AfCFTA – Why regional support is crucial for effective implementation

Wamkele Mene, Secretary-General of the AfCFTA Secretariat

In order to support the implementation processes of the African Continental Free Trade Area agreement, Regional Economic Communities (RECs) need to make informed choices about how to reap the benefits presented by the agreement, while at the same time managing the challenges that may be encountered in the course of the implementation. 

Wamkele Mene, Secretary-General of the AfCFTA Secretariat, stressed this Tuesday, June 7, on the occasion of the second coordination meeting of the CEOs of RECs, on the implementation of the AfCFTA held at the EAC Headquarters, in Arusha, Tanzania.

The meeting sought to take stock of the progress made since the last meeting in Accra in 2021.

The role of the continent’s eight RECs is critical especially as the latter are building blocks for the AfCFTA.

Mene said the implementation of the AfCFTA will likely influence future trade policies of the RECs. 

“In this regard, effective collaboration between the RECs and the AfCFTA Secretariat is necessary to ensure that the AfCFTA outcomes are consistent with regional advancements in trade integration made thus far and the projections for the future,” Mene said.

“Therefore, the coordination meetings offer us an opportunity to listen to one another, to better understand our areas of difference, and to work together to build consensus around common positions critical to our success at creating an African Economic Community.”

African leaders mandated the AfCFTA Secretariat, the African Union Commission, and the RECs to develop a framework of collaboration to enhance complementarity, synergies, and alignment of programmes and activities to facilitate the effective implementation of the AfCFTA. The negotiation of the AfCFTA is now in phase two which covers investments, intellectual property rights, women and youth in Trade competition policy and digital trade. 

It is Mene’s strong conviction that by agreeing on a workable framework which will strengthen the interdependence of RECs on the one hand, and strengthen the cooperation between RECs and the AfCFTA Secretariat on the other hand, “we will be taking steps critical to the success of the AfCFTA.”

“We have already received instructions from the Assembly of Heads of State and Government of the African Union to take all necessary steps to ensure the effective implementation of the AfCFTA, including facilitating commercially meaningful flow of goods and services under the AfCFTA preferential regime, across the continent. We were also instructed to develop a coordinated approach to the implementation of the AfCFTA Agreement, with the existing RECs as building blocks.”

Peter Mathuki, the EAC Secretary-General, noted that Africa is one of the world’s fastest-growing economies, but trade in goods and services accounts for an estimated 3% of global exports and imports on average. 

As noted, the share of Intra African trade remains low: on average, 13% for intra-imports and 20% for intra-exports, while ExtraAfrican trade accounts for more than 80% of the total trade. Africa’s exports to the rest of the world consist of raw materials, such as oil, gas, minerals, and agricultural commodities, with little to no value addition.

Mathuki said: “There are many reasons why intra-Africa trade is low; these include differences in trade regimes (8 AU recognised RECs), inadequacies of trade-related infrastructure (poor intermodal connectivity), trade finance and trade information. 

“Other constraints are customs, administrative and technical barriers, limited productive capacity, lack of factor market integration and inadequate focus on internal market issues.”

With a market of around 1.3 billion consumers and a GDP of $ 3.4 trillion, Mathuki reiterated, AfCFTA will unlock many opportunities in the continent and redesign the architectural framework of its economic systems. 

“The eight AU recognised RECs are the official pillars of the African Economic Community (AEC) set out in the Abuja Treaty establishing the AEC. The RECs play a critical role in coordinating and submitting REC tariff offers, schedules, and commitments on trade in services and are fully involved in negotiations on outstanding issues,” Mathuki said.

“Active engagement and input from the private sector and interest groups at the national and REC level are needed to shape the AfCFTA trade regime and resolve challenges ahead.”

Amb. Liberata Mulamula, Tanzania’s Minister of Foreign Affairs, said her country commends the initiative of establishing collaboration between the AfCFTA and RECs towards implementation of the AfCFTA Agreement. 

