AfCFTA overview: A few conversation pointers

Many of us have heard ‘AfCFTA’ thrown around everywhere. “It’s the future”; “It is the next big thing for Africa”; “It’s what will set Africa apart”; “It is the dream of Kwame Nkrumah and African freedom fighters”, etc. But after a conversation with a few friends, I realized many people do not know what it is about. So, I thought to help. As such, when you walk into a room and someone brings up the ‘AfCFTA’, you will not be entirely clueless. In conclusion, don’t embarrass me, please.

 I found a good summary on Tralac that can help; you’re welcome.

What is the AfCFTA?

AfCFTA stands for African Continental Free Trade Area.

The AfCFTA agreement was brokered by the African Union (AU) and on March 21, 2018, 44 of its 55 member states signed on in Kigali, Rwanda.

In April 2019, Sierra Leone and the Saharawi Republic (yes, that’s a sovereign state in Africa) kicked things in motion when they deposited their instruments of ratification. Finally, we had met the minimum of 22-country ratification requirement. In other words, these states have given their consent to be bound by the AfCfta agreement. Otherwise stated as they had accepted it, and will implement the obligations agreed upon, as a result.

As of June 2020, 30 countries have deposited their instruments of ratification. Fun fact: Ghana and Kenya led the way with ratification – super impressive but unsurprising. Why? These two countries have been champions of pan-Africanism, since the 60s.

One of the biggest things you should know is that this free trade area will be, by the number of participating countries, the largest trade area in the world, since the formation of the World Trade Organization.

Earlier this year, by some deliberation, the AU chose Ghana to host the AfCFTA Secretariat – Woot Woot.

And on March 19th, 2020, H.E. Mr. Wamkele Mene was officially appointed the first Secretary-General of the Secretariat. On that note, if you’re looking for policy analysts to focus on monitoring and implementation, or to be relationship facilitators, please come find me. Thanks. #shamelesslyplugging

What does the #AfCFTA entail?

Good question! Here’s what I gathered off #Beyonce’s internet:

According to UNCTAD, the #AfCFTA will boost intra-African trade, which currently stands at some 16%.  This is low in comparison to 68% in the European Union’s, 19% in Latin America, 54% in North America, and 60% in Asia. Yes, we kind of suck at supporting ourselves through trade. But if they are right, many organizations have quoted that we can expect a boost up to 52% thereabouts – Brookings, Quartz, UNECA. We hope.

The AfCFTA requires the removal of tariffs on 90% of goods, allowing free access to commodities, goods, and services across Mother Africa. Its main objectives are to create a single continental market for goods and services, permitting free movement of business persons and investments. Through this process, we may lay the groundwork for the establishment of the Customs Union in the future.

Customs Union? Yes. A Customs Union, in other words, means that no customs duties will be paid on goods moving between the AU member states. As a result, all states will apply a common customs tariff for goods imported from outside the region. Ok, back to the topic.

Once its main objectives are achieved, the AfCFTA will have, as a consequence, an estimated combined GDP of more than $2 trillion and 1.2 billion people market.

It has general objectives too…

As stated in Article 3 , the AfCFTA will:

• create a single market, deepening the economic integration of the continent;
• establish a liberalized market through multiple rounds of negotiations;
• aid the movement of capital and people, facilitating investment;
• move towards the establishment of a future continental customs union;
• achieve sustainable and inclusive socio-economic development, gender equality and structural transformations within member states;
• enhance the competitiveness of member states within Africa and in the global market;
• encourage industrial development through diversification and regional value chain development, agricultural development, and food security; and
• resolve challenges of multiple and overlapping memberships

The above summary of objectives is from Wikipedia. A totally trustworthy source of quick overviews according to one of my French professors.

There is more…

According to SAIA, some benefits we can expect from a functioning AfCFTA include:  

• $16.1 billion in welfare gains;
• GDP growth of 1-3%;
• employment growth of 1.2%;
• intra-African trade growth of 33%; and
• 50% reduction in Africa’s trade deficit.

Is it all roses and candy?

No.

Non-tariff barriers have yet to receive much attention, as they should. Existing trade areas such as the East African Community and the Common Market for Eastern and Southern Africa (COMESA) still contend with several practical challenges around non-tariff barriers. If anything, that’s some indication of how problematic they can be if not properly addressed. In conclusion, we need to do more.

