By: James Karuhanga
When asked what single word can best describe the African Continental Free Trade Area agreement’s journey through 2019, Carl Oshodi, the Executive Director of Nigeria’s Africa Industrialisation Group, said; “progressive.”
Indeed, nearly 22 months after the African Continental Free Trade Area (AfCFTA), was signed by African leaders on March 21, 2018, in Kigali, a lot of ground has been covered in an attempt to create a single continental market for goods and services, with free movement of business persons and investments.
At the onset, 44 out of the 55 AU member states – except the big boys such as South Africa and Nigeria— signed the consolidated text of the agreement at the Kigali Summit.
The 44 leaders signed the agreement establishing the AfCFTA, a protocol on trade in goods, a protocol on trade in services and a protocol on rules and procedures on the settlement of disputes.
Gathering the 22 ratifications needed to make the agreement operational, however, would take some time, and hard work.
Nonetheless, by March 21, as countries marked the anniversary of the agreement’s signing, there was cause for celebration, especially as, among others, 21 countries had not only signed but had also ratified the agreement.
Finally, the 22-country threshold in conformity with legal provisions was reached on April 29 when Sierra Leone and the Saharawi Republic deposited their instruments of ratification.
The agreement eventually entered into force on May 30, 30 days after 22 countries deposited their ratification instruments, for all the 24 countries that had by then deposited their instruments of ratification.
The coming into force of the Agreement, on May 30, experts said, was a turning point for the continent, as the pact then became a binding international legal instrument.
More than a month later, on July 7, the operational phase of the pact was launched during the extraordinary session of the AU Assembly in Niamey, Niger.
The AU Commission Chairperson, Moussa Faki Mahamat, hailed the launch as a “historic moment” in Africa’s history.
“The speedy entry into force of the AfCFTA has been a major pride to all of us,” Faki said.
During the same Niamey session, the President of Niger and leader of the AfCFTA process, Issoufou Mahamadou, presented his second report – the first was presented in February – on the status and progress made.
He noted that a lot of work was done to conclude major issues of the agreement.
Member states were at advanced stages in preparing their schedules of tariff concessions.
On AfCFTA rules of origin, Mahamadou observed, the remaining rules pertained to member states’ policy and investment interests. This, he said, required political intervention and guidance.
At the time, technical submissions were exhausted without consensus on areas pertaining to fisheries; edible oils; sugar; leather; textiles and apparel; machines and machinery; and motor vehicles.
Failure not an option
The July session in Niamey launched the operational phase of the AfCFTA, supported by key instruments.
These are the agreed Rules of Origin; a dashboard of the AU Trade Observatory, a Trade in Goods Password Protected Dashboard, a Pan-African Payments and Settlements System; an AfCFTA Mobile or Web-based application, and the Online Mechanism for Reporting, Monitoring and Elimination of Non-Tariff Barriers.
In addition, the Niamey meeting also made a number of important Decisions which included that: the AfCFTA be hosted by Ghana and that July 1, 2020, be the date to start trading within the AfCFTA regime.
It was also decided that AU Commission should ensure that the AfCFTA Secretariat is operational no later than March 31, 2020; and that July 7 every year be designated “the Africa Integration Day” without being a public holiday to commemorate the operationalization of the agreement.
Prudence Sebahizi, Chief Technical Advisor on AfCFTA at the AU Commission, said: “When the Heads of State and Government met in Niamey in July 2019, they launched the operational phase of the AfCFTA and decided that dismantling of tariffs shall start not later than July 1, 2020, to allow the start of trading within the AfCFTA regime on the same day.”
Sebahizi added: “We are working around the clock to ensure that this decision is fully implemented. Failure is not an option.”
Cameroon approved ratification on July 19.
Fast forward, on December 14-15, Ministers of Trade met in Accra, Ghana and decided that the positions of AfCFTA Secretary-General and three Directors for the AfCFTA Secretariat be advertised immediately to allow completion of recruitment by March 2020.
As of December 17, 54 AU member states had signed the AfCFTA Agreement.
Efforts are ongoing – by the AU Commission – to engage with Eritrea, the only country yet to sign, as the former prepares to sign and ratify the agreement.
So far 28 countries have deposited their instruments of ratification with the AUC and hence became state parties.
These are Burkina Faso, Chad, Congo Republic, Côte d’Ivoire, Djibouti, Egypt, Eswatini (Swaziland), Equatorial Guinea, Ethiopia, Gabon, Gambia, Ghana, Guinea, Kenya, Mali, Mauritania, Mauritius, Namibia, Niger, Rwanda, Saharawi Republic, São Tomé and Príncipe, Senegal, Sierra Leone, South Africa, Togo, Uganda, and Zimbabwe.
The Agreement will be governed by five operational instruments: 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.
The rules of origin, the criteria needed to determine the national source of a product, derive their importance from the fact that duties and restrictions in several cases depend upon the source of imports.
For Andrew Mold, the Acting Director of UN Economic Commission for Africa- Eastern Africa sub-regional office in Kigali, one of the main moments in 2019 was reaching 28 ratifications – more than half the continent’s countries.
The date the agreement will come into force, July 1, 2020, Mold said, “Is a major target that has been set.”
“There will be an intensification of the negotiations in a lot of areas over the first semester of 2020. Services trade negotiations have to be initiated – there is enormous potential in terms of increased intra-African services trade,” Mold said.
“In contrast with its deficit on merchandise trade, for instance, Rwanda posted a positive balance in services trade for the first time last year. Five other countries in eastern Africa actually have positive service trade balances. So, the region potentially has a lot to gain from the successful conclusion of the service trade negotiations.”
Also yet to be concluded are the rules of origin negotiations, a very important area for an effective AfCFTA, Mold noted.
The rules of origin will need to be as flexible as possible in order for poorer African countries to be able to significantly increase their intra-African trade under the AfCFTA, he said.
“I think we will find discussions also focusing on the protocols on competition, investment, intellectual property and free movement. Ultimately, for citizens to benefit from the AfCFTA there are crucial areas in the construction of the continental market.”
“Take competition policy, for instance. A recent COMESA study shows that consumers in the region typically pay 25-30 per cent more than prevailing prices globally for a set of 12 staple goods. This is ascribed to anti-competitive behaviour.”
Clearly, Mold said, if the agreement can make a positive impact in this kind of domain, by increasing intra-regional trade and investment, creating new employment opportunities and reducing prices to consumers, “it will gain a lot of popular support.”
Once implemented, the agreement which connects 1.3 billion people across 55 countries with a combined Gross Domestic Product valued at $3.4 trillion will create the largest free-trade area in the world measured by the number of countries participating.