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Adoption by the African Union of the theme for 2023 as the “Year of AfCFTA: Acceleration of the African Continental Free Trade Area Implementation”, will generate greater political commitment and accelerate the effective implementation of the agreement.
By eliminating barriers to trade in Africa, the African Continental Free Trade Area (AfCFTA) will lift 30 million people from extreme poverty and another 68 million people from moderate poverty.
To boost intra-African trade, the continent has embarked on the gradual elimination of tariffs on 90 percent of goods, and the reduction of barriers to trade in services aimed at increasing Africa’s income by $450 billion by 2035.
The successful implementation of the AfCFTA will lead to the creation of more decent jobs, improved welfare and better quality of life for all citizenry, and sustainable development.
Beyond the policy transformation and reforms, the AfCFTA seeks to ensure inclusivity of women and youth, including youth in the rural areas, development of Small and Medium Enterprises (SMEs) and overall industrialisation of the continent.
As of February 2022, eight countries representing the five regions of the continent — Cameroon, Egypt, Ghana, Kenya, Mauritius, Rwanda, Tanzania and Tunisia — participated in the AfCFTA’s Guided Trade Initiative (GTI), which seeks to facilitate trade among interested AfCFTA state parties that have met the minimum requirements for trade, under the Agreement.
This initiative supports matchmaking businesses and products for export and import between State parties.
The products earmarked to trade under the initiative include: ceramic tiles; batteries, tea, coffee, processed meat products, corn starch, sugar, pasta, glucose syrup, dried fruits, and sisal fibre, among others, in line with the AfCFTA focus on value chain development.
In 2023, the AfCFTA Guided Trade shall also focus on trade in services in the five priority areas, namely: Tourism, transport, business services; communication services; financial services; transport services, and tourism and travel-related services.
The ultimate objective is to ensure that AfCFTA is truly operational and the gains from the initiative are improved implementation to achieve increased inter-regional and intra-Africa trade that would yield economic development for the betterment of the continent at large.
The adoption by the African Union of the theme of the Year 2023 as the “Year of AfCFTA: Acceleration of the African Continental Free Trade Area Implementation”, is expected to generate greater political commitment and accelerate the effective implementation of the AfCFTA to fully benefit the African citizenry and achieve the aspirations and goals of Agenda 2063.
The year-long activities will enhance the existing collaboration among the member states, the Regional Economic Communities (RECs), AU institutions, the private sector, development partners, and other stakeholders, to mobilise and implement actions that boost intra-Africa trade, particularly trade in value-added production and trade across all sectors of Africa’s economy.
The AfCFTA will build on the progress achieved by the eight RECs under their customs unions, free trade areas and other trading arrangements.
Currently, 44 member states are state parties to the AfCFTA Agreement following the ratification of the instruments establishing the AfCFTA while 54 member states have signed the Agreement.
As of February 2023, forty-six Provisional Schedules of Tariff Concession have since been submitted by member states including four from the Customs Unions.
Following the coming into force the Agreement establishing the AfCFTA in May 2019, efforts have been enhanced to accelerate the implementation and advanced usage of the existing operational tools that to facilitate the realisation of commercially meaningful trading under the AfCFTA.
These include, among others:
The conclusion of the AfCFTA Phase One and Two Protocols which provide a legal basis to advance the operationalisation of the trading. The finalisation of the AfCFTA negotiations to ensure that the market access under AfCFTA was not taken advantage of only by the big corporations but for the SMEs, women, and young Africans in trade, to also grow their businesses.
The recently concluded Phase Two Protocols cover protocols on Investment, Competition Policy, and Intellectual Property Rights and will contribute to deepening economic integration in Africa.
Under the Phase One Protocol on Trade in Goods, State Parties committed to reduce tariffs on 90 percent of goods traded among themselves in equal annual instalments until they are eliminated within five years for non-Least Developed Countries (LCDs) and 10 years for Least Developed Countries. For an additional 7 percent of ‘Sensitive’ goods, tariffs will be eliminated within 10 years for non-LDCs and 13 years for LDCs.
A final 3 percent of ‘Excluded’ products are to retain their tariffs to allow flexibilities for State Parties with particular sensitivities but will be subject to review every five years. Under Phase II, the finalisation of the Protocol on Women and Youth in Trade and Digital Trade will be concluded in 2023.
The development of the AfCFTA Guided Trade Initiative to connect businesses and products for export and import between interested State Parties.