“Tanzania as a member of EAC Customs Union has ratified the AfCFTA agreement and is also a member of SADC and EAC. In order to have a meaningful implementation of the agreement, the United Republic of Tanzania needs to align its participation in the AfCFTA to that of the RECs as its member.”

“I am confident that this framework will underpin the interface between the AfCFTA and RECs Free Trade Area and laydown actionable policy proposals that would assist in ensuring coherent, coordinated and fully responsive collaboration between the AfCFTA and RECs.”

Source: The New Times, 8 June 2022

AfCFTA, EU and WCO join forces to support digital transformation of Customs work

Picture: Damien Patkowski

On 27 January 2022, representatives of the WCO, the AfCFTA Secretariat and the European Commission held a virtual meeting to review the state of play in the implementation of the African Continental Free Trade Area (AfCFTA). The meeting focused on the trade liberalization mechanism envisaged by the AfCFTA Agreement, the management of tariff offers and a possibility of setting up a continental digital platform to handle information on applicable tariff rates covering all African countries.

In opening the meeting, Mrs. Demitta Chinwude Gyang, Head of Customs at the AfCFTA Secretariat, expressed her appreciation for the support provided by the WCO and the EU on the implementation of the Harmonized System (HS) under the EU-WCO Programme for HS in Africa (HS-Africa Programme), funded by the EU. She emphasised that the trade under the AfCFTA had already started from January 2021, and 44 tariff offers had been submitted by AfCFTA signatories already. She explained that the AfCFTA Secretariat intended to create a web-based ‘tariff book’ whereby all the necessary information on tariff offers and applicable tariff rates would be made available in a user-friendly and easily accessible manner.

The representatives of the WCO and the EU welcomed the AfCFTA initiative to set up a digital tariff platform at the continental level, recalling that electronic tariffs had been successfully implemented in some African countries in the recent past, with the support of the HS-Africa Programme. They stressed that such digital tools contributed significantly to trade facilitation efforts of Customs administrations and Regional Economic Communities by providing data that were vital for trade operators. The EU and the WCO reiterated their firm commitment to offering continued support to the AfCFTA in that regard, under the HS-Africa Programme.

In conclusion, the meeting participants agreed that the initiative should start by developing terms of reference for the implementation of the AfCFTA digital ‘tariff book’ and launching a tendering process to select a service provider that would carry out the required technical work. It was felt that this project would contribute to scaling up digital transformation of Customs, announced as the theme of the year 2022, and create a foundation for the next steps in the establishment of the Customs union on the African continent.

For more details, please, contact capacity.building@wcoomd.org.

AfCFTA Postpones Implementation of Agreement

The Secretary-General the Africa Continental Free Trade Area (AfCFTA), Mr. Wamkele Mene, yesterday announced the postponement of the implementation of the AfCFTA agreement scheduled for July 1, 2020, citing the COVID-19 pandemic.

Mene said: “It is obviously not possible to commence trade as we had intended on 1 July under the current circumstances.

“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 1 July deadline. Instead all governments should be allowed to concentrate their efforts on fighting the pandemic and saving lives at home.”

Mene did not disclose the targeted implementation date, but there were strong speculations that the new commencement date might be January 2021. “The political commitment remains, the political will remains to integrate Africa’s market and to implement the agreement as was intended,” he said.

The AfCFTA was promoted as having the capacity to bring about $3.4 trillion intra-African trade with 1.3 billion people across Africa and constitute the largest new trading bloc since the World Trade Organisation was formed in 1994.

According to the Head, Division of International Economics Relations, Nigeria Institute of International Affairs (NIIA), Dr. Efem N. Ubi, the postponement of the take-off date was in order to enable African countries focus fully on surviving the threat from COVID-19.

