Month: May 2021

The Africa Continental Free Trade Agreement is in session with some inroads made towards maximizing the continent’s 3.5 trillion market value.

Even as member states partake in this single market, young entrepreneurs and small scale industries seem left out of the picture as they have no muscle and mileage to compete with well-established industries.

It is for this reason that a network of young entrepreneurs from across the African continent that serves as a representative voice for young entrepreneurs on AfCFTA has been formed by the Chamber of Young Entrepreneurs and other development partners.

President of the AfCFTA Young Entrepreneurs Federation (AfYEF), Siita Sofo Hissan told Joy Business that “young entrepreneurs are the underdogs when it comes to maximizing AfCFTA because they do not have the needed resources – money, know-how and capabilities – to push and succeed. So we have come together under AFYEF to galvanize young African entrepreneurs for this 3.5 trillion dollars single market.”

Meanwhile, Siita Sofo Hissan has called for support from authorities in member states to leverage AfCFTA.

Also, the Secretary-General of AFYEF, Sherif Ghali, has hinted that cross-sectional information sharing with the AfCFTA will provide a unified front for these young entrepreneurs.

“We believe that young entrepreneurs have the potential to make huge contributions to the economic, social and political development of Africa and as such we commit to strengthen, advocate and support the dreams of young entrepreneurs in Africa”. 

“We commit to engage stakeholders and facilitate the exchange of ideas in a bit to remove barriers to enterprise development for young people as AfCFTA envisaged,” he stated.

“AfYEF is a network of young entrepreneurs from across the African continent that serves as a representative voice for young entrepreneurs on AfCFTA.

As an apex body, AfYEF was formed with the primary objective of mobilizing and empowering African young entrepreneurs to actively participate and benefit from the AfCFTA agreement.

AfYEF aims to drive trade, advocate for policy reforms, provide business support services with needed information on funding source to facilitate access to credit and improve the business eco-system for the development of African youth entrepreneurs with a special focus on AfCFTA.”

Project description

Title: Support to the African Continental Free Trade Area (AfCFTA)
Commissioned by: German Federal Ministry for Economic Cooperation and Development (BMZ)
Country: Member States of the African Union
Lead executing agency: African Union Commission (AUC)
Overall term: 2020 to 2023

Context

Although growth in Africa is forecasted at an average of 3.6 per cent for 2019–20, with the world’s fastest growing economies being on the continent, there is still much to be done. Africa is still heavily reliant on commodity and agricultural exports while importing capital goods or food products predominantly from outside the continent. With a global trade share of less than 3 per cent, export diversification has yet to be achieved, as many African countries still rely on rents from extractive exports, whilst falling behind on industrialisation efforts. 
Against this backdrop, intra-African trade remains below its potential, accounting for about 17 per cent of the total African trade volume in 2017. In contrast, North American intracontinental trade accounts for 51 per cent of exports, 49 per cent in Asia, and 22 per cent in Latin America, while among West¬ern European countries this number reaches 69 per cent. Although some Regional Economic Communities (RECs) have achieved improvements in trade integration through tariff reductions, the African market remains fragmented. Non-tariff barriers such as uncoordinated bureaucratic procedures, long waiting times at the border or lengthy and cumbersome export requirements raise trade costs on the continent. As a result, Africa has integrated with the rest of the world faster than with itself.

With the Treaty of Abuja in 1991, the Member States of the Organisation for African Unity (OAU) agreed on a road map for the creation of a common African market. To accelerate the implementation of the Treaty and strengthen regional integration, the African Union (AU) Trade Ministers agreed to establish an African Continental Free Trade Area (AfCFTA). The AfCFTA has since been a flagship programme of the AU and AfCFTA negotiations were launched in June 2015.

Out of 55 Member States of the AU, 44 signed the Agreement in March 2018 at the AU Extraordinary Summit in Kigali, Rwanda. Phase I of negotiations covers trade in goods, trade in services and dispute settlement. Phase II is to cover investment, competition policy and intellectual property rights. Outstanding issues of Phase I such as tariff schedules, rules of origin and specifics on trade in services are yet to be completed. At the same time, the Kigali summit kicked off the ratification process of the AfCFTA, with an increasing number of AU Member States ratifying the Agreement in their national parliaments. The AU comes into force with the 22nd ratification deposited at the AU.

