, Europe, Africa and Latin America. To add to this complexity, Brazil, Russia, India, China and South Africa (BRICS) in essence replicate the objectives within a third geo-political, geo-economic configuration.
Concurrently, Africa is itself, through the establishment of the African Continental Free Trade Area (AfCFTA), undergoing its own regional integration. All this while having to coordinate its own internal realignment processes with the realignment processes of the three other inter-regional initiatives.
A single integration and re-alignment project on its own is complex and challenging. To manage four such integration and re-alignment processes at the same time, requires great skill and coordination. There is not much evidence to support the notion that sufficient coordination is in place to synchronise the work of the AfCFTA, FOCAC, BRICS, the BRI. This paper examines the phenomena, the need for coordination between these initiatives and explores proposed mechanisms that can give effect thereto.
2. FOCAC, BRICS & BRI: Necessary process or superfluous
triplication?
To give support to its foreign policy initiatives, the Chinese government has incrementally introduced policy instruments to coordinate their activities and programmes across the various regions they have targeted for strengthened relationships in support of their own development, albeit within mutually beneficial arrangements with their strategic counterparts.
From an African perspective the first such coordinating initiative was the Forum for China Africa Cooperation (FOCAC), which held its first ministerial session in Beijing from 10 – 12 October 2000 (PRC,2000). FOCAC has established a strategic partnership between China and Africa, which is working towards greater cooperation between the two sides in the areas of politics, economics, international affairs and social development (Shelton & Paruk, 2008).
The second coordinating mechanism involving Africa was the formation of BRICS. It was founded on 20 September 2006 on the margins of the United Nations General Assembly in New York. It was initiated by Russia as BRIC, since South Africa was not part of the initial formation. Its first summit was held on 16 June 2009 (BRICS, N.d.). On 24 December 2010, BRIC was expanded to BRICS, when South Africa was invited to join the group of developing nations. It joined its first summit on 14 April 2011 in Sanya, China (RSA, N.d.). South Africa was invited to join because of its position to make a unique contribution to the BRICS Africa agenda of promoting global economic governance reforms and the institution of BRICS as a credible international organisation. It was a strategic move by the bloc to get a foothold in Africa as a whole (Manda, 2018).
Then came the Belt and Road Initiative (BRI) in 2013. It is an ambitious programme which aims to improve regional integration, grow trade and stimulate economic growth by connecting Asia with Africa, Europe and Latin America via land and maritime networks. The initiative has five major priorities: policy coordination, infrastructure connectivity, unimpeded trade, financial integration and connecting people (European Bank, N.d.).
With the advent of the African Continental Free Trade Area (AfCFTA), which came into force on 30 May 2019 (tralac, N.d.), BRICS and BRI planning will by extension also impact African countries that are not part of these formations. As such BRICS and the BRI programmes and projects will also by necessity have to be integrated into the AfCFTA planning. It will become increasingly difficult to isolate non-BRI and BRICS African countries from these regional initiatives.
At its core, and as illustrated in the table below, the three initiatives, essentially, have the same objectives:
Sources: Mackinnon (2016); Dristi Media (N.d.); OECD (2018).
The proliferation of regional initiatives in which China plays a central role, is linked to China’s rapidly growing global role and more assertive approach in the international arena (Hass, Rubenstein & Thornton, N.d.). As can be deduced from the preceding sections, China has asserted itself in a growing number of regional initiatives. From an African perspective these include FOCAC, BRICS and the BRI. Whilst affirming the constructive roles that these initiatives play in advancing development, the question arises whether this proliferation best serves the objective, or whether the streamlining of the multiple approaches will enhance greater efficiency in the execution of the mutually beneficial development goals as envisaged in the mandates of the various formations.
Whilst each of these initiatives are in essence promoting the same policy ideals, or at least different elements of the same policy areas, and indeed many of the same players, there does not appear to be a bridge between the various initiatives and/or an umbrella coordinating mechanism. This paper highlights, what it believes, a flaw in the multi-lateral coordination architecture.