“The focus should be on sustaining our economy and see how we can win the war against COVID-19 by managing what we have. And the most important thing for the post COVID-19 economy is for African countries to focus on the kind of education that will promote science and technology that will transit the continent from a primary producer to a manufacturing economy. The focus onward should be science, technology, agriculture and health so that Africans can produce and have things to trade among themselves,” Ubi said.

Source: This Day Live, Nigeria, 29 April 2020

AfCFTA – an uphill struggle in quest for regional trade on the continent

Picture : Bloomberg.com

The following article was published by Bloomberg and sketches the day-to-day hardship for cross border trucking through Africa. In a sense it asks the very questions and challenges which the average African asks in regard to the highly anticipated free trade area. While rules of origin and tariffs form the basis of trade across borders, together with freedom of movement of people, these will mean nothing if African people receive no benefit. As globalisation appears to falter across Europe and the West, it begs the question whether this is in fact is the solution for Africa; particularly for the reason that many believe globalisation itself is an extension of capitalism which some of the African states are at loggerheads with. Moreover, how many of these countries can forego the much need Customs revenue to sustain their economies, let alone losing political autonomy – only time will tell.

Nyoni Nsukuzimbi drives his 40-ton Freightliner for just over half a day from Johannesburg to the Beitbridge border post with Zimbabwe. At the frontier town—little more than a gas station and a KFC—he sits in a line for two to three days, in temperatures reaching 104F, waiting for his documents to be processed.

That’s only the start of a journey Nsukuzimbi makes maybe twice a month. Driving 550 miles farther north gets him to the Chirundu border post on the Zambian frontier. There, starting at a bridge across the Zambezi River, trucks snake back miles into the bush. “There’s no water, there’s no toilets, there are lions,” says the 40-year-old Zimbabwean. He leans out of the Freightliner’s cab over the hot asphalt, wearing a white T-shirt and a weary expression. “It’s terrible.”

By the time he gets his load of tiny plastic beads—the kind used in many manufacturing processes—to a factory on the outskirts of Zambia’s capital, Lusaka, he’s been on the road for as many as 10 days to traverse just 1,000 miles. Nsukuzimbi’s trials are typical of truck drivers across Africa, where border bureaucracy, corrupt officials seeking bribes, and a myriad of regulations that vary from country to country have stymied attempts to boost intra-African trade.

The continent’s leaders say they’re acting to change all that. Fifty-three of its 54 nations have signed up to join only Eritrea, which rivals North Korea in its isolation from the outside world, hasn’t. The African Union-led agreement is designed to establish the world’s biggest free-trade zone by area, encompassing a combined economy of $2.5 trillion and a market of 1.2 billion people. Agreed in May 2019, the pact is meant to take effect in July and be fully operational by 2030. “The AfCFTA,” South African President Cyril Ramaphosa said in his Oct. 7 weekly letter to the nation, “will be a game-changer, both for South Africa and the rest of the continent.”

It has to be if African economies are ever going to achieve their potential. Africa lags behind other regions in terms of internal trade, with intracontinental commerce accounting for only 15% of total trade, compared with 58% in Asia and more than 70% in Europe. As a result, supermarket shelves in cities such as Luanda, Angola, and Abidjan, Ivory Coast, are lined with goods imported from the countries that once colonized them, Portugal and France.

By lowering or eliminating cross-border tariffs on 90% of African-produced goods, the new regulations are supposed to facilitate the movement of capital and people and create a liberalized market for services. “We haven’t seen as much institutional will for a large African Union project before,” says Kobi Annan, an analyst at Songhai Advisory in Ghana. “The time frame is a little ambitious, but we will get there.”

President Nana Akufo-Addo of Ghana and other heads of state joined Ramaphosa in hailing the agreement, but a number of the businesspeople who are supposed to benefit from it are skeptical. “Many of these governments depend on that duty income. I don’t see how that’s ever going to disappear,” says Tertius Carstens, the chief executive officer of Pioneer Foods Group Ltd., a South African maker of fruit juices and cereal that’s being acquired by PepsiCo Inc. for about $1.7 billion. “Politically it sounds good; practically it’s going to be a nightmare to implement, and I expect resistance.”

