In Quest of a New Era of Trade in Africa: 2023 in Retrospect and the promises of 2024

The AfCFTA, officially began trading on January 1, 2001, aims to create the world’s largest single market, fostering economic integration, trade liberalization and increased cooperation across the African continent.

As we reflect on this incredible initiative that embodies our collective aspiration as a people base on our common heritage and shared future prosperity, the promise of the AfCFTA is rapidly shaping our sustainable development milestones, transforming into reality.

At the forefront of one of the remarkable achievements of the AfCFTA in 2023 is the swift ratification and engagement of a significant number of African Union members’ states following a whopping 54 of the 55 African Union member states who have signed the agreement, and 47 who have ratified it.

1.) Implementation of the AfCFTA Agreement: Within a relatively short period, significant progress has been recorded in the implementation of the Agreement. This underscores the political will and a shared desire of our leaders to significantly advance on the historic mission of economic integration and eventually a common market in Africa, with the AfCFTA – being the legal foundational construct – serving an essential first step.

2.) Trade and Market Integration: So far, African Union Member States have negotiated and adopted Protocols on Trade in Goods, Trade in Services, Competition Policy, Investment and Intellectual Property Rights (IPR) as well as harmonization of customs procedures and standards to boost trade and investment in the continent.

The Protocols on Trade in Goods and Trade in Services as well as the Rules and Procedures for the Settlement of Disputes, which were negotiated under Phase I, entered into force on 30th May, 2019. These are the Protocols that would make the one Africa market function and represent the building blocks for most free trade arrangements necessary for deeper integration, which the Phase II Protocols on Competition Policy, Investment and IPR, and future Protocols aim to achieve.

The Secretariat is committed to facilitate and coordinate the removal of physical and non-physical barriers to trade in order to foster the goal of market integration. When trade flows are faster and more cost effective, business and consumers in the continent benefit as it creates industrial linkages, employment, economic diversification and structural transformation.

3.) Protocol on Trade in Goods: Member States committed to remove tariffs on 90 percent of all goods traded among themselves in equal annual reductions toward a zero tariff. For Least Developed Countries (LDCs) this reduction is spread over 10 years; for non-LDCs the reduction occurs over five

years. The remaining 10 percent of goods are further divided to 7 percent representing ‘sensitive products’ which are to be liberalized over a period of 10 and 13 years for non-LDCs and LDCs respectively, while 3 percent of goods are excluded from tariff liberalization altogether.

Remarkable progress was achieved in the negotiations on the key instruments of rules of origin and schedules of tariff concessions on trade in goods required for the practical implementation of the AfCFTA

Currently, the Agreement has been reached on 92.3 percent of rules of origin covering 95.5% of intra-Africa trade. This means that we have now defined for each of them what constitutes the minimum African content for a product to be traded among countries of the continent on the basis of preferences. Such a high threshold of consensus guarantees that the vast majority of products can be traded.

It is expected that this year, the State Parties will finalize the negotiations on the outstanding rules in order to achieve 100 percent of rules of origin coverage.

With respect to tariff offers, to date, 48 Member States have submitted their tariff offers (42 of these have been technically verified and approved by the Council of Ministers), that cover these goods with rules of origin in place.

4.) Protocol on Trade in Services: With respect to trade in services, five priority sectors in services for the first round of negotiations have been adopted namely; tourism, transport, communication, financial and business. State Parties may, however, liberalize more sectors based on the principles of variable geometry and reciprocity.

Significant progress has been made in the submission and verification of the specific commitments. Currently, 48 Member States have submitted their offers, covering the five priority sectors, with 22 provisional schedules of specific commitments that have been technically verified and approved by the Council of Ministers

5.) Dispute Settlement Mechanism: A major achievement under the Phase I negotiations is the operationalization of the dispute settlement mechanism, to be implemented by the Dispute Settlement Body (DSB) which was established in April 2021.

Today, for the first time on the continent, free trade in goods and services is backed by a robust dispute settlement framework for the resolution of trade disputes that are to be adjudicated by a competent, impartial and independent panel. We have recently concluded the process of appointing the Appellate Body of the dispute settlement mechanism. Now the focus is on creating awareness of the DSM by considering and adopting a communication plan.