Objective

The AU is coordinating the ongoing free trade negotiations and the transition to implementation of the African Continental Free Trade Area (AfCFTA).

Approach

The AU Commission (AUC), specifically AUC´s Department of Trade and Industry (DTI) is in charge of coordinating in BIAT and AfCFTA related activities. The project advises the AUC Trade Commissioner on strategic policy and advocacy issues by seconding a regional trade policy advisor to DTI´s structures. It also supports the AfCFTA Negotiation Unit by seconding a customs cooperation and trade facilitation expert for the preparation of the negotiations. Outstanding negotiation issues of Phase I for trade in goods and trade in services are being supported by a range of mechanisms, e.g. by providing tailor made technical consultancy expertise, by organising trainings, seminars and workshops or by selectively rendering financial support. 

In addition, GIZ is cooperating with a number of institutional partners on specific AfCFTA related topics. The cooperation with ITC’s SheTrades Initiative aims to embed a gender sensitive approach into the negotiating process. Joint efforts with the United Nations Economic Comission for Africa (UNECA) and the Trade Law Centre (TRALAC) are aimed at raising awareness and disseminating information. Furthermore, a close cooperation with the RECs East African Community (EAC), Economic Community of West African States (ECOWAS) and the Southern African Development Community (SADC) is envisaged to ensure the continental and the regional levels are linked. 

The programme is targeting AfCFTA related topics such as stakeholder involvement, industrialisation, Special Economic Zones, Green Econ¬omy or eCommerce. In a rapidly changing Africa, a trade agreement that reflects current socioeconomic realities is needed to provide a solid foundation for economic integration across the continent.

Results

The African Continental Free Trade Framework agreement has been signed by 52 African Member States and is operationalised with the necessary 22 ratifications after only three years of free trade negotiations. This stands for a huge diplomatic and political success given the short timeline, the ambitious liberalisation goals set and the heterogeneity and large number of 55 Member States negotiating the Free Trade Area. The course is now set to actively change, reform and agree on new framework conditions, regulations and agreements likely to foster and boost Intra-African trade, investment and employment in the intermediate term. Accompanying and seconding policy documents such as the African Union Trade Facilitation Strategy or the AU Services Sector Development Programme have been developed to set continental-wide guiding standards for further rolling out strategies translating them on to regional and national levels in terms of actual implementation.

Trading under the African Continental Free Trade Area kicked off on 1 January. The coming months will likely witness a convergence of fruitful outcomes of multiple moving parts.

On 1 January 2021, some 100 days ago this month, free trading officially commenced under the African Continental Free Trade Area (AfCFTA). Four days later, two Ghanaian companies became pioneer exporters of products using the AfCFTA preferences, marking a major milestone in the short but eventful history of the trade pact. 

Alcoholic product manufacturers Kasapreko airfreighted a container-load of goods to South Africa, while Ghandour Cosmetics shipped by sea items to Guinea.

An event organized by the Ghanaian government to celebrate the first consignments of products exported under the AfCFTA conveyed much more than a perfunctory or historical symbolism, for several reasons.

Firstly, the conception, birthing, and now implementation of the AfCFTA continue to unfold with remarkable speed. 

Negotiations spanning more than five years led to the signing of the trade agreement on 21 March 2018; it entered into force on 30 May 2019; free trading began on 1 January 2021 after a six-month delay following the COVID-19 outbreak. 

First shipment

And then, the first shipments took place on 4 January 2021.

Secondly, Africa’s free trade area represents a decisive step toward the continent’s long-held regional integration aspiration.

