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A practical perspective on the African Continental Free Trade Area (AfCFTA)

This story is sponsored

This Mail & Guardian webinar was sponsored by the Trade Law Centre (Tralac) and featured Trudi Hartzenberg, Executive Director of Tralac, and Professor Gerhard Erasmus, Founder of Tralac and Professor Emeritus (Law Faculty), University of Stellenbosch.

One only has to think of the enormous queues of trucks at Beit Bridge to realise that any agreement that makes trade between African countries a smoother process is essential. The African Continental Free Trade Area is still being hammered out, but has the potential to put Africa, which presently has very little trade between its own member states, on the map. But, as with any agreement like this, compromise from all parties is essential.

Hartzenberg began the webinar by summarising what Tralac is about. It is a public benefit organisation, based in South Africa, which works across Africa in its trade agenda. Among others, it provides training and facilitates policy dialogue; great emphasis is placed upon improving governance.

Professor Gerhard Erasmus, Founder of Tralac

Erasmus said that the African Continental Free Trade Area (AfCFTA) is an ambitious initiative by the member states of the African Union, which aims to boost intra-African trade, integration and development by creating an integrated market for goods and services, and promoting cross-border movement of capital and persons. AfCFTA entered into force on 30 May 2019, and trade under the AfCFTA was launched on 1 January 2021, but key issues for this free trade area are still under negotiation.

AfCFTA creates a free trade area, which will reduce or remove tariffs. Services are also essential to all economies and must be available across borders, for example healthcare services — especially in the era of Covid-19. AfCFTA will be implemented across a period of time, in subsequent rounds of liberalisation. It includes flagship projects such as Pida (Programme for Infrastructure Development in Africa) and Aida (Alternative Initiatives for the Development of Africa) to develop industry, infrastructure and agriculture, which are all linked to the success of AfCFTA. They all form part of Agenda 2063, the continental equivalent of a country’s NDP, to address issues such as building digital infrastructure.

Erasmus stressed that at this point only 16% of goods produced in Africa go to other African countries; the rest is exported. There are huge expectations for AfCFTA, and it is hoped that through changing regulations that governance will improve, which will cut down on the current delays and red tape at borders between African countries. Improving governance will have a multiplier effect and have efficiency gains.

The implementation of AfCFTA will take place in three phases; Erasmus outlined these with the help of a chart, which outlined several protocols and annexes relating to trade. Hartzenberg then addressed how many countries have ratified AfCFTA. So far 36 countries have, which now have to take the necessary actions to put AfCFTA in motion, but all 54 African countries are still busy with crucial negotiations.

There are huge differences in development between African countries, which makes the process extremely difficult. The aim is liberalise 90% of tariff lines, but this will take place over a time period of 10 years. Individual countries will have a choice about 3% of tariff lines which may be excluded; rules of origin are sensitive issues and are still being negotiated.

AfCFTA is meant to address the impediments to intra-African trade, which have been in part already been addressed by regional economic communities such as SADC, which will continue to exist. “We have to study the fine print,” said Erasmus, regarding the tariff agreements that already exist and those that are going to change, in the interim and final phases.

Some issues were then raised by the webinar audience, including some African countries having very little infrastructure, and how to harmonise regional and country development. Hartzenberg said a lot of effort is being put into developing infrastructure, and the issue of maintaining high standards in trade is paramount for AfCFTA. “There must also be a process of give and take for all 54 African countries to benefit, instead of countries just falling back into defensive interests.”

For trading partners in the private sector to benefit, there must be negotiations on lowering tariffs, for instance if a South African company wishes to export wine to Nigeria. All the countries in the South African Customs Union (Sacu) have agreed on a common tariff rate, but the tariff rates for AfCFTA are still being negotiated. An interim arrangement is now in place, enabling trade — under certain conditions, such as reciprocity requirements — between African countries that have updated their tariff books.

Other issues which link into this include investment, competition policy, intellectual property right and e-commerce. An important goal of AfCFTA is to increase or create jobs, particularly for women.

There has been significant interest from the rest of the world in AfCFTA, which will also increase competition in local markets. Africa must stay abreast of global developments and member states working together through AfCFTA is one way to do this; hopefully the negotiations that still lie ahead proceed smoothly and rapidly.

To view the webinar, click on the video below

For more information on Tralac, click here

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