Africa: AfCFTA Comes Into Force - So, What Next?

analysis

The coming into force of the African Continental Free Trade Area (AfCFTA) Agreement, on May 30, 2019, is a turning point for the African continent, experts and integrationists have said.

The development means that AfCFTA is now a binding international legal instrument.

"For many who have yearned for an integrated Africa, today is that day where hope of an Africa that trades more with itself than the rest of the world is palpable," Chijioke Odo, Trade Advisor at international accounting firm Deloitte, tweeted yesterday.

He added: "Whilst some would argue that removing tariffs would not necessarily increase intra-Africa trade (with logistics, free movement of persons and territorial protectionism being the notorious impediments to intra-Africa trade), it is my view that AfCFTA will galvanise progress."

Source: African Union Commission

Change is coming to Africa and those who have not recalibrated their business for the incoming market would be left behind," he added.

Francis Mangeni, Director for Trade, Customs and Monetary Affairs at the COMESA Secretariat, told The New Times on Thursday that the entry into force of the trade deal is "a turning point in African history."

The development, he said, opens up a "market of over 1.2 billion people".

The region's consumer and business spending is over US$4 trillion annually and is estimated to hit US$5.6 trillion by 2025.

"The private sector is awake to these prospects and is mobilising," Mangeni said, adding that "125 companies already have a multinational presence across Africa and a number of developed countries."

Some 400 pan-African companies have formed an alliance under what they call the "Afrochampions Initiative" to make the most of investment opportunities presented by AfCFTA, among others.

The entry into force of AfCFTA comes at a time when several major foreign companies, such as Volkswagen and Toyota, are planning to scale up their investments in Africa's automobile sector, Mangeni said.

The AfCFTA was first signed by African leaders on March 21, 2018, in Kigali, with 52 countries having already signed on it. Twenty-four have since completed the ratification process - effectively domesticating the agreement- surpassing the minimum target of 22 nations that were needed for the pact to come into force.

Experts say AfCFTA will increase intra-African trade by over 50 per cent, and boost the continent's GDP by more than $40 billion.

The deal will make the continent the world's largest free trade area, with a market of 1.2 billion people and GDP of over US$2.5 trillion.

'Dream of fore fathers

Joseph Atta-Mensah, the Principal Policy Adviser at the Macroeconomics and Governance Division of the UN Economic Commission for Africa, said AfCFTA will eliminate tariffs on intra-African trade and "significantly reduce the cost of trade" on the continent.

"More jobs will be created and women who are the backbone of informal trade will benefit from the deal," he said. "The dream of our forefathers is being realised with the creation of the AfCFTA."

"The entry into force of the AfCFTA is a truly momentous event that changes Africa forever. There has never been a better time to invest and trade in Africa," Mangeni said.

African political and intellectual leadership now need to sustain the momentum and ensure that this trajectory is irreversible, he said.

"Economic pan-Africanism has come of age," he said. "We have been blessed with a crop of pan-Africanists who have negotiated this Agreement, in a record period of just two years, and have ensured it has come into force in just over one year of its signing."

Going forward, he said, there is need to "build a sustainable intergenerational institutional capacity" to deliver on Africa's promise.

Speaking to The New Times on the sidelines of a consultative meeting on AfCFTA at the African Union headquarters in Addis Ababa, Ethiopia earlier this week, Abdoulie Janneh, a Gambian economist, said that AfCFTA is a catalyst for Africa's integration.

Janneh, the Executive Director of the Mo Ibrahim Foundation, called on the remaining three countries that are yet to sign the deal to do so and all those that have yet to ratify to fast-track the process.

Only Benin, Eritrea and Nigeria have yet to sign the agreement establishing the AfCFTA.

Chipego Zulu, former Chief Executive Officer of the Zambia Association of Manufacturers, speaking to this newspaper, pointed to the need for AfCFTA to be fully inclusive. She said the private sector, women and youth should be encouraged to play a pro-active role in the implementation of the deal.

