Key issues on the African Continental Free Trade Area
On July 7, 2019 African Heads of State and Government held their summit in Niger and signed up the African Continental Free Trade Area (AfCFTA).
The signing was a continuation of a long process. It includes the summit where 44 Heads of States and Governments met in Rwanda in March 2018 to deliberate on the matter.
The free trade area is among the key issues of discussion in the continent and beyond. New as it is, there are many unknowns in this potentially very important initiative to boost trade in Africa.
This piece contributes in making the AfCFTA more known.
AfCFTA
The AfCFTA is a free trade area outlined in the African Continental Free Trade Agreement among 54 of the 55 African Union nations.
It is the largest free trade in the world in terms of participating countries since the formation of the World Trade Organization (WTO). Its objectives include creating a single continental market for goods and services, with free movement of goods and services, labour, capital and investments.
Its operational phase was launched in Niger on July 7, 2019. The agreement establishing it was entered into force on May 30, 2019. The operational phase of the AfCFTA began on the July 7, 2019 with all African countries except Eritrea which had not signed to the agreement. By November 2019 only 27 out of 55 African countries had ratified it. Tanzania is not one of them.
Operational instruments
The AfCFTA needs operational instruments for it to deliver successfully. There are five operational instruments for the AfCFTA.
These are the Rules of Origin which helps in issues related to knowing the source country of a product for various purposes such as tariff. Another instrument is the online negotiating forum.
The third instrument is the monitoring and elimination of non-tariff barriers.
This is very important for AfCFTA to be a real free trade area. This is because among the factors limiting free trade and therefore limited intra-Africa trade are not just tariff but also non tariff barriers (NTBs). NTBs are measures that hinder import and export of gods and services.
They include protectionists and non protectionist policies. More specifically, NTBs include import quotas, subsidies, customs delays, technical barriers, or other systems preventing or impeding trade such as road tolls. Others include import licensing, rules for valuation of goods at customs, pre-shipment inspections, rules of origin, and trade prepared investment measures.
Other operational instruments for the AfCFTA include a digital payments system and the African Trade Observatory.
Signing, ratification and domestication
After signing, countries are required to ratify and then domesticate the instruments of the AfCFTA. By November 2019 a total of 54 countries had signed and only 27 had ratified including depositing ratification instruments. Tanzania was yet to ratify by November 2019. Eventual signing, ratification and domestication is expected to facilitate continental integration in line with the aspirations of Africa Agenda 2063.
Economics of hosting the secretariat
The AfCFTA is hosted by Ghana following confirmation by the Heads of State and Government. There were over six other countries that had also expressed interest in hosting it.
There are a number of benefits in hosting such a body. They include such economic benefits as direct and indirect employment for nationals of the hosting country, business opportunities such as those related to real estate sector in the context of offices and residences for staff.
In the Tanzanian context one can see this in light of benefits accruing to Tanzania by hosting the East African Community in Arusha and in Ethiopian context by Addis Ababa in hosting the African Union.
Role of peace and security
There are a number of factors that are pre-requisite for eventual success of this grand regional integration block.
They include peace building and maintenance as well as security in Africa. This is due to the pivotal role of peace and security in trade in general and intra-Africa trade in particular. Without peace and security, production of goods and services and trading of the same within and between countries will be highly limited.
Apart from peace and security, there are other pre-requisites for success of the AfCFTA. They include but not limited to adequate quantity and quality of infrastructure both soft and hard; removal of tariff and non tariff barriers, adequate skills and talents in the labour force and many other variables that constitute good, conducive and attractive business and investment environment and climate.