The initiative requires state parties to issue AfCFTA trading documents, including certificates of origin, importer and exporter declaration forms, and ensure that their customs laws and systems are aligned to the AfCFTA requirements.
The operationalisation of the AfCFTA Adjustment Fund aims to support both the member states and private sector to effectively participate in the new trading environment established under the AfCFTA.
As with any major trade liberalisation regime, the AfCFTA Agreement will introduce near-term disruptions, as tariff revenues by State Parties are reduced, industrial sectors are disordered, businesses and supply chains are re-organised, and employment is dislocated — often in ways that cannot be anticipated.
The estimated requirement for uninterrupted implementation of the AfCFTA Agreement and to eliminate the adjustment cost is at $10 billion over the next six to 10 years.
The adjustment fund will for instance, be meaningful for a country experiencing challenges with its textiles and clothing sector to access the fund for retraining of workers or for recapitalisation, procuring machinery for goods, or to increase competitiveness. The adjustment fund consists of a base fund, a general fund and a credit fund.
The base fund will consist of voluntary contributions from State parties, grants and technical assistance funds to address tariff revenue losses as tariffs are progressively eliminated. It will also support countries to implement various provisions of the AfCFTA Agreement, its protocols and annexes.
The general fund will mobilise concessional funding, while the credit fund will mobilise commercial funding to support both the public and private sectors, enabling them to adjust and take advantage of the opportunities created by the AfCFTA.
The Pan African Payment System (PAPSS) in place is a centralised Financial Market Infrastructure enabling the efficient and secure flow of money across African borders.
PAPSS works in collaboration with central banks in the continent to provide a payment and settlement service to which commercial banks, payment service providers and fintech organisations across the continent can connect as participants.
The platform provides a simple, low-cost risk-controlled payment clearing and settlement system. It also serves as an avenue of expanding financial inclusion to cover the informal sector while monitoring funds transfers, thus reducing money laundering, which costs the continent several billions of dollars annually.
As of June 2022, the PAPSS network consists of eight central banks, 28 commercial banks and six switches. It will expand into the five regions of Africa before the end of 2023.
All central banks are to sign up by the end of 2024 and all commercial banks by the end of 2025. With 42 currencies on the continent, PAPSS will significantly reduce the costs of currency convertibility and save the continent an estimated
$5 billion annually.
The AfCFTA Private Sector Strategy aims at delivering impact and economic recovery in the post-pandemic world by engaging with stakeholders from across the private and public sector, and from across all corners of the continent to ensure an inclusive approach to implementing the AfCFTA.
For the continent to reduce its vulnerability to external shocks and improve trade and economic performance, the AfCFTA, regional value chains are being developed, under the AfCFTA Private Sector Engagement Strategy, to offer African countries an opportunity to use regional advantages to boost competitiveness, diversify product supply, and export products with higher value-addition.
The strategy focuses on four initial priority sectors or value chains, namely agro-processing, automotive, pharmaceuticals, and transportation and logistics, based on the potential for import substitution and existing production capabilities on the continent.
Launching of the AfCFTA e-Tariff Book in November 2022 further allowed for a digitalised trade facilitation that ensures tariff concession schedules are easily accessible to trade and customs authorities.
The tariff book includes rules of origin and the customs procedures that apply to products which allows users to benefit from enhances knowledge and capacities in the use of tariffs, commodity classification and organisation of tariff-related work within customs administrations and other relevant stakeholders.
These tariff concessions have been offered by the customs unions and once agreed they will then be nationalised and traders will be able to trade fully.
Conducting the AfCFTA Regulatory Audits on Trade in Services that identify restrictions on market access and national treatment affecting the supply of services into the country as defined in the AfCFTA Trade in Services Protocol.
By understanding the restrictions on market access and national treatment impacting tourism services, countries can work to remove those barriers and create a more open and welcoming environment for tourists. This, in turn, can help to boost the economy through increased tourism revenue.
The ultimate objective is to ensure that AfCFTA is truly operational and the gains from the initiative are improved implementation to achieve increased inter-regional and intra-Africa trade that would yield economic development for the betterment of the continent at large.
A comprehensive strategy has since been developed for automotive manufacturing in Africa. The strategy points to an immediate need to finalise the Rules of Origin (ROO) and the establishment of the Task Force that could fast-track the development of a major advanced automotive value chain in Africa.
The Protocol on Trade in Goods establishes a reporting, monitoring, and elimination mechanism where traders can file a complaint on a specific trade obstacle they have encountered during the process of moving goods and services across borders.
— Africa Renewal
Online Reporter