THE AFRICAN CONTINENTAL FREE TRADE AREA (AFCTA) AGREEMENT: BRIEF OVERVIEW


 

INTRODUCTION

The African Continental Free Trade Area (AfCTA) Agreement (Agreement) is a free trade agreement that was signed by 44 out of a total of 55 African countries in Kigali, Rwanda on 21 March 2018, at the 10th Extraordinary Summit of the African Union to establish a free trade area across the African continent. Once fully implemented, AfCTA will be the largest free trade area in the world. The Agreement officially entered into force on 30 May 2019. Prior to this Agreement, there were various existing economic communities within the African continent including the Arab Maghreb Union (AMU); the Common Market for Eastern and Southern Africa (COMESA); the Community of Sahel-Saharan States (CEN-SAD); the East African Community (EAC); the Economic Community of Central African States (ECCAS); the Economic Community of West African States (ECOWAS); the Intergovernmental Authority on Development (IGAD) and the Southern African Development Community (SADC).

It is expected that the Agreement once fully implemented will boost manufacturing and by 2035 contribute to reducing the number of people living in extreme poverty by 30 million people and people living in moderate poverty by 68 million. Other gains expected from this Agreement are increase in real income by US$450 billion; increase the volume of total exports by 29%; intracontinental exports to increase by more than 81% and exports outside the African continent by 19%; increase employment opportunities and wages for both skilled and unskilled workers. Most gains are expected within the manufacturing sector, followed by agricultural sector and modest gains from trade in services.

Kenya is one of the countries which has ratified the Agreement and others include: Algeria, Angola, Burkina Faso, Cameroon, Chad, Republic of Congo, Côte d'Ivoire, Djibouti, Egypt, eSwatini, Equatorial Guinea, Ethiopia, Gabon, Ghana, Guinea, Kenya, Mali, Mauritania, Mauritius, Namibia, Niger, Rwanda, Saharawi Republic, São Tomé and Príncipe, Senegal, Sierra Leone, South Africa, The Gambia, Togo, Uganda and Zimbabwe.

SCOPE OF THE AGREEMENT

The Agreement comprises of Protocols on Trade in Goods; Protocol on Trade in Services; Protocol on Rules and Procedures on the Settlement of Disputes. In addition, The Protocol on Investment, Protocol on Intellectual Property Rights and Protocol on Competition will be formulated in subsequent phases of implementation.

Generally, the Agreement covers reduction of tariffs among member countries; trade facilitation policies including those relating to investment and intellectual property rights protection; regulatory measures across the African continent to establish standards and counter technical barriers to trade. The policy areas covered by this Agreement include tariffs on manufactured and agricultural goods; export taxes; customs; competition policy; anti-dumping; counterveiling measures; State Trading Enterprises; technical barriers to trade; sanitary and phytosanitary measures; movement of capital; intellectual property rights; and investment.

KEY PRINCIPLES GOVERNING THE AFCTA

The Agreement will be governed by various principles including those commonly applicable to other preferential trade areas and these include: Most-Favoured-Nation (MFN) Treatment; reciprocity; substantial liberalisation; transparency and disclosure of information; consensus in decision-making; national treatment; flexibility, special and differential treatment.

IMPLEMENTATION OF THE AGREEMENT

Implementation will be done in a phased manner with Phase I focusing on liberalisation of trade in goods and services and specifically eliminating tariffs on 90% of product categories and establishing a framework for dispute settlement. Phase II of implementation will focus on establishing competition and investment policies, and intellectual property rights protection. It is expected that the AfCTA will culminate into a customs union at a later stage.

INSTITUTIONAL FRAMEWORK FOR IMPLEMENTATION

The African Union Assembly which comprises of all African Union Heads of State and Government will provide oversight on the implementation of the Agreement and is also the decision-making body for the AfCTA. Other bodies involved in the implementation of the Agreement are the Council of Ministers comprised of Ministers for Trade or other nominees from State Parties; the Committee of Senior Trade Officials comprised of Permanent Secretaries or other officials from participating countries; The AfCTA Secretariat which is the administrative organ responsible for coordination of implementation; and the Dispute Settlement Mechanism to handle disputes involving participating countries.

OPPORTUNITES

Generally, intra-African trade, has over time been much lower in comparison with intra-regional trade in other regions for example America, Asia, Europe and Oceania. The foregoing notwithstanding, some of the regional trading blocs have grown in strength and yielded positive results over the years. In 2019, Kenya’s imports from countries within the African region were mainly from the Republic of South Africa; Egypt; Uganda, Tanzania, Eswatini and Mauritius and Kenya exports were mainly to Uganda, Tanzania, Rwanda, Egypt, Congo and Somalia. Kenya’s major imports were mineral fuels, mineral oils, and their products and mineral waxes and major exports were coffee, tea, mate, spices, cut flowers.

The AfCTA offers greater access to a wider market, various business and partnership opportunities for economic growth within the African continent. Increased intra-African trade is expected to promote competitiveness within the manufacturing sector and industries, spur infrastructure development and technology transfer across countries within the region.

CHALLENGES

Full implementation of the Agreement will not be free of challenges. Implementation of the Agreement is likely to pose various challenges given the nature and extent of policy and institutional changes, infrastructure development and resources required for effective implementation. Secondly, due to the existing and overlapping memberships of AfCTA participating countries in other regional economic bodies, AfCTA participating countries may find themselves in a difficult position of conflicting obligations or prioritisation of their obligations under other regional bodies over obligations under the AfCTA. Thirdly, there is a downside to lowering non- tariff barriers and implementation of other trade facilitation measures advocated for under the Agreement and some of these negative effects may take a while to materialise so it is yet to be seen how successful this Agreement will be. Other challenges may arise from the very principles governing the AfCTA for example consensus building which is very difficult to attain given divergent interests and priorities of participating countries and political instability in some countries.

CONCLUSION

Even as participating countries prepare and take appropriate measures in preparation for operationalisation of the Agreement, businesses too should prepare and position themselves for various opportunities available under the AfCTA.

References:

  1. Agreement establishing the African Continental Free Trade Area https://au.int/sites/default/files/treaties/36437-treaty-consolidated_te...
  2. Group World Bank. The African Continental Free Trade Area: Economic and Distributional Effects. Washington, DC: World Bank. doi:10.1596/978-1-4648-1559-1. License: Creative Commons Attribution CC BY 3.0 IGO
  3.  https://au.int/en/treaties/1161
  4. The African Continental Free Trade Area - A Tralac Guide 6th ed. November 2019 https://www.tralac.org/documents/resources/booklets/3028-afcfta-a-tralac...
  5. https://africa-eu-partnership.org/en/afcfta
  6. African Trade Statistics – 2020 Yearbook https://au.int/sites/default/files/documents/39607-doc-af trade_yearbook2020_v4_comp-compresse_1.pdf

 

Article by Monica K. Engola Principal Associate in the Commercial and Projects Practice Groups. She has a strong background in regulation, projects and commercial law, particularly in commercial contracts, telecom and energy. She is an Advocate of the High Court of Uganda and the High Court of Kenya.

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