Under the rules, small countries such as Malawi, whose central government gets 7.7% of its revenue from taxes on international trade and transactions, will forgo much-needed income, at least initially. By contrast, relatively industrialized nations like Egypt, Kenya, and South Africa will benefit from the outset. “AfCFTA will require huge trade-offs from political leaders,” says Ronak Gopaldas, a London-based director at Signal Risk, which advises companies in Africa. “They will need to think beyond short-term election cycles and sovereignty in policymaking.”

Taking those disparities into account, the AfCFTA may allow poorer countries such as Ethiopia 15 years to comply with the trade regime, whereas South Africa and other more developed nations must do so within five. To further soften the effects on weaker economies, Africa could follow the lead of the European Union, says Axel Pougin de La Maissoneuve, deputy head of the trade and private sector unit in the European Commission’s Directorate General for Development and International Cooperation. The EU adopted a redistribution model to offset potential losses by Greece, Portugal, and other countries.

There may be structural impediments to the AfCFTA’s ambitions. Iron ore, oil, and other raw materials headed for markets such as China make up about half of the continent’s exports. “African countries don’t produce the goods that are demanded by consumers and businesses in other African countries,” says Trudi Hartzenberg, executive director of the Tralac Trade Law Center in Stellenbosch, South Africa.

Trust and tension over illicit activity are also obstacles. Beginning in August, Nigeria shut its land borders to halt a surge in the smuggling of rice and other foodstuffs. In September, South Africa drew continentwide opprobrium after a recurrence of the anti-immigrant riots that have periodically rocked the nation. This could hinder the AfCFTA’s provisions for the free movement of people.

Considering all of these roadblocks, a skeptic would be forgiven for giving the AfCFTA little chance of success. And yet there are already at least eight trade communities up and running on the continent. While these are mostly regional groupings, some countries belong to more than one bloc, creating overlap. The AfCFTA won’t immediately replace these regional blocs; rather, it’s designed to harmonize standards and rules, easing trade between them, and to eventually consolidate the smaller associations under the continent­wide agreement.

The benefits of the comprehensive agreement are plain to see. It could, for example, limit the sort of unilateral stumbling blocks Pioneer Foods’ Carstens had to deal with in 2019: Zimbabwe insisted that all duties be paid in U.S. dollars; Ghana and Kenya demanded that shippers purchase special stickers from government officials to affix to all packaging to prevent smuggling.

The African Export-Import Bank estimates intra-African trade could increase by 52% during the first year after the pact is implemented and more than double during the first decade. The AfCFTA represents a “new pan-Africanism” and is “a pragmatic realization” that African countries need to unite to achieve better deals with trading partners, says Carlos Lopes, the former executive secretary of the United Nations Economic Commission for Africa and one of the architects of the agreement.

From his closer-to-the-ground vantage point, Olisaemeka Anieze also sees possible benefits. He’s relocating from South Africa, where he sold secondhand clothes, to his home country of Nigeria, where he wants to farm fish and possibly export them to neighboring countries. “God willing,” he says, “if the free-trade agreement comes through, Africa can hold its own.”

In the meantime, there are those roads. About 80% of African trade travels over them, according to Tralac. The World Bank estimates the poor state of highways and other infrastructure cuts productivity by as much as 40%.

If the AfCFTA can trim the red tape, at least driving the roads will be more bearable, says David Myende, 38, a South African trucker resting after crossing the border post into South Africa on the way back from delivering a load to the Zambian mining town of Ndola. “The trip is short, the borders are long,” he says. “They’re really long when you’re laden, and customs officers can keep you waiting up to four or five days to clear your goods.” 

Source: article by Anthony Sguazzin, Prinesha Naidoo and Brian Latham, Bloomberg, 30 January 2020