AfCFTA updates and latest developments

The African Center for Trade, Integration and Development (ENDA-CACID), an African think-tank based in Dakar, Senegal, has made available on its website the report of the former president of Niger Issoufou Mahamadou, mandated in 2018 by the AU Assembly to champion the the African Continental Free Trade Area (AfCFTA) - (Doc. Assembly/AU/4(XXVIII)), on the Implementation of the AfCFTA. The report was presented on 16 July 2023 to the Fifth (5th) Biannual Coordination Meeting of the African Union and Regional Economic Communities held in Nairobi, Kenya. It gives an update on the status of implementation of the AfCFTA and its future challenges, which are described as follows.

At present, 8 African Union Member States have not yet ratified the Agreement or deposited their instruments of ratification. These are Benin, Eritrea, Liberia, Libya, Madagascar, Somalia, South Sudan and Sudan. With regard to the Provisional Schedules of Tariff Concessions (PSTC), so far 42 have been verified by the AfCFTA Secretariat  and adopted by the AfCFTA Council of Ministers, among a total of 47 tariff offers submitted. These ones include those of 4 Customs Unions, namely: the East African Community (EAC), the Economic Community of West African States (ECOWAS), the Southern African Customs Union (SACU) and the Central Africa Economic and Monetary Community (CEMAC). The 8 African States which have not yet submitted their provisional list of tariff concessions are Djibouti, Eritrea, Ethiopia, Libya, Mozambique, Somalia, the Sahrawi Republic (which is recognised as a member of the AU), and Sudan.

The report encourages States Parties and Customs Unions whose tariff offers have been technically verified and adopted to publish them in their official journals/Gazettes in accordance with their respective regulations, in order to begin preferential trade within the framework of the AfCFTA preferences.

With regard to rules of origin, at present 88.3% of tariff lines have been agreed, while negotiations are still ongoing in two sectors: 1) automotive and 2) textiles and clothing. With regard to the first one, two main rules are under consideration: (i) value of non-originating materials at 50% and (ii) value of non-originating materials at 70%. To facilitate consensus, the AfCFTA Secretariat has proposed an intermediate option of 60% of the tolerance value of non-originating materials and created an automotive task force to accelerate the establishment of continental value chains. However, only 3 of the 14 headings were resolved by the Council of Ministers. Therefore, a series of consultations will be initiated to address the remaining rules of origin for the automotive sector. For what concerns textiles, progress has been made, particularly with regard to the adoption of list rules for Chapters 61 and 62. Among these, a rule has been adopted which prohibits preferential trade in second-hand clothes within the framework of the AfCFTA. We discussed this issue in this post.

The report also communicates that the negotiations of the Protocols on Digital Trade and Women and Youth in Trade have been recently completed and will be formally submitted in February 2024 at the 37th Ordinary Session of the AfCFTA Council of Ministers and to the Specialized Technical Committee on Justice and Legal Affairs of the African Union for their final approval.

An update is provided on the AfCFTA Adjustment Fund, the financial tool developed to compensate for the loss of revenue that some State Parties may suffer as part of the process of tariff liberalization for the full implementation of the AfCFTA. The Fund, to be hosted in Kigali, Rwanda, will also help to address the infrastructure deficits and supply chain bottlenecks to the implementation of the Agreement. The AfCFTA Secretariat will organize in the next months a series of technical workshops for a better understanding by the AfCFTA States Parties of such Fund, and will promote its deployment within the framework of the programme for the acceleration of the AfCFTA implementation.

Another update regards the establishment of the AfCFTA National Implementation Committees and the development of strategies for the implementation of the AfCFTA. The report reveals that to date, 29 national strategies have been validated (recently, the Republic of Congo has published it), while five (5) AfCFTA National Implementation Committees are operational, namely in Côte d'Ivoire, Ghana, Kenya, Nigeria and Rwanda. Some other countries, such as the Democratic Republic of Congo, Comoros and Tunisia, have recently adopted laws to establish such Committees, but they are not yet fully operational. Others, such as Algeria and Mauritania, are in the process of adopting laws for establishing such Committees. At the level of Regional Economic Communities, ECOWAS and IGAD have already validated their regional AfCFTA implementation strategies.

The report also mentions the Africa Business Forum, held from 16 to April 18, 2023, in Cape Town and organized by the AfCFTA Secretariat in collaboration with the South African government. The event, which served as a private sector engagement platform for ongoing consultations on the needs of the private sector in the implementation of the AfCFTA, will be institutionalized and held annually with the name of "Biashara Afrika" (in Swahili “Business Africa”). The next edition is planned from May 24 to 25, 2024, at a location to be announced.

Regarding the Guided Trade initiative, officially launched on October 7, 2022, the report recognizes that it has permitted to test the national legal and institutional systems of the participating countries for the beginning of trade under the AfCFTA. Given its success, the initiative will be expanded in October 2023 to include the trade of services, with 29 States that have already expressed their interest to participate.

Moreover, the report announces the creation, by the end of 2023, of a Pan-African Trade and Investment Agency, as provided for in Article 42, para 1, of the AfCFTA Investment Protocol. This body will be a technical institution of the AfCFTA Secretariat with the mandate to (i) assist States Parties in building their capacity in the formulation and implementation of investment policies in order to foster the expansion of intra-African investments, especially those that increase exports; (ii) facilitate coordination, interaction and dialogue between and among national focal points, investment promotion agencies and other relevant stakeholders to enable sharing of information relating to trade, exports, to investment opportunities, peer learning and best practices; and (iii) promote investment for trade on the African continent. In this regard, the AfCFTA Secretariat will share soon the host country selection criteria, together with the proposed structure and financing needs of the Agency, including mechanisms to meet its budgetary needs. At present South Africa, Ethiopia, Kenya and Tanzania have expressed their interest to host this Agency.

The report closes with a final section dedicated to the challenges for the future. It points out that the implementation of the AfCFTA poses the problem of trade financing and that to this end, Africa must have its own financial system with continental financial institutions to support the demands of trade in the continent. The report also notes that already the Abuja Treaty provided for the creation of African Financial and Monetary Institutions. Accordingly, it proposes to recognize AfreximBank as a Specialized Agency of the African Union, calling this organization, as well as all African development finance institutions (such as the African Development Bank, the African Finance Corporation, and the Regional Investment and Development Banks of the various African Regional Economic Communities), to combine their efforts to finance fundamental development projects that the AfCFTA Secretariat, in collaboration with the Commission and other organs of the African Union will identify in order to accelerate the implementation of AfCFTA and other flagship projects of Agenda 2063. Some of these projects may include trade infrastructure, energy infrastructure, value chain development related projects, trade corridors, etc.

Lastly, the report announces that the AfCFTA Secretariat will organize in September, in collaboration with the Government of the Union of the Comoros, a series of awareness-raising activities and events on the AfCFTA in all the Africa Island States (Cape Verde, Comoros, Mauritius, Madagascar, Sao Tome and Principe and the Seychelles). This program will see the participation of financial institutions, small and medium enterprises and the private sector.