The services sector plays a key role in Africa’s economy and its regional integration endeavors, helping drive growth, productivity, employment, investment, and trade1. Sectors like transport, communication, finance and professional services such as legal and business services, are important facilitators of cross-border trade in goods. Services also determine how citizens of a country travel, and how investment flows. Trade in services is key for Africa’s socioeconomic transformation - more efficient technologies, ports, transportation and logistics, financial and digital services all help enable better living standards, higher paying jobs and wider choices.
People are central to the provision of many services. People provide expertise, remotely or in person. As business and trade develop, people are required to move across borders, whether to supply goods and services, or to install, train and offer after-sales support. The ability to provide services is affected by people’s ability to move seamlessly across borders. Barriers to movement therefore not only have social consequences, but also economic impacts.
The AfCFTA Protocol on Trade in Services provides a legal framework covering four modes of services supply2. Below are the details:
- Mode 1 - Cross border supply: A service supplied from the territory of one State Party into the territory of any other State Party (e.g. an IT company providing a software consulting service to a client in another country). No cross-border movement of persons is required.
- Mode 2 - Consumption abroad: A service provided in the territory of one State Party to a service consumer of another State party (e.g. a student from one country attending university in another country).
- Mode 3 - Commercial presence: A service provided by a supplier of one State party through commercial presence in the territory of another State Party (e.g. a foreign hotel chain opening a tourist establishment in another country). Often this is complemented by the temporary presence of service suppliers (e.g. a manager from the foreign hotel chain may help establish and run the business in the foreign jurisdiction).
- Mode 4 - Temporary presence of a natural person (service supplier) abroad: A service supplier of one State party, through the presence of a natural person of a State Party in another State Party (e.g. an engineer from one country travelling to a client’s construction site in another country).
The AfCFTA Protocol on Trade in Services links to the movement of persons insofar as it relates to commitments on the temporary presence of persons abroad who are involved in the consumption or supply of a service, and specifically, to Mode 2 (consumption abroad) and Mode 4 (temporary presence of natural persons). Links between Mode 3 and Mode 4 are often found to facilitate foreign investment in services sectors.
The AfCFTA Protocol on Trade in Services covers twelve sectors, five of which have been identified as priorities for initial liberalisation efforts: Financial, business, communications, transport, and tourism services. To the extent that States Parties make commitments in these sectors, they are available for access, subject to conditions contained in their schedules of specific commitments.
Forty-nine AU Member States submitted initial offers on services liberalisation, covering the five priority sectors. Twenty-four draft schedules of specific commitments have been adopted.18 Furthermore, studies to support the inclusion of additional sectors from the list of the twelve are in progress, in construction and engineering services, education, environmental and health services, as well as in recreational, cultural and sporting services.
While the trade in services protocol commits countries to progressive liberalisation of services, including the movement of persons, initial progress is still modest. There is need for more ambitious action, especially given that several RECs have similar commitments in comparable sectors.