There are practical reasons to invest time and political capital in coordination. These include, amongst others: (i) the elimination of duplications, which can produce unnecessary costs for government, and lost time for citizens and businesses, (ii) the avoidance of contradictions where different organizations, often for good political reasons, implement programmes that are directly contradictory, (iii) minimising displacement, where one organisation, without consultation, may make decisions that create problems for others, (iv) greater efficiency in dealing with cross cutting problems, where scarce resources needed for a range of services often cut across the usual and/or regional lines, and (v) to ensure simple tidiness, through which governments can appear more capable, building public confidence in the process (Peters, 2018).
Moreover, political leaders traverse the globe to attend a multitude of multi-lateral meetings, often to discuss the same cooperation issues with different partners. This comes at great expense to the fiscus and exacerbates the already stretched capacity of the civil service.
The secretariats of FOCAC, BRICS and the BRI need to contemplate how best to coordinate their individual activities into a cohesive whole, that is to ensure cross-organisational planning and coordination. This may take the form of a new global counter-balancing institution, which essentially absorbs the three initiatives; or a cross-organisational coordinating mechanism, which at the very least eliminates duplication and at best ensures an integrated approach to the global issues they jointly wish to address.
This becomes even more important given the very high cost of development projects, the fact that countries along the BRI have different levels of development and at times poor governance, which may hinder infrastructure development and the development of trade and investment (Hind, 2019).
China holds the key to FOCAC and BRI coordination, in that, although the initiatives are multi-laterally owned, both are driven by China (Burger, 2017). This means that establishing coordination between the two initiatives could prove less complex than it would be with BRICS, which is not driven by a single country. It may therefore be that coordination does not take on one form, but a combination of forms.
The author does not presume to have the competence, nor the mandate, to prescribe such coordination mechanisms, but does offer illustrative approaches that could be applied to effect greater coordination between the BRICS, FOCAC and BRI initiatives.
The absorption model
This model would entail the fusing of BRICS, FOCAC and the BRI into a single multi-lateral development agency, to carry out a common mandate across all the countries that have subscribed to the various initiatives. There could be different streams within the single entity that will execute the peculiar geo-political and/or geo-economic priorities envisaged by the former formations.
(Source: Author, 2020)
The collaborative model
In turn, this model would retain the three independent initiatives, which would continue to direct their own programmes. They would however agree to coordinate their individual activities in an effort to ensure a greater level of synchronisation aimed at improving delivery effectiveness for the greater good of their subscribing members. This would require the establishment of a coordinating mechanism established by the three secretariats to cede certain activities to either BRICS, FOCAC or the BRI, and/or to supplement and support projects initiated by any one of the three, and/or to carry out individual projects in a manner that effectively integrates the separate initiatives into an aligned result.
(Source: Author, 2020)
The hybrid model
In this instance, the two Chinese-led initiatives – FOCAC and the BRI – would, under the banner of the BRI, be folded into one, whilst BRICS would continue independently, albeit within a cooperative arrangement with the BRI. Within the BRI there could be regional streams that would fulfil the previous regionally executed programmes, but now within an integrated overall master plan. This would entail a similar approach being followed with other regional programmes that also face parallel duplicity akin to FOCAC.
(Source: Author, 2020)
The exact form and shape of the coordination mechanism remains to be seen. It will be the subject of much intense diplomatic dialogue and negotiation. What that form and shape turns out to be, is, however, in the authors mind, secondary to the indisputable reality that efficacy in policy implementation will require a greater level of structural coordination. Coordination is crucial within the ever more interconnected and integrated world. For them to remain at the cutting-edge of global realignment, FOCAC, BRICS and the BRI will, sooner or later, have to factor these into their execution arrangements.
