2019 Business Review: CFA reforms, border closures, power crisis, AfCFTA etc.
The business news calendar for 2019 was busy and bubbly with issues from monetary reforms across West Africa, financial squeeze in Central Africa whiles the Southern bloc experience dire economic times.
The crisis down south had to do with power crisis in the most advanced economy South Africa which impacted neighbours including Zimbabwe, Mozambique and Lesotho.
The issue of border closures was also prominent as Nigeria opted to unilaterally shut its land borders despite repeated protests by neighbours. In East Africa Eritrea like Nigeria shut her borders with Ethiopia.
A dream, an old dream is coming true, since the inaugural summit of the Organization of African Unity in May 1963, the African Continental Free Trade Area that we are launching today is one of the most emblematic projects on the African Agenda, the founding fathers will certainly be proud of it.
Kenya did same with her border with Somalia but more for security reasons even though the economic impact thereof was also reported as cross-border trade did suffer.
Our review into 2019’s top African business news will also look at strides by the African Union in the area of moving to operationalize the free continental trade area, AfCFTA.
Monetary reforms across West Africa
In July, the 15 member states of the Economic Community of West African States (ECOWAS) agreed to adopt a single currency, the “eco”, as early as 2020. Given that the bloc comprised eight members of the West African Monetary Union (WAMU), the eco was expected to supplant the CFA franc for those countries.
Then came the pronouncement of Benin leader Patrice Talon who said the WAMU states planned to pull their reserves from the Bank of France. The move elicited huge support in a region that has long advocated ditching the France-backed ‘colonial’ currency.
Then in December during a visit to Ivory Coast, the French President and his Ivorian counterpart announced that Francophone West Africa was abandoning the CFA to take adopt the “eco.”
It means that the other seven ECOWAS countries will also have to abandon their respective currencies and embrace the “eco” as agreed by leaders earlier in the year. Definitive dates have yet to be set on when the “eco” will go into circulation.
Experts have said there are challenges that exist in case of implementation and that states must smoothen all those edges. Central Africa’s six Francophone nations will continue to use the CFA for now.
CEMAC fund transfer squeeze
The Central African zone noted for its oil wealth was also at the center of business news after strict regulations were announced in remitting funds outside of the zone.
The rules include: that all forex transfers over a 1 million CFA francs ($1,680) be vetted for approval by the bank, and that all export proceeds above 5 million CFA ($8,400) be repatriated in 150 days to a local bank account.
The move affected top businesses as well as people sending money home to other regions on the continent. Struck by the fall in oil prices, six countries of the CFA franc zone are pegged to the euro by a fixed exchange rate.
To cope with and increase the level of reserves, “the BEAC hardened the conditions for obtaining foreign currency for banks”, refusing the demands “so that our customers can pay their foreign suppliers”, some industry players complained in May.
Ethiopian crash and rippling implications on Boeing
Africa and the world joined Ethiopia to mourn one of Africa’s worst aviation disasters in recent years. On March 10, the Ethiopian Airlines Boeing 737 Max crashed in the town of Bishoftu in Ethiopia’s Oromia region.
The flight was on its way to the Kenyan capital Nairobi but it made only six minutes out of the over two hours flight before crashing and killing all on board.
The crashed hogged the news headlines across the world due to its implications on the world biggest plane manufacturer. Till date issues around the crash continue to ripple with the most recent being the firing of Boeing’s chief executive officer when the crash occured.
Some key points from the crash were as follows:
1 – All aboard killed
2 – Boeing 737 MAX 8s grounded worldwide
3 – Black boxes flown to Paris for analyses
4 – Burial ceremony was held in Addis Ababa
5 – Airline, customers fought off foreign media misreport on crash
6 – Preliminary report released
Four main findings:
- Aircraft passed airworthiness test before takeoff.
