African free-trade deal jeopardized by anti-foreigner violence and border closings

Open this photo in gallery:

Just weeks after an eruption of violent attacks on African migrants and foreign-owned businesses in its streets, the South African government has announced a plan to ban foreigners from specific sectors of its economy.

The violence and the planned restrictions are the latest signs of a growing anti-foreigner and protectionist trend in some of Africa’s biggest economies, threatening to undermine the potential benefits of a free-trade agreement that had sought to unleash growth in the continent.

Other African governments – including those of Nigeria, Rwanda and Uganda – have closed their borders temporarily on some of their neighbours, seemingly oblivious to the damage they are inflicting on the African free-trade agreement, which was formally launched at a July summit and is scheduled to begin taking effect across the continent next year.

The agreement seeks to create the world’s biggest free-trade zone, covering 55 countries and 1.2 billion people. The Canadian government, which financed an African trade policy centre that was instrumental in negotiating the trade deal, has voiced strong support for the agreement.

Studies suggest the trade deal could boost internal African trade by 52 per cent over the next three years. The goal is to remove all tariffs from 90 per cent of African trade within the next five years for most countries, and within 15 years for all countries.

But the obstacles to the trade agreement have already been exposed in rising tensions between South Africa and Nigeria, the two biggest economies on the continent.

The tensions were fuelled by violent attacks on African migrants in Johannesburg last month, sparking clashes in which at least 12 people were killed. Foreign-owned shops were looted or destroyed, and hundreds of African migrants fled into shelters or returned to their home countries in fear of attack. The violence led to reprisal attacks on supermarkets and cellphone providers owned by South African companies in Nigeria.

The two countries are scrambling to repair their frayed relations. In a state visit to South Africa on Thursday, Nigerian President Muhammadu Buhari met with his South African counterpart, Cyril Ramaphosa, and the two presidents pledged to boost the level of trade and investment between their two countries.

But just days earlier, Mr. Ramaphosa’s government had announced it is drafting legislation to prohibit foreign nationals from operating in certain sectors of the economy. It did not disclose which sectors.

“We want to strengthen the protection for the locals,” South Africa’s small-business minister, Khumbudzo Ntshavheni, told a Johannesburg radio station.

“Government cannot account for the businesses done by foreign nationals in the country, and the majority of the money they make is not banked in our banking system.”

The planned ban is a response to vocal complaints from many South Africans, including those who have led violent attacks on foreign-owned shops. They allege that migrant shopkeepers are unregulated and too dominant in the impoverished townships where millions of South Africans live.

Many shops in Johannesburg are now operated by “somebody you do not know,” Ms. Ntshavheni said. She complained that foreigners have taken over the small-business sector and refuse to employ South Africans – an allegation refuted by studies of the sector.

Peter Leon, an Africa expert at Herbert Smith Freehills law firm, said the planned legislation is “regrettable” and would violate South Africa’s commitments under the new African free-trade agreement and existing regional trade agreements.

In another recent example of trade restrictions, Nigeria unilaterally closed its borders with Benin and Niger in late August, complaining of chronic smuggling. The effect on local traders, who could no longer get their products into the country, was devastating. And in a third example, Rwanda and Uganda closed their border for about six months this year because of political tensions between the two countries.

In other African countries, border crossings are lengthy and time-consuming. At the border between Kenya and Tanzania, trucks must often wait for several days to clear the bureaucratic hurdles, despite a regional free-trade agreement.

There are “massive” challenges to the goal of reducing the non-tariff barriers that impede African trade, according to Catherine Grant Makokera, a trade policy expert at Tutwa Consulting Group in Johannesburg.

The waves of anti-foreigner attacks in South Africa, which date back more than 10 years but have seemed to intensify in recent years, are another impediment to African free trade. Wamkele Mene, the chief South African negotiator for the continental trade agreement, told a panel discussion on Thursday that the anti-foreigner violence has a “political impact” on South Africa’s trade negotiations, even if it doesn’t have a legal impact.

In an attempt to defuse the tensions, Mr. Ramaphosa has dispatched envoys across Africa to apologize for the anti-foreigner attacks and to insist that South Africa is not xenophobic.

But South Africa has made similar apologies in the past, and the patience of other African countries is waning. After the latest anti-foreigner attacks, African outrage at South Africa was fiercer than ever.

Your time is valuable. Have the Top Business Headlines newsletter conveniently delivered to your inbox in the morning or evening. Sign up today.