Archie Matheson raised some critique over what I am calling the ‘hyper sensationalization’ of the AfCFTA. His view questioned the so-called ‘52.3% increase in intra-African trade by 2022’. He writes,

“this number comes from a paper presented in 2012 by two UNECA specialists to the 7th African Economic Conference. And, importantly, the report’s authors make clear that their projection of a 52.3% increase by 2022 – compared to a 2010 baseline – is based on several assumptions: a fully-liberalized and continent-wide trade area by 2017; harmonization of external tariffs across the continent by 2019; and a series of practical trade facilitation measures.”

Archie Matheson

Matheson further argued that many of the assumptions are not reflective of Africa’s current situation. In addition, “90% of goods will be liberalized over the course of 5-8 years; 7% of goods will be classed as sensitive and liberalized over 10-13 years, and 3% of goods will be exempt from free trade entirely.” Translation: “Y’all are moving mad by conflating figures. Calm down, get the prerequisites in place first, and don’t mess this up. But for now, y’all lying”. Shots fired. At least that’s my interpretation.

Evidently there is still more work to do, including around countries’ schedules of tariff concessions and services commitments, rules of origin, investment, intellectual property, competition, and a possible protocol on e-commerce, as identified by to Brookings.

Status of the AfCFTA today?

Today, of the 55 AU member states, only Eritrea has yet to sign. Eritrea, what’s going on? From what I gather, no one really knows but…

Many seem to think Eritrea’s leader, Isaias Afwerki who has ruled Eritrea since it gained independence in 1993, is really just taking a piss. I am not saying that I agree or that they must sign it; no-no. Not at all. They can choose not to. But what is the reason? Give me something to work with.

Anyway, after we passed the ratification minimum, the next phase is operationalization. And that’s where we are right now.

At the Extraordinary session in July 2019, it was decided that 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. Consequently, we have a lot to iron out concerning how to execute, monitor, and evaluate this glorious agreement.

Trading under the #AfCFTA was due to commence on 1 July 2020. But as a result of the COVID-19 global pandemic, H.E. Mr. Wamkele Mene, in agreement with the African Union Commission, postponed it to 2021. A contentious decision of course.

COVID-19 is really causing problems…

H.E Mene stated, “I think that’s the responsible thing to do. I don’t think it would be appropriate when people are dying to be focused on meeting the July 1st deadline. Instead, all governments should be allowed to concentrate their efforts on fighting the pandemic and saving lives at home.” You cannot really fault that argument.

Even if you tried, here’s the kicker. They actually tried to move on with negotiations through video conferencing but internet issues made it extremely difficult as connectivity problems became the order of the day. According to Mene, they very quickly discovered it was virtually impossible to conduct these multilateral trade negotiations remotely.

Honestly, they could probably have made it work if everyone was on the same page but perhaps fear and a lack of uncertainty about how to stop the spread shifted priorities and interests. Maybe.

Also, Trade Ministers were probably needed to do their jobs. They needed to set up new industries. SMMES and big businesses needed support to navigate the varied border regulations and closures… I get it. That said, I do think there is some opportunity in this crisis that we need not waste, completely.

Other views on the postponement of the AfCFTA

Others say a full-blown postponement of AfCFTA is a mistake; they should reschedule only some aspects of it. You can read more here. An interesting piece by ISS Consultant, Ronak Gopaldas adds some color to the discussion. His point, in other words, is that global trade will be altered. Therefore, as people shift away from an overreliance on China to mitigate trade risks, Africa must benefit.

As such, this pandemic offers a window of opportunity for Africa to make a claim. We must capture some of the ‘reshoring’ away from China, especially to counter the accelerating trend toward isolationist policies. As such, losing momentum now would be a major setback.

Even more so, as “global political and trade relations regress, Africa could be the unlikely model of cooperation, pushing back against nationalism, and positioning the continent to reap the benefits of a recovery.” Good word.

PS: I wrote two pieces pertaining to the above for Ghana and South Africa. You can read more here and here. Above all, the point is that no silver bullets exist. Neither are there any easy simplistic solutions. The path ahead lies somewhere in between radical offers, involving a series of difficult political trade-offs, and tough resource choices.

Now, you’re certified to go to that networking event and show off…until major developments happen of course.

Anyway, that’s it for now. I hope you picked up a thing or two to enlarge the scope of your conversations on the topic. Lastly, as I learn more, I’ll share more so hang in there.

PEACE.

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Noelle Wonders

Marie-Noelle is the creator and curator of Noelle Wonders - a blog created to pose questions, exchange ideas, explore power asymmetries, and humanize topics around growth and development.

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