The Status of the African Continental Free Trade Area- The Dawn of a New Era

The momentum is there, and external partners should recognise that the time for the AfCFTA has come, and support it, rather than frustrate it
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A lot has changed since the signing of the African Continental Free Trade Agreement (AfCFTA) at the African Union Summit, held in Kigali in March 2018. Initially, 44 AU member states signed up to the agreement, but that soon rose to 54 – a remarkable show of consensus for an agreement that encompasses the largest number of member states of any regional bloc in the world. By signing up for the AfCFTA, the African continent really has been moving in a different direction to much of the rest of the world, which has become increasingly sceptical of the power of international trade agreements to contribute to global development and economic wellbeing.

Officially, the implementation phase of the AfCFTA started in the midst of the Covid-19 pandemic, on the 1st January 2021. However, this was obviously not the most propitious moment for implementing such a major initiative – global trade contracted by -8 percent in 2020, and subsequently, in Africa, the recovery has been complicated by rising levels of debt, increased climatic challenges, and uncertainty over the general direction of global economic policy. Although there is some evidence that intra-African trade was quite resilient to the associated economic downturn, the timetable for the implementation of the AfCFTA did inevitably suffer some setbacks.

That said, reflecting the strong degree of political support behind the agreement, the AfCFTA still managed to make progress on many fronts. A big step forward in 2020 was the establishment of the AfCFTA Permanent Secretariat in Accra. Wamkele Mene – the former Chief Negotiator for South Africa – was elected its first Secretary General in February 2020. The AfCFTA Permanent Secretariat is playing a vital role not only in concluding the negotiations, but also in its effective implementation. Although it has still not reached its full complement of staff (250 staff when all recruitment has been finalised), and the effective implementation of the agreement is ultimately the responsibility of national governments, experience shows that successful regional secretariats can significantly facilitate and support member states.

A key milestone was reached in July 2022, when the Facilitated and Guided Trade Initiative, which aims to kickstart trading under the AfCFTA, was launched. Reflecting the diversified nature of the opportunities of the larger continental market, participating State Parties will showcase their consignments and products – Rwanda (to export coffees and teas), Egypt (air conditioner parts and processed foods), Kenya (teas, Exide batteries, avocados), Cameroon (teas and dried fruits), Ghana (ceramic tiles and palm kernel oil). Tunisia, Tanzania and Mauritius are expected to process some consignments soon. The Initiative aims to test and prove that the AfCFTA system works and to inspire trading under the AfCFTA across the continent.

The commencement of trading was possible because the enabling regime is in force. The agreement officially entered force on 30 May 2019, about a year after the consecration of the AfCFTA at the Kigali AU Summit. Of the 54 signatories to the agreement, there are now 43 ratifications – the process of formally approving the agreement through national parliaments and constitutional assemblies. For these member states, it means that they can now enter directly into the operational phase of the agreement.

Oversight institutions are also already in place – the Council of Ministers, Senior Trade Officials Committee, and Committees of Experts on goods and services, as well as the dispute settlement body. Trade and customs documents have been designed and are ready for use, especially the AfCFTA certificate of origin, on the basis of which preferential treatment is accorded. At the national level, coordination committees have been established to facilitate trade. Tariff and Services Schedules for phasing out trade restrictions are also in place. Thus far, 88 percent of product lines have agreed rules of origin – the ‘passports’ for goods that allow them to qualify for the AfCFTA tariff reductions (i.e. all except mainly textiles and clothing and automobiles). In services too, much progress has been made, with 48 countries having made their initial offers of liberalisation in the five-priority sectors designated in the agreement. Of those initial offers, 15 have now been verified by the Secretariat, approved by the Ministers and will constitute the initial core of the single African market for trade in services. 20 more are expected to be approved by the Ministers.

Being a modern and comprehensive agreement, digital tools have been established to address non-tariff barriers, provide market intelligence (the Africa Trade Observatory), and facilitate cross-border payment (the Pan-African Payment and Settlement System). Negotiations on the protocols on competition and investment are practically finalised, and these protocols will be adopted in November 2022. Negotiations on the protocols for digital trade and women and youth in trade are currently at the design stage.

One area less talked about in the media, but of fundamental importance for the effectiveness of the whole agreement is the Protocol on the Free Movement of Persons. Here the level of support from member states is less pronounced, with just 33 countries signing up to the agreement and only four countries having ratified it. This is a shame, because the implementation of this protocol offers the prospects of enormous benefits to the general public, in terms of easing the ability to travel between and work in different African countries. Free movement is often considered as the ‘handmaiden’ through which greater trade and investment opportunities materialise, and it would also represent a great boon for young people, who tend to be the most mobile among the African population, and yet who often struggle to find gainful employment in their countries of origin. Given the manifest skills shortages that the business sector often complains about in many African countries, implementation of this part of the agreement needs to be prioritised. Moreover, the Protocol has taken into account practically all security, immigration, health and other public policy concerns, and should be signed, ratified and implemented, but misconceptions persist. The EAC and ECOWAS, as well as a number of other countries on an autonomous basis, such as Mauritius and Seychelles, have all demonstrated the significant economic benefits from liberalising the movement of persons.

Other critical success factors will include the scaling up of Foreign Direct Investment (particularly by African-owned firms), deeper private sector ownership of the agreement, greater awareness creation and more market information. Also, supranational institutions in areas such as competition and investment will be helpful, along the lines of those in regional economic communities, such as COMESA, EAC, ECOWAS, UEMOA on competition policy, dispute settlement, finance and trade facilitation.

Of course, implementation challenges that have plagued regional economic integration efforts in the past will have to be monitored closely – such as inadequate resources (both human and financial) and infrastructure, including issues such as the lack of flight interconnectivity and unreliable energy supplies. Among the services sectors, transport, energy, communication, banking, insurance, health, education, distribution, and professional services will all be important facilitators to greater intra-African trade in agricultural and, above all, industrial products.

Fortunately, political will remains strong. Together with the creation of a large continental market, the increased predictability due to its rules-based nature, and the associated policy reforms, the agreement implicitly carries a generous value proposition. The momentum is there, and external partners should recognise that the time for the AfCFTA has come, and support it, rather than frustrate it. There needs to be realism, of course, and the agreement will take some time to implement – but over the course of this decade and the next, the AfCFTA will put the continent’s economy on a stronger footing, and with it, accelerate the process of social economic transformation that is already underway. All is set, and Africa is open for business.

 

 

 

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