Fast-tracking the African free trade area crucial as more join

African Continental Free Trade Area summit

Heads of States and Governments pose during African Union Summit for the agreement to establish the African Continental Free Trade Area in Kigali, Rwanda, on March 21, 2018. 

Photo credit: File | AFP

What you need to know:

  • The ACFTA should not join this lot of instruments that remain on the shelves and hardly of any value in the end.
  • Capacity building — including targeted practical training of users in the public and private sectors — and building on existing regional free trade areas will assist the process.

As Africa's ministers of Trade met in Cairo on Wednesday and yesterday, there was a quite bit to celebrate. Within nine months of its signature on March 21, in Kigali, the African Continental Free Trade Area (ACFTA) has been ratified by 13 countries, nine of which had deposited ratification instruments with the African Union Commission.

Only nine more countries are required to reach the required 22nd ratification instrument for ACFTA to be in force and the free trade area formally launched at the next African Union Summit in February.

Priority has now rightly shifted to fast-tracking the 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. ACFTA should not join this lot of instruments that remain on the shelves and hardly of any value in the end.

PLANNING

Fortunately, quite some work has been done to publicise the free trade area around the world.

The communication and visibility strategy mounted by the AU and its partners has been quite effective in mobilising and reaching out to political leaders, the media, civil society, the private sector and academia.

But, although 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 user-friendly business manuals and targeted customised training events.

Planning or programming of investment and production with a view to using the free trade area will require advance knowledge of the new regulatory environment.

PRODUCTS

Payable taxes, rules of origin that determine which products qualify for duty- 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 learn the ropes and assist in utilisation of the instruments and preferences provided under ACFTA.

It has been agreed that seven percent of product lines will be sensitive products, with much longer transition periods, and three percent will be totally excluded from ACFTA. These products should not exceed 10 percent of the values of imports.

It is important to get this right because intra-Africa trade in goods, though increasing, remains low, estimated at only 18 percent of the continent’s total trade.

The impetus around industrialisation for socio-economic transformation requires active and beneficial regional and global value chains, which need readily available and timely cost-effective exportation and importation of inputs or components and intermediate products.

TARIFF

The good news though is that 90 percent of the product lines will be subject to straightforward linear reductions over the transition periods — namely; five years for the 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 as per the transition periods. The reductions can then start next year, when ACFTA will be in force.

The agreement establishing ACFTA recognises that the higher levels of economic integration in the regional economic communities — such as Comesa, East African Community and SADC — should be preserved and not rolled back.

The three have agreed on a Tripartite Free Trade Area that covers half of the continent.

The tripartite agreement is ready for implementation — the legal instruments are ready, tariff negotiations are completed and the other countries will use the acquis (extend existing levels of market opening subject to reciprocity).

TRAINING

One easy way to fast track ACFTA is to immediately operationalise this tripartite FTA.

This will be a game-changing step towards actually getting the ACFTA off the ground, while other processes play out, especially on continental tariff negotiations for market opening.

In conclusion, some remarkable progress has been made towards the ratification of the ACFTA.

As the priority now shifts towards fast-tracking its implementation, capacity building — including targeted practical training of users in the public and private sectors — and building on existing regional free trade areas will assist the process.

Dr Mangeni is the director of Trade and Customs at the Comesa Secretariat. [email protected].