FULFILLING THE OBJECTIVES OF THE AFRICAN CONTINENTAL FREE TRADE AREA AGREEMENT

1.0 Introduction???????

In 2018, the agreement establishing the African Continental Free Trade Area (AfCFTA) was signed, ushering a new dawn for continental trade in Africa. This was in line with the African Union Agenda 2063 Pan African vision of “an integrated, prosperous and peaceful Africa, driven by its own citizens, representing a dynamic force in the international arena.”[i]. The agreement is projected to create the largest free trade area in the world in terms of the number of countries participating.[ii] It also connects over a billion people with a combined GDP of about US $3.4 trillion.[iii] The agreement is also said to have the potential to lift about 30 million people out of poverty[iv] and according to trade experts, the full implementation of the agreement is crucial to the post-pandemic economic recovery of the continent.[v]

The AfCFTA equally has the potential to help African countries establish trade corridors for essential goods, reduce duties on essential products, establish regional value chains, reconfigure supply chains, establish local pharmaceutical production facilities and increase access to medication.[vi] Likewise, boosting intra-African trade can also increase job creation, foreign exchange, industrial development, and economic growth.[vii]

The agreement came into force in 2019 after 24 countries had deposited their instruments of ratification with the Chairperson of the African Union Commission (AUC) according to the provisions of the Agreement.[viii] Trading however commenced officially in January 2021.

2.0 Objectives of the AfCFTA

The objectives of AfCFTA are divided into two groups, the general and the specific objectives. The general objectives are found in Article 3 of the Agreement. They include:

1.?????To create a single market for goods, services, facilitated by movement of persons in order to deepen the economic integration of the African Continent and in accordance with the Pan African Vision of “An integrated, prosperous and peaceful Africa” enshrined in Agenda 2063;

2.?????To create a liberalised market for goods and services through successive rounds of negotiation;

3.?????To contribute to the movement of capital and natural persons and facilitate investments building on the initiatives and developments in the State Parties and RECs;

4.?????To lay the foundation for the establishment of a Continental Customs Union at a later stage;

5.?????To promote and attain sustainable and inclusive socio-economic development, gender equality, and structural transformation of State Parties;

6.?????To enhance the competitiveness of the economies of State Parties within the continent and the global market;

7.?????To promote industrial development through diversification and regional value chain development, agricultural development, and food security; and

8.?????To resolve the challenges of multiple and overlapping membership and expedite the regional and continental integration processes.[ix]

The specific objectives were set out in order to realise the general objectives. They include:

a.??????To progressively eliminate tariffs and non-tariff barriers to trade in goods;

b.?????To progressively liberalise trade in services;

c.??????To cooperate on investment, intellectual property rights, and competition policy;

d.?????To cooperate on all trade-related areas;

e.??????To cooperate on customs matters and the implementation of trade facilitation measures;

f.??????To establish a mechanism for the settlement of disputes concerning their rights and obligations; and

g.?????To establish and maintain an institutional framework for the implementation and administration of the AfCFTA.[x]

3.0 Fulfilling the AfCFTA’s objectives

Despite how beautiful these objectives are and the noble intention of the drafters, they are not self-fulfilling. Achieving these objectives still depends on some significant factors such as policy reforms and trade facilitation measures as well as cooperation among member states. In order for these objectives to be fulfilled, the signatories of the AfCFTA would need to consider the following;

1.?????Ratification by Member States: Article 23 of the Agreement establishing the Free Trade Area provides that the agreement and its protocols shall enter into force thirty days after the deposit of the twenty-second instrument of ratification. This means that Member States must cooperate in ensuring that the agreement and its protocols are swiftly ratified. As of May, 2022, 43 of the 54 signatories to the AfCFTA agreement had deposited their instruments of ratification with the chair of the African Union Commission[xi]. It is important that this process is sped up as slow ratification can be a clog in the wheel in the ratification of subsequent protocols. Ultimately, a united front on the Agreement will speed up the achievement of its objectives.

