Applying the African Continental Free Trade Area (AfCFTA) agreement has always been described as a marathon, not a sprint. This has proven true as no commercially significant trade has occurred under the deal since its launch on 1 January 2021 due to negotiation delays.
However, significant progress has been made, and the continent’s leading economies should help move things further. Africans have been preparing to trade more with one another – on the continental, regional and national levels – and many trade facilitation measures have been put in place.
The Pan-African Payment and Settlement System has been piloted and will allow traders to transact in their local currency. A dispute settlement mechanism has been set up to deal with trade disputes. And a platform for monitoring non-tariff barriers allows traders to report constraints and have them addressed. These measures were put in place by the AfCFTA Secretariat and its partners.
Although negotiations are at various stages of completion, an interim trading arrangement, the Guided Trade Initiative, was launched in October 2022. It comprises eight countries – Cameroon, Egypt, Ghana, Kenya, Mauritius, Rwanda, Tanzania and Tunisia – trading specific goods with the support of the AfCFTA Secretariat. These countries were chosen from a pool of those who submitted their tariff offers. One of the initiative’s aims is to maintain interest in the AfCFTA while testing its provisions.
Other tools and platforms have also been created, such as an e-tariff book, Rules of Origin (RoO), and an AfCFTA Hub.
Support continues to flow from other Pan-African entities. The African Export-Import Bank announced a renewal of its US$1-billion commitment out of the US$10-billion funding target for helping countries adjust to the new deal. The AfCFTA Secretariat is being strengthened with a US$11.6-million grant from the African Development Bank.
African countries are also trying to do their part. National plans are at different stages of completion, and sensitisation exercises are being held for the private sector. Soft and hard trade infrastructure is being put in place, often led by inter-governmental initiatives.
The Secretariat for Nigeria’s National Action Committee for implementing the AfCFTA has launched numerous initiatives to ensure the country’s small and large manufacturers can use the agreement. Rwanda’s national carrier, RwandAir, recently announced special rates for traders to reduce trading costs under the AfCFTA.
Outside Africa, the agreement is also being taken more seriously. The European Union, the United States and some United Nations agencies have allocated significant amounts to supporting its implementation. Partners are also increasingly facilitating private sector investment to take advantage of the single African market.
The AfCFTA is in motion, but trade under the deal hasn’t yet taken place. The challenging RoO negotiations are contributing to the delay. RoOs determine the extent to which a product has been made in one country or another in order to qualify for preferential access under a trade agreement.
With the AfCFTA, African countries are attempting to use liberalised intra-African trade to transform the structure of their economies and increase prosperity. This continental aspiration must be reconciled with national realities, sometimes resulting in clashes that stall negotiations and slow implementation.
Free trade can interfere with countries’ industrial development goals if not properly managed. Even if these concerns are somehow overcome in negotiations, their persistence can motivate governments to use non-tariff mechanisms to protect industries under the agreement. There’s some evidence of this in the Central African Economic and Monetary Community, where borders were closed arbitrarily and duties and other levies applied to intra-regional imports following the removal of tariffs.
The inequalities that exist among AfCFTA member states have not gone unnoticed, especially as they relate to production and consumption capacities. They may also contribute to the delays as countries negotiate RoO terms that favour their production levels.
For example, strict RoOs for textiles and apparel may require that cotton be produced in Africa for finished goods to be traded under AfCFTA rules. Generous RoOs could allow a clothing item to be tagged as African-made, even if the fabric wasn’t manufactured in Africa.
Such RoOs are argued to facilitate trade but seem to go against the AfCFTA’s ‘Made in Africa’ mandate, and can cause trade diversion. Strict RoOs can increase costs and limit trade. But they are also sometimes used to drive backward integration and regional value chains because they can incentivise manufacturers to source inputs locally.
All AfCFTA member states are looking to grow their exports to Africa, which is already leading to competition as negotiators try to strengthen their countries’ positions. Putting national priorities first is instinctive but goes against the spirit of the AfCFTA and regional integration, especially when it causes debilitating delays. It also goes against Africa’s ubuntu philosophy, which advocates for long-term collective gains ahead of short-term individual ones.
Leading African economies can provide an example by making concessions in the negotiations. These include countries like Nigeria, South Africa, Egypt, Morocco and Kenya. This is not a novel proposal, and was the case with Kenya in the East African Community.
Paying more attention to African collectivist philosophies is an ideological response to the technical challenge of the ‘winners and losers’ that free trade arguably creates. This will only work if the prospective ‘winners’ show they are willing to create policy space for others.
Free trade agreements are tough to negotiate and even harder to implement. Improving national attitudes towards negotiations can strengthen the political will and public support needed to drive implementation. Africa’s ubuntu philosophy provides some direction and can help galvanise momentum to push the negotiations through.
Written by Teniola Tayo, Consultant, ISS