The African Continental Free Trade Area (AFCFTA) was birthed out of the need to promote intra-African trade. When compared to other continents, trade between African Countries is significantly low. For example, intra-European trade is about 70%, intra-Asian trade ranks about 59% while that of Africa is at a low of 16-18%. One of the reasons for this is because African countries majorly import finished goods and export raw materials to the rest of the world such as oil, cocoa, etc.
The African Continental Free Trade Area (AFCFTA) is part African Union’s (AU) Agenda 2063 aimed at creating a single trade market for Africa and achieving a maintainable and inclusive development for the continent over the next 40-50 years. Furthermore, Agenda 2063 is set to transform Africa into the global powerhouse of the future.
The African Continental Free Trade Area Agreement (the Agreement) entered into force on 30 May 2019 with the 24 African countries that had deposited their instruments of ratification with the African Union Commission (AUC) Chairperson. Currently, 54 African Countries have signed the Agreement and 36 African have ratified it through their domestic processes.
The AfCFTA is poised to become the world’s biggest free trade area with Eritrea the only country in the African Union that is not a party to the Agreement. The AfCFTA is set to connect about 1.2 billion people across the 55 member states of the African Union, with a collective Gross Domestic Product (GDP) valued at about US$3 billion which can bring several Africans out of poverty, boost economic growth and development.
The AFCFTA seeks to improve Intra-African trade by creating a single trade market for goods and services facilitated by the movement of people and boost Africa’s trading position in the global market by strengthening Africa’s common voice and policy space in global trade negotiations. For Africa to compete globally, it must start trading a lot more within its ambit before breaking into the global markets. The AfCFTA aims to break these barriers through the creation of a single trade market for Africa as well as reducing tariffs on goods between African Countries in order to make this a reality. However, for the agenda to reach its full potential, the policies and reforms put in place will have to be strictly adhered to.
The Agreement is being implemented in phases as follows :
Phase 1: Reduction of tariffs on 90% of goods within 5 years (with a further 7% over 10 years)
Phase 2: Protocols on Competition, Investment, Intellectual Property and e-Commence.
The Africa Continental Free Trade Area Agreement establishes different organs for the smooth administration and enforcement of the Agreement. These Organs include – The Assembly (the highest authority under the ACFTA), the Council of Ministers (which essentially reports to the Assembly), the Committee of Senior Trade Officials who essentially carry out the role of enforcement of the Agreement and finally the Secretariat which serves a more administrative role although autonomously. This is similar to the contents of other conventions as enacted by the African Union.
Further to the Agreement are several Protocols which are essentially guidelines on how the Agreement is to be enforced by the relevant State Parties who assent to it. The Protocols include;
- i) Protocol on Trade in Goods (PTG);
- ii) Protocol on Trade in Services (PTS) and;
iii) Protocol on Dispute Settlement (PDS).
January 1, 2021, marked the beginning of trade under the AfCFTA Trade Area Agreement. The AfCFTA Secretariat is based in Accra, Ghana and the first Secretary-General is H.E. Mr. Wamkele Mene who was appointed on 19 March 2020.
- The African Export-Import Bank (Afreximbank) and Nigeria Export-Import Bank (NEXIM) have partnered to provide a $50 million project preparation fund for investments in Nigeria. This project is aimed at providing financial and technical support services to the public and private sector entities operating in Nigeria’s trade sector. Read more Here.
- Africa is yet to reap significant benefits from the vast natural resources available to it. There are a lot of countries in Africa known for their oil production which is estimated to account for more than 70% of its exports, it will be interesting to see what impact the AFCFTA will have on countries that fall in this bracket. By focusing on developing intra-continental oil and gas trade, countries will be given more autonomy to oversee their international trade agreements, an area they have usually fallen short of. Africa is known for its inability to utilize its resources, one of the areas the AFCFTA seeks to improve. The AFCFTA by providing a single market with reduced cross-border barriers will generate significant investment from overseas countries as it will provide a larger market at lower risk. Read more Here.
- The AfCFTA Secretariat and the United Nations Development Programme (UNDP) signed a strategic partnership agreement in March 2021 to promote trade in Africa. The strategic partnership seeks to promote trade as a stimulus for Africa’s socioeconomic recovery from the COVID-19 pandemic and as a driver of sustainable development particularly for women and youth in Africa, in line with the SDGs and Agenda 2063.
- The Nigerian team in charge of the AfCFTA; the National Action Committee (NAC), charged with the mission of coordinating the activities of Ministries, Departments and Agencies (MDAs) of government as well as the private sector stakeholders to implement interventions to prepare Nigerian businesses for the AfCFTA has commenced on a nationwide awareness and sensitisation tour in line with its mandate to prepare Nigeria to take advantage of the continental agreement.
- Francis Anatogu, Secretary of the NAC on the AfCFTA speaking at the ongoing AfCFTA Implementation Engagement Series for the Rail Sub-Sector stated that export under the AfCFTA is key for building a post-oil economy for Nigeria and hedging the naira against incessant devaluation and the Rail Sub-Sector is key for this.
- Anthony Ayalogu, Deputy Comptroller Nigerian Customs Service (NCS) stated that the NCS is working on automating the system of approval for exports to aid in the facilitation of the AfCFTA for Nigeria process
We were joined by our AfCFTA industry panelists: Yabi Madurai, Louis Yaw Afful, Opeyemi Akeredolu, and Uwemedimo Atakpo to discuss the topic: Journey to AfCFTA: Prospects and Issues arising for African Business. Click HERE to catch a replay of the session. If you are a potential player in the African Business market, please ensure you watch this Webinar session. It was quite an insightful one.
Till next time.