3. COVID-19 highlights gaps in global supply chain
architecture
In the previous section the paper dealt with the need for coordination between the various regionally orientated bodies. The COVID-19 pandemic laid bare the negative effect that a lack of coordination has on the global economy. The lock down in China, and later in other countries, for example, disrupted the global supply chains. The global pandemic, according to Marianne Schneider-Petsinger (2020) of the renown Chatham House, suggests that the coronavirus “is transforming the future of supply chains as a tool for policymakers”. She says that a “new era of government policy that inextricably links supply chains with wider industrial policy and strategic competitiveness is already upon us”.
As a practical example of such disruption, one may cite the impact that the COVID-19 lock down in China had on the computer sector in South Africa. A large supplier of computer hardware in South Africa was caught unawares. Without prior warning they did not have the time to sufficiently stock their products and as a result, were unable to fill orders for some months. The impact on their financial performance is evident (Anon., 2020). This situation was not an isolated case. As suggested by Schneider-Petsinger, this appears to have been a global phenomenon.
Some, such as the United States of America (US) seem to believe that the solution lies in the re-shoring of global supply chains, even if it means a cost to the fiscus, through for example paying subsidies to domestic manufacturers to counter supplies from abroad. The US are not alone. French president Emmanuel Macron has called for greater industrial sovereignty, and the European Union, in light of economic vulnerabilities created by the pandemic, recently adopted the concept of ‘open strategic autonomy’, which seeks a new balance between open trade and efforts to ‘reduce dependency in order to strengthen security of supply. (Schneider-Petsinger, 2020).
This paper argues that the solution does not lie in the re-shoring approach. Rather, the right blend ought to be found that can help boost national self-sufficiency without turning away from globalization. By exposing companies to domestic concentration, does not reduce the supply chain risks, for their domestic and international customers, in cases of domestic catastrophe (Schneider-Petsinger, 2020).
To illustrate: The same computer hardware enterprise cited earlier, also supplies optical fibre, which, as a result of a Chinese investment, they manufacture in South Africa. When the Chinese economy locked down, their optical fibre supply remained uninterrupted. At the same time, whilst the Chinese side could not, due to the lock down, export optical fibre, the potential existed for them to fill their order books via their South African operation (Anon., 2020). This is the blend argued for: ensuring security of domestic supply without turning away from the benefits of globalisation.
Herein lies the motivation for greater coordination between and within FOCAC, BRICS and the BRI. Holistic planning across these regions is necessary to overcome the pitfalls that catastrophe holds for supply chains. By diversifying manufacturing capacity across the regions ensures continuity of supply when one’s domestic economy shuts down, for whatever reason. This requires careful central planning to ensure, amongst others, optimisation of economic complementarity, competitiveness and equal administrative treatment in areas such as customs, residence permits, investment guarantees, etcetera.
The groundwork for such coordination has been laid by FOCAC, BRICS and the BRI. However, each of these bodies serve different constituencies, negating, in the absence of coordination, the ability to optimise security of production across the combined membership. Brazil and India are for example not part of the BRI, and FOCAC covers only Africa and China, which excludes the other Asian, European and Latin American countries that form part of the BRI.
The coordinating mechanism promoted in the previous section will help overcome such supply difficulties and will promote inter-regional planning. In moving development forward, this paper argues that it is no longer a question of whether coordination is necessary, but rather why such coordination would not be pursued?
The COVID-19 pandemic has exposed the extreme vulnerabilities within the global supply chain environment, and its threat to economic growth. Similar vulnerabilities exists within various other sectors as well, for example tourism, health and the environment. Accordingly, it is proposed that FOCAC add to its agenda the question of coordinating its activities with those of BRICS and the BRI.
4. Extending the BRI to AfCFTA
There are currently 39 countries in Africa participating in the BRI (Risberg, 2019). At the same time, the AfCFTA has come into force. The overlap between the two sets of countries has implications for the BRI.