2.?????Developing a framework for the implementation of AfCFTA: Ratification of the agreement must be followed by swift implementation. It is not enough that state parties have ratified the AfCFTA, but they must also take adequate steps to implement the provisions of the AfCFTA. For instance, just three countries – Ghana, South Africa, and Egypt – had established the necessary customs infrastructure at the start of the free trading in January 2021.[xii] In line with the implementation of the AfCFTA, in 2019 the Nigerian Government established the National Committee on the AfCFTA with the mandate to develop Nigeria’s strategy and mobilise all relevant public and private sector actors to realise her mission and strategic objectives for the AfCFTA.[xiii]

3.?????Negotiation of subsequent protocols: While the preliminary phase of the AfCFTA negotiations which focused on trade in goods and services and dispute resolution mechanisms has been negotiated, the annexes on tariff concessions, rules of origin for goods, and schedules of specific commitments for services are still undergoing negotiations. Likewise, the second phase of the negotiations that will build up to protocols on competition policy, investment, and intellectual property has just begun having missed the earlier concluding deadlines of December 2020 and 2021 respectively.[xiv] The delay has also kept Phase 3 negotiations on Digital Trade and Women and Youth in Trade on hold as it is meant to begin immediately after Phase 2 Negotiations.[xv] The consequence is that the slow negotiations will affect effective trading under the AfCFTA. Member States must therefore cooperate on the negotiations of these protocols to ensure that AfCFTA’s objectives are fulfilled.

4.?????The role of the private sector: The private sector has a key role to play in the realization of the AfCFTA's objectives. Cooperation between companies should be encouraged.[xvi] However, getting the private sector to commit fully to trading and investing in the AfCFTA will not happen by default. This is because investment decisions are typically based on clear information, a favourable business climate, and a clear presentation of available investment project opportunities.[xvii] Thus, the government must ensure that their interests are given priority and they must also be carried along in the policy-making process. Public-private dialogue and business advocacy should be highly encouraged.

5.?????Youth engagement: The strength and the creativity of young Africans can and should be engaged in driving the vision of the AfCFTA and in fulfilling its objectives. The youths are at the forefront when it comes to cutting-edge technological advancements and e-commerce. It is laudable that the involvement of youths in trade has become part of phase 3 negotiating agenda of the agreement.[xviii]

6.?????Creation of Awareness among Micro, Small, and Medium Scale Enterprises: Micro, Small, and Medium Enterprises (MSMEs) form the backbone of the world economy and are an important driver of economic growth in the African continent, providing an estimated 80% of jobs across the continent.[xix] It is therefore important that they are aware of the benefits that come with trading under the AfCFTA. But beyond being aware, intentional engagement of these businesses must be carried out and their interests must be considered in the policy-making process due to their unique peculiarities.

7.?????Online awareness of the AfCFTA: Social media platforms can be engaged to create more awareness of the AfCFTA. Webinars, seminars, and training should also be carried out to create more awareness of the agreement and its implication for trade in the region.

8.?????Addressing infrastructural bottlenecks and supply constraints: Manufacturers and sellers need a distribution chain that delivers their goods to desired markets. Investing in distribution and logistics can help in reducing some of the infrastructural bottlenecks and constraints that affect supply.

9.?????Building the manufacturing sector: Member States should make investments in targeted infrastructure and facilities that will lower the cost of local production and the transportation of goods to compete favourably within the AfCFTA framework.

10.??Adding value to our raw materials: Africa is blessed with raw materials but unfortunately, we have been unable to add value to these materials. This is why although the top producers of cocoa are in Africa[xx], the top producers of chocolate are in Europe[xxi]. If AfCFTA's objectives will be fulfilled, member states must learn to add value to their raw materials before exporting them. Adding value to raw materials will create jobs within the continent since instead of them being processed outside; they will be processed within the continent.[xxii] Likewise, it will increase Africa’s competitiveness globally.

11.?Using of technology to aid trade facilitation: It is no doubt that many developing countries in Africa struggle with cross-border inefficiencies. Technology can be used to improve cross-border transactions, access products, and services, and improve trade security. For instance, member states can build a blockchain network for processing cross-border transactions from the nation of origin to the point of delivery and authenticating the transaction – both payments and product/service – within the shortest time possible.[xxiii]

4.0 Conclusion

Since the establishment of the AfCFTA, a lot of work has been carried out toward its implementation. Negotiations are ongoing. Although the COVID-19 pandemic has delayed the process – for example, the phase 2 negotiations that should have been concluded last year have been set to conclude this year – worthy of note are some achievements like the over 87% agreement reached on the rules of origin, the operationalisation of the Protocol on Disputes Settlement, the establishment of the African Trade Observatory which aims to create a continent-wide trade information portal to facilitate intra-African trade, and the Pan-African Payment and Settlement System (PAAPS) which allows for payment and settlements using local currencies. Nevertheless, there is still more work to be done. Member states must cooperate through negotiations and swift ratification to ensure the successful implementation of the agreement. Each state must also work towards developing its own strategy for implementing the agreement in its country.

