Issues in AfCFTA July 2020 take-off date

The operational phase of the African Continental Free Trade Area (AfCFTA) was launched  on 7 July 2019 after a day-long summit of Heads of State and Government of the African Union (AU) in Niamey, the Nigerien capital. DAVID AGBA reports.

Operational instruments

The AfCFTA will be governed by five operational instruments, i.e. the rules of origin; the online negotiating forum; the monitoring and elimination of non-tariff barriers; a digital payments system and the African Trade Observatory.

Each one was launched by different Heads of State and Government that included President Cyril Ramaphosa of South Africa, President Abdel Fattah El Sisi of Egypt who is current Chairperson of the AU; Mr. Moussa Faki Makamat, the Chairperson of the African Union Commission; and President Mahamadou Issoufou of Niger, who is the Champion of the AfCFTA.

Roll call of honour

The launch ceremony included “a roll call of honour”, at which the 27 countries that have ratified the instruments of the AfCFTA were announced, and those that have signed but not yet ratified were mentioned. A commemorative plaque of the signing was also unveiled.

The AfCFTA agreement was adopted and opened for signature on 21 March 2018 in Kigali. The AfCTA entered into force on 30 May 2019, thirty days after having received the twenty-second instrument of ratification on 29 April, 2019 in conformity with legal provisions.

“The speedy entry into force of the AfCFTA is a source of pride for all of us”, said AU Commission Chairperson Mr. Moussa Faki Mahamat. He described the free trade agreement as one of the instruments for continental integration in line with the objectives of the Abuja Treaty and the aspirations of Agenda 2063.

Importance of peace building

The Chairperson also highlighted the importance of peace building and security on the continent, adding that “it would be a delusion to talk of trade and development without peace and security”. He also stressed that, for the AfCFTA to be effective, there is need to open borders to other Africans. In this light, host President Mr. Mahamadou Issoufou, said the free trade area will tear down borders inherited from Africa’s colonial past and ensure full continental integration.

Egyptian President Abdel Fattah El Sisi stressed the need for the establishment of linkages with the private sector and the business and investment communities, while also calling for the involvement of the youth who will “continue the march” towards development.

Tool to drive growth and innovation for Africa

The United Nations Deputy Secretary General Ms Amina Mohammed noted that the AfCFTA is a tool to drive growth and innovation for Africa, and to create opportunities for sustainable development and realizing Agenda 2063.

The AfCFTA will be one of the largest free trade areas since the formation of the World Trade Organisation, given Africa’s current population of 1.2 billion people, which is expected to grow to 2.5 billion by 2050.

Meanwhile Ghana has been confirmed by the Heads of State and Government as the host of the secretariat of the AfCFTA, having prevailed over six other countries that had also expressed interest in hosting it.

Uphill struggle to meet July’s target for becoming operational

Growing protectionism and nationalism are identified as the greatest risk to the African Union’s prospective continent-wide free trade area, with negotiators facing an uphill struggle to meet July’s target for becoming operational.

The establishment of the African Continental Free Trade Area (AfCFTA) – an ambitious attempt to bring together 54 countries with a combined GDP of over $3 trillion – took significant steps forward in 2019.

According to research by the South Africa-headquartered Trade Law Centre (tralac), 29 African Union member states have now ratified the agreement that underpins its introduction.

Hostilities and restrictions on exports

According to risk consultancy firm EXX Africa, however, hostilities and restrictions on exports in some African countries continue to present issues that are holding up progress.

“The highly diverse continent is not immune to global trends of nationalism and protectionism, as exhibited by recurrent anti-immigrant violence in South Africa, trade restrictions in East Africa, and economically harmful border closures in Nigeria,” it says in a report published in January.

Threat to AfCFTA implementation

Executive Director of EXX Africa, Robert Besseling, said those trends are “by far the greatest threat to AfCFTA implementation”.

The introduction of AfCFTA is grouped into two phases. Phase one includes protocols for trading goods and services, tariff concessions and rules of origin, and is only partly complete. EXX Africa says phase two negotiations, which will cover protocols on competition policy, intellectual property and investment, were scheduled to begin with draft texts published at the end of January, with a target completion date of June – but GTR understands those documents have not yet been made available.

“Phase two is really the most controversial part in terms of bilateral and multilateral negotiations,” Besseling tells GTR. “But if phase one is delayed, the entire agreement will take such a serious knock it could be derailed completely. For the African Union, and the various countries that have ratified the agreement, it would be a symbolic setback if this was delayed at all.”

Catalyst for a major expansion of intra-African trade

The project has been touted as a catalyst for a major expansion of intra-African trade, though EXX Africa says a widely-circulated estimate of 52.3% growth by 2022 is based on assumptions and milestones from 2012 “that have yet to materialise. On the contrary, the UN Economic Commission for Africa has predicted an increase of up to 25% by 2040, which is more likely.”

In order to reach these targets, Besseling said the African Union “would have to see some major advances in the next few months, and a number of major concessions being offered by the countries that have ratified the agreement”.

“Once that’s done you could see phase one implemented according to schedule, but if those major agreements are not reached over the next five months, then you’re starting to look towards a phase one delay,” he said. The target date for beginning trade within the AfCFTA is July 1 this year.

Lack of compelling evidence

Chief Economist for Africa and the Middle East at Standard Chartered, Razia Khan, said another risk is a lack of “compelling evidence that corporates, multinational or local corporates, are reacting to these new trade opportunities in terms of reformulating their investment plans”.

Speaking at GTR West Africa conference in Lagos recently, she said: “When that happens there will be a more sound basis on which to predict that this will eventually be a growth positive. For the moment though, [there are] some near-term worrying issues that seem to point to reasonably more fragmentation of what should be growing regional markets.”

Barriers to free trade

Nigeria has proven one site of conflict. Africa’s largest economy and most populous nation signed up to the free trade area in July last year, but has placed restrictions on its borders with Benin and others largely due to concerns over the smuggling of fuel and agriculture products.

There have been attempts to resolve the problem. Government officials from Nigeria, Benin and Niger met in Abuja last November to discuss a joint response to smuggling in the region. The trio agreed to set up shared monitoring and evaluation committees, a trade facilitation committee and a border patrol team.

Representatives from Benin and Niger “appealed for the immediate re-opening of the Nigerian borders” but were not successful, according to meeting minutes publish by the Economic Community of West African States (ECOWAS).

On the other side of the continent, Rwanda – a keen supporter of the AfCFTA – has also seen its borders with Uganda shut due to a political dispute. Tensions include the two countries’ support for different warring factions in neighbouring DR Congo.

Growth of nationalist sentiment

Concerns are not limited to border closures. The growth of nationalist sentiment in several countries has led to what Besseling describes as “a sense of protecting local businesses to the detriment of foreign investors, by imposing trade or export bans on certain products or commodities”.

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