- Crew properly licensed to operate the flight
- Takeoff was normal
- Boeing procedures were used but the crew was unable to control the flight
Twin safety recommendation to Boeing: A review of flight control system, review should be adequately vetted before planes allowed back in the skies.
7 – US lawmakers called a hearing over the incident
8 – Ethiopia announced a deal with Airbus with all defective Boeings grounded
9 – Boeing admits errors, vows robust response
10 – DNA samples of victims flown to UK for tests
Nigeria’s unilateral border closure and rippling effects
In August this year, Nigeria shut all its land borders unilaterally, a move the government said was to check smuggling in to and out of Africa’s biggest economy. The effects were felt as far as in Ghana.
Several high-level meetings have gone on between Niger, Chad, Benin, Ghana governments with Nigeria but little has changed as Abuja sticks to its guns on keeping the frontiers shut.
A report later in the years said the borders were due to be reopened in early 2020. But the presidency denied the report saying the borders remain closed till the conditions for which it was implemented is cured.
Within the period, Nigeria issued orders banning the sale of fuel within a certain radius of its borders. The move received backlash but the government has persisted in enforcing it.
Analysts hold that the situation is a slap in the face of subregional protocols of free trade and movement by ECOWAS and also bad precedent as Africa readies to welcome the continental free trade area, AfCFTA.
A booming trade between Eritrea and Ethiopia was closed as Eritrea shut her borders with Ethiopia. Analysts hold that the Eritrean economy was benefiting from goods entering from Ethiopia.
The Eritrean government has been mute on the issue whiles Ethiopia insists that it got no prior information before Asmara went ahead to close the borders that had been reopened only for months.
The power crisis across Southern Africa
When South Africa, economic leader in the region suffers, it is a sign that its dependent neighbours will have to endure equally dire circumstances. In this case with power generation.
Talk of reforming the power utility provider in the country, Eskom, continued to roll on till the country was plunged into darkness as a load shedding scheme was announced. South Africa’s national carrier, South African Airways also took a big hit and slumped into business rescue.
South Africa’s power headaches meant that Zimbabwe which also depended on Eskom was also being plunged deeper into load shedding regime amid increasingly dire economic situation back home. Zambia also suffered blackouts.
Natural disasters exacerbated the business crisis across the region from the impact of Cyclone Idai that hit Mozambique, Zimbabwe and Malawi through to the droughts that ravaged through Zimbabwe and forced Namibia to declare a state of emergency.
Zimbabwe introduced new bond notes as Mnangagwa promised to ensure a single currency regime. Economic protests were violently dispersed as doctors were fired en masse over salary impasse.
In a busy election year across the region, the economy was a constant feature in the topical issues that voters were looking at to cast their ballots be it in South Africa, Malawi, Mozambique, Botswana and Namibia.
AU hails progress on AfCFTA
In July, the African Union finally launched the African Continental Free Trade Area Agreement, AfCFTA, after the required number of minimum signatories were reached.
At the launch of the deal in the Niger capital Niamey, the AU Commission chief, Moussa Faki Mahamat described the historic event as ‘a dream come true’.
Je sais qu’il est illusoire de penser que le développement soit possible à l’échelle d’un seul pays. L’Afrique est le continent qui a, aujourd’hui, le plus besoin d’intégration. N’Krumah avait raison de dire, il y a plus de 50 ans, que l’Afrique doit s’unir ou périr. #ZLECAf -IM
“A dream, an old dream is coming true, since the inaugural summit of the Organization of African Unity in May 1963, the African Continental Free Trade Area that we are launching today is one of the most emblematic projects on the African Agenda, the founding fathers will certainly be proud of it,” Mahamat said.
Africa’s economic powerhouse Nigeria, along with Benin signed the free trade agreement on the same day bringing the number of signatories to 54 out of 55 countries.
The African Union also announced it has so far recorded 27 ratifications. Eritrea till date is the sole outsider.
Do share with us other major business issues that you felt took place over the year, we would gladly add it to our list.