About the Author

Eberechukwu Ezike is a private International Trade Law Consultant, Chartered Mediator, & Author. She graduated with a First-Class Honours degree in Law from the University of Ibadan and the Nigerian Law School. She is also a 2022 Rhodes Scholarship West Africa Runner-up and Finalist. She is currently an LL.M Candidate at the University of Ibadan where she is pursuing research in international trade and development in Africa as a University Scholar. You can connect with her on LinkedIn and other social media platforms.

[i] African Union. Agenda 2063: The Africa We Want. Retrieved December 24, 2021 from https://au.int/en/agenda2063/overview

[ii] The World Bank. 2020. The African Continental Free Trade Area. Retrieved December 24, 2021 from https://www/worldbank.org/en/topic/trade/publication/the-african-continental-free-trade-area

[iii] Ibid.

[iv] Ibid.

[v] UNECA. 2020. Covid-19: Trade expert says AfCFTA could help Africa bounce back. Retrieved December 24, 2021 from www.un.org/africarenewal/news/coronavirus/covid-19-trade-expert-says-afcfta-could-help-africa-bounce-back

[vi] World Trade Organisation. 2021. Strengthening Africa’s capacity to trade. Retrieved December 24, 2021 from https://onlinebookshop.wto.org

[vii] UNECA, 2020. Supra, 6.

[viii] Article 23:1, Agreement Establishing the African Continental Free Trade Area. Retrieved December 24, 2021 from https://au.int/en/treaties/agreement-establishing-african-continental-free-trade-area.

[ix] Article 3, Ibid.

[x] Article 4, Ibid.

[xi] TRALAC. May 3, 2022. Status of AfCFTA Ratification. Retrieved June 6, 2022 from https://www.tralac.org/resources/infographic/13795-status-of-afcfta-ratification.html

[xii] Ighobor, K. 2021. AfCFTA: 100 days since the start of free trading, prospects seem bright. Retrieved December 24, 2021 from www.un.org/africarenewal/magazine/april-2021/afcfta-100-days-start-free-trading-prospects-seem-bright.

[xiii] See National Action Committee African Continental Free Trade Area Nigeria (NG-AfCFTA). Retrieved, December 24, 2021 from www.ngrafcfta.goc.ng/about-us/#tradewith_nigeria.

[xiv]Baker Mckenzie. 2022. Africa: AfCFTA Update – the streamlining of intra-African trade gathers momentum. Retrieved June 6, 2022 from https://insightplus.bakermckenzie.com/bm/international-commercial-trade/africa-afcfta-update-the-streamlining-of-intra-african-trade-gathers-momentum

[xv] Chidele T. 2021. AfCFTA Phase II and III Negotiations – Update. Tralac. Retrieved December 24, 2021 from https://www.tralac/org/blog/article/15090-afcta-phase-ii-and-iii-negotiations-update.html.

[xvi] Esmel, A. 2019. The private sector has a key role to play in realising AfCFTA's promise. International Trade Forum. Retrieved December 24, 2021 from www.intracen.org/news/Private-sector-has-key-role-to-play-in-realizing-AfCFTAs-promise/.

[xvii] Ibid.

[xviii] United Nations. What the AfCFTA holds for Women and Youths in 2022. Retrieved April 22, 2022 from www.un.org/osaa/news/what-afcfta-holds-women-and-youths-2022

[xix] CSIS. 2021. Supporting Small and Medium Enterprises in Sub-Saharan Africa through Blended Finance. Retrieved June 9, 2022 from https://www.csis.org/analysis/supporting-small-and-medium-enterprises-sub-saharan-africa-through-blended-finance

[xx] WorldAtlas. The Top cocoa-producing Countries. Retrieved December 25, 2021 from www.worldatlas.com/amp/articles/top-10-cocoa-producing-countries.html.

[xxi] Maverick, J.B. 2021. The 4 Countries that Produce the Most Chocolate. Retrieved December 25, 2021 from www.investopedia.com/articles/investing093015/4-countries-produce-most-chocolate.asp.

[xxii] Brookings. 2020. Ngozi Okonjo-Iweala’s vision for the WTO. Retrieved December 25, 2021 from www.google.com/amp/s/www.brookings.edu/podcast-episode/ngozi-okonjo-iwealas-vision-for-the-wto/amp/

[xxiii] Ganne, Emmanuelle. 2018. Can Blockchain revolutionise International Trade?. Geneva: WTO Publications