This plan will ensure that stakeholders are well-informed about the DSM and its processes, promoting transparency and understanding.

6.) Phase II Protocols: Following the conclusion of the Phase II Protocols on Competition Policy, Investment, and Intellectual Property Rights (IPR), in October 2022, the Assembly of Heads of State and Government of the African Union at its Summit convened in February 2023, adopted the three Protocols as recommended by the Executive Council paving way for their implementation.

Work is currently ongoing to conclude the outstanding two Protocols on Digital Trade (formerly e-Commerce) and Women and Youth in Trade. The Protocol on Digital Trade is set to broaden access to trade, particularly for Micro, Small and Medium-sized Enterprises that are led by women and young Africans.

7.) The Protocol on Women and Youth in Trade: The Protocol on Women and Youth in Trade when completed will address challenges that young people as entrepreneurs and traders face through legally binding commitments. Over the past two years, the Secretariat has undertaken extensive consultations of women and youth on the challenges they face when trading across the continent; as well as on the key elements that needed to be included in the protocol and its implementation once negotiations were concluded.

These two protocols are critical for the AfCFTA to be inclusive.

8.) Start of Trading/Guided Trade Initiative: January 1, 2021 marked the beginning of a monumental milestone in Africa’s integration history, as the continent opened its markets for trade in goods under the continental free trade area. This came nearly three years after the establishment of the AfCFTA in Kigali – Rwanda amid the global COVID-19 pandemic which delayed the commencement of trading by six months.

However, since this historic launch of trading was on the basis of a “provisional arrangement,” as negotiations to finalise the rules of origin and tariff reductions were still ongoing, commercially meaningful trading under the AfCFTA preferential regime did not take place.

The Secretariat launched the Guided Trade Initiative (GTI) on October 7, 2022 in order to facilitate the start of commercially meaningful trading under the AfCFTA tariff preferences.

This Secretariat-driven initiative, therefore, provided a solution-based approach to address the non-trading situation under the AfCFTA and was a key development at the continental level that injected some vitality into the implementation of the AfCFTA.

Seven (7) State Parties from the five regions of Africa, participated in the inaugural Guided Trade Initiative event, which was facilitated by the AfCFTA Secretariat, in close coordination with the national AfCFTA implementation committees to ensure trading under the AfCFTA through matchmaking of businesses and product for export and import between participating State Parties.

Under the Guided Trade Initiative, various consignments of agro-based products including tea, coffee, palm oil, cashew, dried safou, and manufactures such as ceramic tiles, and car batteries have been traded among the first batch of countries participating in the initiative.

For the countries involved, this expands their export markets and benefits their own consumers by importing cheaper products. The businesses producing the ‘made-in-Africa’ goods and trading under the initiative, are also now making more money which is helping to improve livelihoods, including for small traders and women.

On account of the success of the GTI, we intend to extend the coverage of GTI to trade in services on the basis of the criteria to be agreed on. Services are now the backbone of manufacturing and industrialization, accounting for a significant share of gross domestic product (GDP) in most African countries. The inclusion of services would, therefore, significantly boost intra-Africa trade. We also anticipate that many more State Parties will join the GTI.

9.) Regional Economic Communities (RECs): The achievement of the AfCFTA goals involves the utilization of Africa’s Regional Economic Communities (RECs) to serve as the building blocks of the AfCFTA, as provided for in the Agreement.

To this end, the Secretariat have devised mechanisms and arrangements, in the form of a framework of collaboration among the African Union Commission, the AfCFTA Secretariat, as well as the Secretariats of the RECs, to ensure optimal benefits.

The Framework promotes synergy by avoiding duplication and facilitates efficiency in advancing our economic integration agenda. It is also designed to promote transparency, which is critical to building trust among the collaborating partners.

At the 2nd Coordination Meeting of the CEOs of Regional Economic Communities (RECs) on the Implementation of the African Continental Free Trade Area (AfCFTA) hosted by the EAC in Arusha – Tanzania in June 2022, there was a deliberation on an innovative framework for resource mobilization towards the implementation of the AfCFTA, including unity in purpose in approaching development partners such as the EU.

