For a while now, the media space has been occupied by news on the African Continental Free Trade Agreement. You might have been wondering, what this is about and why it should concern you. This article intends to explain this and other technical terms concerning the AFCFTA that you might have encountered.
The main objective of the AFCFTA is to create a single market for goods and services, facilitate the movement of persons, promote industrial development and sustainable and inclusive socio-economic growth, and resolve the issue of multiple memberships.
For a long time, many African Countries have been trading with global trading partners (UK, America, etc.). The African Continental Free Trade Area (AFCFTA) offers an opportunity for Africa to boost its trading position in the global market by forming a single market that strengthens Africa’s Policy space in global trade negotiations.
At the heart of this agreement is the need to promote market access and remove Tariff and non-Tariff trade barriers through a unified regime of trade rules.
The free trade area is a flagship project of the African Union Agenda 2063. Agenda 2063 is Africa’s blueprint for attaining inclusive and sustainable development across the continent over 50 years.
During the 18th Ordinary Session of the Assembly of Heads of State and Government of the African Union of 2012 held in Addis Ababa, the Assembly decided to establish a continental free trade area by 2017. Unfortunately, it was not established until 2018, when the Assembly of African Union Heads of State opened signatures for the treaty establishing the AFCFTA agreement. This happened on the 21st of March 2018 in Kigali Rwanda. The AFCFTA subsequently entered into force on the 30th of May 2019. The operational phase of the AFCFTA was thereafter launched during the 12th Extra-ordinary session of the Assembly held in Niamey, Niger on the 7th July 2019.
The African Free Continental Trade Area (AFCFTA) if achieved will be one of the largest single continental market and trade blocs on the planet, the AFCFTA is unique because it incorporates negotiation in trade and services, and other complementary issues as the operational phase of the AFCFTA kicked off with five instruments. The five operational instruments include.
1. Rules of Origin
2. Online negotiating Forum
3. Monitoring and Elimination of non-tariff barriers
4. Digital Payments System
5. African Trade Observatory.
The agreement is negotiated in two phases. Phase 1 covers trade in goods, trade service disciplines, and dispute settlements, while Phase 2 will cover cooperation on investment, competition, and intellectual property rights. Tariff concessions will still have to be negotiated among member states after they finalize negotiations on rules of Origin. The specific commitments for trade in services will also still be negotiated.
Ghana will be the secretariat of the African Continental Free Trade Area, his excellency Mr. Wamkele Mene is consequently the first Secretary-General of the secretariat, effective from 19th March 2020.
It is estimated by the United Nations Economic Commission for Africa (UNECA) that this agreement has the potential to boost intra-African trade by 52.3% when import duties are eliminated and non-tariff barriers are reduced.
On the 5th of December 2020, the Assembly through a virtual extraordinary summit of the AU Assembly approved the start of trading under the AFCFTA as 1st January 2021. As of the time of writing, 54 African countries have signed the AFCFTA agreement, except for Eritrea while 36 countries have signed and deposited their instruments of AFCFTA ratification making them AFCFTA state parties. Nigeria signed the Agreement in July 2019 and the Federal Executive Council has approved the ratification.
While a new trade agreement does not guarantee trade, this agreement is attractive because it alters the incentives that come with trading partners. For instance, the AFCFTA has the potential to put mechanisms in place that address the frustrations that currently come with intra-African trade. This can ensure certainty and a level of predictability that has previously hindered intra-African trade. Some of such practical benefits include.
1. Reduction of Border Bureaucracy,
2. Investment in infrastructures that facilitate e.g., roads, rails, and modern ports.
3. Creation of Employment
4. Reduction of cost of Raw Materials for businesses in Africa
5. Increased Market Access for Africans
6. Cross-border business expansion
7. Investment opportunities
8. Facilitation and Development of the regional and continental value chain.
9. Revenue generation through export earnings and investment opportunities.
10. Boost in Intra-African Trade Value
11. Cheaper, Faster, and Simpler Trade-related Activities
12. ICT driven platforms
13. Improve transport and communication linkages.
14. Elimination of the historic fragmentation and Isolation of Africa’s Economy.
15. Positioning Africa to speak and act Unitedly.
16. Inclusive and sustainable development
17. Commitment to Multilateralism
From the list above, I am certain that you understand what the hassle is about the AFCFTA. You can stay tuned to this blog or any of my social media handles to keep being updated on this. Special thanks to Eromosele Iriogbe for always making sure I have articles to publish.
Ndam Nander Esmeralda