Speaking at the forum in Addis on Monday, former Nigerian President Olusegun Obasanjo hailed the framework and said its socioeconomic benefits to the people of Africa cannot be overemphasised.

***

Ratified

1. Ghana

2. Kenya

3. Rwanda

4. Niger

5. Chad

6. Congo Republic

7. Djibouti

8. Guinea

9. eSwatini (former Swaziland)

10. Mali

11. Mauritania

12. Namibia

13. South Africa

14. Uganda

15. Côte d'Ivoire

16. Senegal

17. Togo

18. Egypt

19. Ethiopia

20. The Gambia

21. Sierra Leone

22. Saharawi Republic

23. Zimbabwe

24. Burkina Faso

***

WHAT THEY SAID...

Amb. Albert Muchanga, Commissioner for Trade and Industry, African Union Commission

"Historic milestone! AfCFTA Agreement has today come into force.

"We celebrate the triumph of bold, pragmatic and continent-wide commitment to economic integration. We launch market on 7 July, 2019 and begin the journey of transformation to secure inclusive prosperity."

Chijioke Odo, Trade Advisor, Deloitte

"In what is set to become the largest free trade agreement since the creation of the WTO (World Trade Organization), the agreement establishing the AfCFTA has today, 30 May 2019, entered into force and become a binding international legal instrument.

"For many who have yearned for an integrated Africa, today is that day where hope of an Africa that trades more with itself than the rest of the world is palpable... Change is coming to Africa and those who have not recalibrated their business for the incoming market would be left behind."

Moussa Faki Mahamat, Chairperson, AU Commission

"I hail Albert Muchanga (AU Commissioner for Trade and Industry) and his team for their relentless work to ensure the entry into force of AfCFTA in a record 18 months, ushering in the world's largest trading market of 1.2 billion people with a combined GDP of 2.5 trillion USD. Today is a historical win for the Africa we want!"

Faten Aggad-Clerx, Advisor, Maendeleo Group, and Pan-Africanist

"Today we make Pan-African history with the entry into force of the largest free trade area in the world, the AfCFTA.

"Hard work ahead but we did it. Congratulations in particular to the founding members".

Carlos Lopes, Bissau-Guinean economist & former executive director of United Nations Economic Commission for Africa

"It is today, May 30th 2019, that the AfCFTA enters into force. Potentially the most important move towards Africa's regional integration since the end of colonialism. No less."

Teddy Kaberuka, Rwandan economist

"Now the AfCFTA has become legally binding, I hope we will not have excuses from countries not to implement it. I want to remain optimistic going forward."

SO, WHAT NEXT?

The AfCFTA agreement officially came into force on Thursday, May 30, 2019. Twenty-four countries have already submitted their ratification instruments, with 52 having signed the deal. That means that only three countries are yet to put pen to paper.

But even as the agreement has come into force - 15 months after most countries first signed it at an AU Heads of State and Government summit in Kigali - it's not ready for implementation. Key sticking issues will have to be ironed out first before business can start trading across borders duty free under the AfCFTA framework.

But the entry into force of the agreement paves way for the next step. Already negotiations among signatory parties are ongoing around the operational framework, which clarifies on matters such as rules of origin, tariff concessions, payments and settlements, non-tariff barriers, and trade information. AfCFTA enthusiasts hope that this phase of negotiations will be completed before the Extraordinary Summit of the AU Heads of State and Government in Niamey, Niger due July 2019.

Later, signatory states will enter into phase two of negotiations, which will tackle matters relating to investment, competition policy, and intellectual property rights.

While it remains far from certain as to when traders and Africans will start to fully benefit from AfCFTA, bureaucrats at the AU Commission Secretariat have said that the market will be launched on July 7. It is expected that the upcoming AU summit in Niger, whose president Mahamadou Issoufou was chosen by African leaders as the champion of AfCFTA talks, will provide concrete way-forward on implementation roadmap.

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