10.) AfCFTA Trade and Industrial Development Advisory Council: The Secretariat has established an AfCFTA Trade and Industrial Development Advisory Council. This is an informal structure but, comprised of respected African development economists, researchers, academics and business people to assist the Secretariat to discharge the mandate set out in Article 3 of the Agreement Establishing the AfCFTA.

11.) Private Sector Initiatives (AfCFTA Private Sector Engagement Plan): The Secretariat have put in motion an industrial plan for Africa, what we call the AfCFTA Private Sector Engagement Plan, to help scale up the continent’s manufacturing capacity via regional value chains.

The aim is to increase industrial production and reduce dependencies in four critical sectors, namely agriculture and agro-processing, automotive, pharmaceuticals, and transportation and logistics. Until now, local demand for these goods and services is currently being met through relatively high-cost

imports, despite the continent’s growing and lower cost production capabilities.

The interventions are expected to potentially add more than US$11 billion in production and US$5 billion in intra-Africa trade per annum, more than doubling the current contribution of these value chains to intra-Africa trade. The additional investment in these value chains could create 700,000 jobs, with 50 percent focused on youth and women.

With this Plan, government officials can well target sectors which consist of

There are several other sectors with high potential and these would be addressed in later phases, for example, textiles, horticulture, financial services, telecommunications and digital services.

12.) The AfCFTA Adjustment Fund: In the last couple of years, the Secretariat have worked, in collaboration with the Afreximbank, to deliver an impactful and sustainable adjustment (fund) facility.

The Adjustment Fund is a critical instrument in the realisation of the AfCFTA and consists of the Base Fund, the General Fund, and the Credit Fund. It addresses short-term disruptions from the implementation of the AfCFTA agreement through financing, technical assistance and grants and compensation funding.

The resources required for the Adjustment Fund over the next 5-10 years are estimated at about US$10 billion. The Afreximbank has committed US$1 billion to catalyze activities. It also approved a Grant Funding in an amount of US$10 million to seed the Base Fund. We intent to raise more funds, to enable all AfCFTA State Parties to benefit from the AfCFTA.

The AfCFTA Secretariat, Afreximbank, and the Government of the Republic of Rwanda, have signed the Host Country Agreement to formalise the status of the Adjustment Fund office in Kigali, Rwanda. This is a critical step to the operationalization of the Fund, as it facilitates the establishment of the Fund and the requisite structures in Rwanda.

13.) Pan -African Payments and Settlement System (PAPSS): At the continental level, Afreximbank, in partnership with the Secretariat, has put in place the Pan-African Payment and Settlement System (PAPSS) to provide a cross-border, financial market infrastructure. This is to enable instant cross-border payments in the respective local African currencies and save the continent around US$5 billion in currency conversion each year. The PAPSS effectively eliminates Africa’s financial borders, formalises and integrates Africa’s payment systems.

14.) Intra-Africa Trade Fair (IATF): Intra-Africa trade is one of the lowest among other regions of the world, and one reason for this is the lack of access to trade and market information. To address this challenge, Afreximbank in collaboration with the African Union Commission and the AfCFTA Secretariat launched the biennial IATF to, among others, sustainably address the gap in trade and market information for the successful realisation of the AfCFTA objectives.

The 3rd Intra-Africa Trade Fair (IATF2023), will be hosted by the Arab Republic of Egypt, in Cairo, in November 2023, under the theme: “Building Bridges for a successful AfCFTA”. A strong focus will be placed on recognizing growth opportunities for Intra-Africa cross border trade and investments.

15.) The AfCFTA Business Forum: Again, to promote private sector led integration, the Secretariat has established the AfCFTA Business Forum which is now contributing to increased cross-border trading and investments. This is Africa’s biggest business event, designed with the aim of accelerating the implementation of the AfCFTA and activating trade and investments.

The AfCFTA Business Forum’s main focus is the private sector. The programme and activities have been curated specifically to create a private sector engagement platform and promote a private sector-friendly environment.

The AfCFTA Business Forum provides a platform to showcase the African Union’s commitment to promoting economic integration on the continent and to encourage investment and trade within the AfCFTA. This is a crucial moment for businesses, investors, and governments to come together to discuss, collaborate and create a shared vision for the future of African trade. The forum was successfully held in April 2023 in Cape Town, South Africa.

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