Alliance des Etats du Sahel (AES) has officially left the Economic Community of West African States (ECOWAS) – the real question is: what are the consequences to local businesses?

Whilst the Alliance des Etats du Sahel (AES), Mali, Niger and Burkina Faso, may have a valid point in that ECOWAS has lost its original purpose, is it a good enough reason to leave the organisation? Wouldn’t it be better for all its members to get together and re-organise ECOWAS to better serve its members in the face of today’s challenges?

The departure of Mali, Niger and Burkina Faso from ECOWAS to form the AES has significant implications for both local businesses and national economies of these countries. Here are some important aspects that should not be undermined and have not been clarified:

Economic Integration and Trade:

• Loss of Access to a Larger Market: The AES states will no longer benefit from the free trade agreements and the broader market access provided by ECOWAS. This could lead to higher tariffs on goods traded between AES countries and the remaining ECOWAS states, potentially increasing the cost of goods and reducing the competitiveness of Sahelian products in the regional market.
• Impact on Local Businesses: Businesses in Mali, Niger and Burkina Faso that have relied on free movement of goods, capital, and labor across ECOWAS borders will face new challenges. Currently it is estimated that about 5 million nationals from AES states live in neighboring Ivory Coast alone. The loss of free movement could particularly affect sectors like agriculture and livestock, which are integral to these economies and heavily dependent on regional trade networks.

Security and Economic Stability:

• Security Challenges: The AES’s focus on regional security might initially strengthen their military capabilities against islamic threats. However, the withdrawal from ECOWAS could also complicate security cooperation with neighboring countries, potentially leading to increased instability affecting economic activities.
• Economic Sanctions and Isolation: Prior to their departure, ECOWAS had imposed sanctions on these countries following coups, which already strained their economies. While some posts on X suggest that ECOWAS might maintain certain advantages, the overall impact of leaving could mean further economic isolation unless the AES quickly establishes viable alternative economic partnerships.

Monetary and Financial Implications:

• CFA Franc and Monetary Policy: As members of the West African Economic and Monetary Union (WAEMU), these countries use the CFA franc. Their exit from ECOWAS does not automatically mean leaving WAEMU, but there’s speculation about the potential for creating a new currency or abandoning the CFA franc, which could introduce economic uncertainty.
• Access to Financial Markets: The departure might affect access to regional financial markets and development funds, potentially slowing down infrastructure projects and other economic initiatives that relied on ECOWAS funding or support.

Long-term Economic Development:

• Regional Reorganization: The formation of AES might lead to new regional trade agreements, potentially benefiting from closer ties with countries like Guinea, Chad, or even North African states. However, this would require time to develop, and in the interim, the economies might suffer from the loss of ECOWAS’s economic framework.
• Investment Climate: The political instability and uncertainty could deter foreign direct investment, crucial for economic growth in these states. Businesses might be cautious about investing in an area with shifting regional alliances and potential for further economic sanctions or conflicts.

While the AES aims to assert greater autonomy and regional cooperation among the Sahel states, the immediate consequences could be challenging for local businesses and national economies. The success of AES will largely depend on how quickly and effectively it can establish new economic and security frameworks to compensate for the loss of ECOWAS benefits.