As Africa’s Ministers of Trade met in Cairo on 12-13 December 2018, there was a quite bit to celebrate.
Within nine months of its signature on 21 March 2018, in Kigali in Rwanda, the African Continental Free Trade Area has been ratified by 13 countries and nine of these had actually deposited their ratification instruments with the African Union Commission.
Only nine more countries are required to reach the required twenty-second ratification instrument for the Agreement to enter force and for the free trade area to be formally launched at the next African Union Summit scheduled for February 2019.
With this imminent entry into force, priority has now rightly shifted to fast-tracking implementation of the Agreement, so that economic operators can actually utilise the expected trade and investment opportunities.
The issue is, Africa has been good at adopting Agreements and taking numerous decisions, but very bad at implementation. The African Free Trade Area should not join this lot of instruments that remain on the shelves and hardly of any value in the end.
Fortunately, quite some work has been done to publicise the African Free Trade Area around the continent and the world at large. The communication and visibility strategy mounted by the African Union and its partners has been quite effective, in mobilising and reaching out to political leaders, the media, civil society, the private sector and academia.
Though many have heard about the initiative, good knowledge of the rules of the game will be important to facilitate actual utilisation of the trade and investment opportunities.
Long-term and executive courses will, therefore, come in handy, as well as user-friendly business manuals and targeted customised training events.
Planning or programming of investment and production with a view to using the African Free Trade Area will require advance knowledge of the new regulatory environment.
Payable taxes, rules of origin that determine which products qualify for duty-free and quota-free treatment, the quality and health standards to meet, and the applicable documentation, all need to be factored in.
Investors and producers need to have this information, which therefore should be quickly finalised and packaged in easily accessible formats.
The customs authorities, logistics industry and financial institutions, in particular, will need to know the ropes and assist in the utilisation of the instruments and preferences provided under the free trade area.
It has been agreed that 7 per cent of product lines will be sensitive products, with much longer transition periods, and 3 per cent will be totally excluded from the African Continental Free Trade Area. These products should not exceed 10 per cent of the values of imported products.
It is important to get this right as intra-Africa trade in goods, though it has been increasing, remains low estimated at only 18 per cent of Africa’s total trade.
The impetus around industrialisation for social economic transformation requires active and beneficial regional and global value chains, which require readily available and timely cost effective exportation and importation of inputs or components and intermediate products.
The very good news though is that the 90 per cent of product lines will be subject to straightforward linear reductions over the transition periods, namely, 5 years for developing countries, 10 to 13 years for least developed countries and possibly 15 years for a small group other countries.
An immediate step is to produce the tariff reduction schedules according to these transition periods. The reductions can then start in 2019 when the Continental FTA Agreement enters force.
The Agreement establishing the African Continental Free Trade Area recognises that the higher levels of economic integration in the regional economic communities, such as COMESA, EAC and SADC, should be preserved and not rolled back.
These three regional economic communities have negotiated and agreed on a single Tripartite Free Trade Area, which covers half of Africa.
The Tripartite Agreement is ready for implementation – the legal instruments are ready, tariff negotiations are completed, the other countries will use the acquis (extend existing levels of market opening subject to reciprocity).
One easy way to fast track implementation of the Continental Free Trade Area is to immediately operationalise this Tripartite FTA.
This will be a game-changing step towards actually getting the Continental FTA off the ground while other processes play out especially on continental tariff negotiations for market opening.
In conclusion, then, remarkable progress has been made towards ratification of the African Free Trade Area, which should enter into the force next year 2019.
As the priority shifts towards fast-tracking its implementation, capacity building including targetted practical training of users in the public and private sectors, and building on existing regional free trade areas will assist the process.
By Francis Mangeni, PhD
Director – Trade, Customs and Monetary Affairs