In accordance with the African Union’s Agreement Establishing the African Continental Free Trade Area (AU, 2012), the general objectives of the AfCFTA are to:
create a single market for goods and services, facilitated by movement of persons in order to deepen the economic integration of the African continent and in accordance with the Pan African Vision of “An integrated, prosperous and peaceful Africa” enshrined in Agenda 2063;
create a liberalised market for goods and services through successive rounds of negotiations;
contribute to the movement of capital and natural persons and facilitate investments, building on the initiatives and developments in the State Parties and Regional Economic Communities;
lay the foundation for the establishment of a Continental Customs Union;
promote and attain sustainable and inclusive socio-economic development, gender equality and structural transformation of the State Parties;
enhance the competitiveness of the economies of State Parties within the continent and the global market;
promote industrial development through diversification and regional value chain development, agricultural development and food security; and
resolve the challenges of multiple and overlapping memberships and expedite the regional and continental integration processes.
In these provisions, there are especially two stipulations that have a direct bearing on the way forward for the BRI – AfCFTA planning. Firstly, it lays the foundation for a continental customs union, and secondly, it aims to resolve the challenges of multiple and overlapping memberships and expedite the regional continental integration processes.
Practically, this means that the BRI objective of creating integrated trade markets, including FTA’s, is no longer feasible by means of a bilateral agreement between an individual African country and the broader BRI. Any arrangement with an individual country will be subject to that country’s obligations in term of the AfCFTA agreement.
Furthermore, since the AU is moving in the direction of a continental customs union, here too, the BRI will be obliged to consider the aspirations of the broader AfCFTA as opposed to individual African countries.
And, in terms of regional integration, the AU has adopted the Program Infrastructure Development for Africa (PIDA) masterplan (AU, N.d.). This plan has as its primary objective the development of infrastructure that will support the economic integration envisaged by the AfCFTA.
All of the above would suggest that in terms of developing an African BRI integration plan, BRI architects will have to shift away from negotiations with individual African countries, towards negotiations with the organs of the AU. This in turn places a heavier burden on the BRI planners, in that they will have to understand the intricacies of layered economic infrastructure planning, that is between the individual African countries, at an African continental level and between the continent and the broader BRI.
And finally, it appears the author is not alone in his concern relating to overlapping memberships of individual African countries and its impact on trade growth and economic infrastructure optimisation for the continent. In identifying the need to resolve the challenges of multiple and overlapping memberships, they in effect give guidance to the BRI planners. African countries’ integration into the BRI requires coordination at an African continental level.
This brings the discussion full circle. Is the proliferation of political and economic integration initiatives necessary process, or, as it relates to FOCAC, BRICS and the BRI, superfluous triplication? The paper leaves the question open for the political leaders to ponder, suffice to suggest that it is an issue worth pondering.
5. Conclusion
The status quo relating to the current global multi-lateral institutions has for some time now been challenged as not ‘being fit’ for purpose, in that it is often experienced as transactional, ideologically uncompromising and exclusive in its decision-making. The inability to transform this architecture has gradually led to the establishment of alternative geo-political formations aimed at addressing the divide. Prominent amongst these have, from an African perspective, been FOCAC, BRICS and the BRI.
The progression of each has served their objectives well, and they have gathered momentum and good reputation. There is general consensus that FOCAC, BRICS and the BRI have enormously aided socio-economic development on the continent.
However, given the recent developments on the African continent whereby progress is rapidly being made in the implementation of the AfCFTA, together with the cross-cutting nature of the stated aims and objectives of the three groupings, questions are starting to be raised as to whether some form of consolidation is required.
This paper has elaborated on the question as to whether, from an African perspective, the need for a proliferated approach still holds true, or whether some form of streamlining of the triplication may lead to better coordination and developmental outcomes. It does not venture a firm solution, but does suggest that it is a topic worthy of consideration.
6. Recommendation
It is recommended that the secretariats of BRICS, FOCAC and the BRI consider further structured interrogation and dialogue to determine the merits of the arguments made, that is structured cooperation between FOCAC, BRICS and the BRI. The China-Africa Think Tanks Forum could be the ideal body to undertake such research.
Whatever the outcome, the exercise should aim at strengthening mutually beneficial multilateralism, since, in the authors view, nations - and indeed the world - are better served through cooperation based on mutual respect than they would be by following an isolationist and/or going it alone approach.
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