AFRICA’S journey of a thousand miles began on January 1 under the Africa Continental Free Trade Agreement (AfCFTA). This is Africa’s opportunity towards recovery, prosperity and ultimately an opportunity to fulfil the vision of our founding fathers of an integrated continent where everyone has an opportunity to grow, contribute and prosper, writes Agnes Gitau.
The journey won’t be without its challenges, but the collective political will for an integrated Africa will be a driving force for its success.
After years of talks and six months behind schedule, Africa’s vision of establishing a single market for goods and services across 54 countries, allow the free movement of business travellers and investments, and create a continental customs union to streamline trade – and attract long-term investment is now underway. The agreement, which has been ratified by 34 African countries, is critical for growth and job creation for Africa and its 1.27 billion people.
According to the Johannesburg-based Trade Law Centre (Tralac), AfCFTA’s scope exceeds that of a traditional free trade area, which generally focuses on trade in goods, to include trade in services, investment, intellectual property rights and competition policy, and possibly e-commerce. The AfCFTA is complemented by other continental initiatives, including the Protocol on Free Movement of Persons, Right to Residence and Right to Establishment, and the Single African Air Transport Market (SAATM).
The scale of AfCFTA’s potential impact makes it vital to understand the main drivers of the agreement and the best methods to harness its opportunities and overcome its risks and challenges. To date 34 countries have deposited their instruments of AfCFTA ratification, these countries include:
Ghana, Kenya, Rwanda, Niger, Chad, Eswatini, Guinea, Côte d’Ivoire, Mali, Namibia, South Africa, Congo, Rep., Djibouti, Mauritania, Uganda, Senegal, Togo, Egypt, Ethiopia, Gambia, Sahrawi Arab Democratic Rep., Sierra Leone, Zimbabwe, Burkina Faso, São Tomé & Príncipe, Equatorial Guinea, Gabon, Mauritius, Central African Rep., Angola, Lesotho, Tunisia, Cameroon and Nigeria.
It has been indicated that parliamentary/cabinet approval has been obtained by Somalia, Algeria and Zambia.
Economic prospects under the AfCFTA
No country has ever developed without trade as economists have us believe, however, we must ensure that the benefits of trade are shared equally amongst members of the Africa union. Here are some economic benefits expected from AfCFTA:
- Africa’s cumulative GDP is projected to reach $ 3.4 trillion – The GDP is expected to grow due to improved efficiency, trade facilitation measures & reducing red tape.
2. An increase in income levels – According to the UN economic Commission for Africa, the agreement once fully implemented will boost wages for skilled workers (10.3 percent) and unskilled workers by 9.8 percent. This will support Africa’s vision of poverty elimination and lift over 30 million Africans out of poverty by 2030.
3. Increase in foreign exchangeas Africa’s exports are expected to increase by $560bn as a result of the continent’s investment in its manufacturing sector.
4. A large trading market /Economies of scale – Africa’s population is expected to rise to 1.27 billion people, creating a market for businesses.
Possible dispute areas
With 54 countries on board the free trade agreement, and as evidenced from the existing regional economic trade agreements, there are bound to be disputes. Member states, however, must be willing and prepared to resolve these disputes in order to facilitate trade. One of the protocols within AfCFTA is the Protocol on Rules and Procedures on the Settlement of Disputes. This protocol establishes a Dispute Settlement Body (DSB) that is mandated to resolve disputes arising from member states.
The possible areas of dispute are:
- Dispute on MFN (Most favoured Nations)
- The MFN Principle requires all member states to be afforded the same treatment
- This principle is entrenched in Articles 4 of the Protocols on Trade in Goods and Services
- Dispute on Non-Tariff Barriers to Trade (NTBs)
NTBs as barriers that hamper trade through the imposition mechanisms other than tariffs as defined by the AfCFTA protocol on goods and services.
NTBs involve restrictive practices by the government, restriction at the point of entry or administrative restrictions. Countries are mandated to progressively get rid of NTBs.
3. National Treatment
National Treatment is a principle that mandates member states to treat goods and services similar to local goods. This is only applicable after entry of the goods and services in the country and not at customs
4.Rules of Origin
These are rules that determine the origin of a good in based on its economic origin and not geographical origin.
5. Dumping and Anti-Dumping
These are rules prohibiting countries from exporting their excess goods and selling them at a lower price in a member state.
To address these disputes members of the Africa Union must be willing to work together, learn and listen to each other. The vision will not be implemented in the boardrooms of the African Union, but at the borders where traders cross every day, It is therefore important that the vision is communicated to the last person in the continent, particularly the border officials who will be instrumental in making this vision a reality.
As a whole, the continent will have to take several steps to boost trade, these steps include : promoting skills for entrepreneurship and providing more access to credit and capital particularly for SMEs, addressing Africa’s infrastructure deficit of $90bn and most importantly providing a conducive environment for local businesses to thrive and grow. And as the Secretary General of AfCFTA said during the official launch, ‘Africa has nothing to prove to her critics, but to the 1.27 billion Africans, we have to deliver on our promises’. Business and political leaders will need to think creatively about continental joint ventures to build strong production and manufacturing networks across the continent.
Agnes is the Managing Partner at GBS Africa, where she provides political and economic risk advisory for businesses operating in Africa.
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