Thirdly, the start of free trading rekindles hope in Africa’s post-pandemic recovery. The Secretary General of the Accra-based AfCFTA Secretariat, Wamkele Mene, emphasized throughout these past 100 days—and before then—that effective implementation of the trade pact is the post-pandemic stimulus Africa needs.RELATED STORIESAfrica’s free trade area opens for businessAfCFTA: Implementing Africa’s free trade pact the best stimulus for post-COVID-19 economiesAfrica’s Free Trade Area: What we must do for a smooth take-off on 1st JulyAfCFTA: Africa readying for free trade come January 2021AfCFTA: Experts, traders call for robust participation of women and youth

“Increased intra-African trade is what will drive economic development post-COVID-19,” Mr. Mene told Africa Renewal in an earlier interview.

The AfCFTA establishes a single market for made in Africa goods and services, eliminates tariffs by 90 per cent and tackles non-tariff barriers such as customs delays. 

A unified market of 1.2 billion people with a combined GDP of $3 trillion is potentially a strong foundation for industrialization. Currently intra-African exports stand at about 17% of total continental exports. Increasing this share is expected to increase value addition, help create jobs and boost incomes.

Mr. Mene has devoted considerable time and energy superintending a successful takeoff of free trading. He has been ubiquitous in Africa’s state capitals, from Niamey in Niger, to Addis Ababa in Ethiopia, Lome in Togo, Khartoum in Sudan and others, meeting with political and business leaders, youth and women traders, touting AfCFTA’s benefits, entreating traders to seize the opportunity, and highlighting solutions to emerging challenges. 

He continues to promote the agreement with eloquent aplomb—with urgency and ardency.

“We are not going to get another opportunity to integrate; this is our last opportunity,” he said at a press briefing in January.

“There is not a single African country that can work alone to trade its way out of poverty,” he opined at an event in New York just last month.

While in New York, together with Ambassador Fatima Kyari Mohammed, the Permanent Observer of the African Union (AU) to the UN and Ms. Ahunna Eziakonwa, the Director of the UN Development Programme’s Regional Bureau for Africa, Mr. Mene signed an MOU.

The MOU relates to UNDP’s support for, among others, the AfCFTA in strengthening the capacities of national customs authorities, digitizing intra-African trade and enhancing export readiness of women- and youth–led SMEs. 

The optimism heralded by the start of free trading aside, 36 AU member states have so far deposited their ratification instruments.

Countries ratifying the agreement can trade with each other based on their tariff concessions and proposed rules of origin. Currently, about 90% of the rules of origin are in, while the remainder are expected before the end of July 2021.

Meanwhile, just three countries—Ghana, South Africa and Egypt—had established the necessary customs infrastructure for trading at the start of free trading last January.

According to Article 23 of the Agreement Establishing the African Continental Free Trade Agreement (AfCFTA), entry into force occurs 30 days after the 22nd instrument of ratification is deposited with the Chairperson of the African Union Commission (AUC) – the designated depositary for this purpose. The Agreement entered into force on 30 May 2019 for the 24 countries that had deposited their instruments of ratification by this date.

The operational phase of the AfCFTA was launched during the 12th Extraordinary Session of the Assembly of the Union on the AfCFTA in Niamey, Niger on 7 July 2019.

As at 5 February 2021, 36 countries have deposited their instruments of ratification:

Ghana, Kenya, Rwanda, Niger, Chad, Eswatini, Guinea, Côte d’Ivoire, Mali, Namibia, South Africa, Congo, Rep., Djibouti, Mauritania, Uganda, Senegal, Togo, Egypt, Ethiopia, Gambia, Sahrawi Arab Democratic Rep., Sierra Leone, Zimbabwe, Burkina Faso, São Tomé & Príncipe, Equatorial Guinea, Gabon, Mauritius, Central African Rep., Angola, Lesotho, Tunisia, Cameroon, Nigeria, Malawi and Zambia

It has been indicated that parliamentary/Cabinet approval has been obtained by Somalia and Algeria; confirmation is pending.

Start of trading under the AfCFTA Agreement began on 1 January 2021, in line with a Decision and Declaration adopted during the 13th Extraordinary Session of the Assembly of the Union on 5 December 2021.

Last updated: 15 March 2020