Latest developments on the AfCFTA
The African Continental Free Trade Area (AfCFTA) is the largest free trade agreement in the world. It counts more member countries, covers a larger geography, and applies to more people than any similar agreement.
The AfCFTA is the flagship project of the African Union (AU) and is the AU’s blueprint for inclusive and sustainable development under Agenda 2063. Over the past year, another seven AU member states ratified the AfCFTA and deposited their instruments of ratification with the AU Secretariat, bringing the number of ratifications to 44.
"Africa shall be a continent where the free movement of people, capital, goods and services will result in significant increases in trade and investments amongst African countries rising to unprecedented levels, and strengthen Africa’s place in global trade."
The AfCFTA has its origins in an AU decision, adopted at a meeting of the AU Heads of State in 2012, to establish a continental free trade area that will culminate in a single continental market for goods and services in which businesspeople and investments may move freely across borders. The AfCFTA Agreement’s ultimate objective is to eliminate 97% of tariffs on intra-Africa trade. The Agreement also addresses non-tariff barriers to trade and related concerns: the harmonization of standards, procedures that govern the movement of goods across borders, and administrative matters.
For preferential trade to happen under the AfCFTA, AU member states must agree on rules of origin and tariffs. These determine the market access conditions that allow traders throughout Africa to do business across borders on a preferential basis. Most of the negotiations on rules of origin and most offers of tariff liberalization under the AfCFTA occur between countries that do not already have a preferential trade agreement with one another. This is because several of Africa’s regional economic communities have already implemented preferential trading regimes, which will continue to exist alongside the AfCFTA.
Negotiations on rules of origin and tariffs have progressed substantially since the AfCFTA was agreed, but the process, content, and dynamics of free trade agreements are complex and official trading under the AfCFTA’s system, which had been scheduled for 1 January 2021, only recently began on a small number of products between a reduced group of countries. Nonetheless, significant additional progress took place over the past year and almost all outstanding rules of origin are now agreed. Some of the remaining rules will be finalized imminently.
At the ninth meeting of the AfCFTA Council of Ministers in July 2022, the parties agreed to invite the 29 countries that had submitted their tariff schedules to begin trading under the AfCFTA. Their objective was to test the AfCFTA’s operational, institutional, and legal arrangements and its trade policy environment, and to demonstrate that the AfCFTA is ready for business—that it allows for commercially meaningful trade. The start of trading was also expected to send a clear political message to countries that had not yet submitted their tariff offers, and to demonstrate to economic operators the AfCFTA’s promise of real opportunities in Africa.
On 7 October 2022, the pilot phase of the Guided Trade Initiative launched with eight member states: Cameroon, Egypt, Ghana, Kenya, Mauritius, Rwanda, Tanzania, and Tunisia. Eligible products include ceramic tiles, batteries, horticulture products, avocados, flowers, pharmaceuticals, palm oil, tea, rubber, and other products for which rules of origin and tariffs have been agreed.
"The AfCFTA sends a strong signal to the international investor community that Africa is open for business, based on a single rule-book for trade and investment.”
This is a significant development, and the first trade in goods under the AfCFTA has subsequently taken place, notably between countries that are not members of the same regional trading bloc and among whom trading preferences did not yet exist. Meanwhile, a special committee has been established to coordinate and operationalize trade transactions. Member states have also established their own ad hoc committees.
Transparency and access to information are key tenets of the AfCFTA. One of the AfCFTA’s trade facilitation measures is a digital e-tariff platform11 which supplies users with information relevant to trade, specifically on different countries’ tariffs and the classification of commodities.
Only goods that originate in a AfCFTA member state qualify for preferential market access. The AfCFTA Secretariat has published a new manual that details the AfCFTA’s rules, how preferential origin is determined, and administrative criteria. This manual will play an important role in helping businesses take advantage of opportunities under the AfCFTA. The manual forms an integral part of the Agreement’s trade provisions.
Recent strides towards completing negotiations on the AfCFTA trade provisions have been notable, and include meaningful tools and emerging opportunities for traders. These developments help set the course for a more integrated continent where trade has a greater chance to flourish. But, in the absence of progress in a host of other disciplines, opportunities for trade will always be limited.
Access to the continent’s markets also depends on conditions that govern the trade in services. Trading across borders requires communications, financial services, and transport, and many of these involve people moving across borders. So do tourism, higher education, medical care, professional services and many others.
In March 2018, in Addis Ababa, Ethiopia, a majority of African countries—30—signed the Protocol on the Free Movement of Persons. Another two countries signed later. The Protocol adopts a progressive approach that seeks to liberalize movement in three primary phases: the right of entry, the right of residence, and the right of establishment.
The free movement of Africans throughout Africa will do more than promote integration. It will facilitate intra-African trade and investment, create and promote employment opportunities, make labour more mobile, and raise living standards.
To date, however, only four countries have ratified the Protocol: Mali, Niger, Rwanda, and São Tomé and Principe. Some of the highest ranked countries on the AVOI are still to sign. The number of ratifications has remained unchanged over the past year and is below the threshold of 15 countries needed for the Protocol to enter into force.
Yet as this report chronicles, many African countries have made significant strides towards visa openness and have sometimes introduced innovative solutions to ease travel and access. Most countries have also fully signed and ratified the AfCFTA Agreement, and openly embrace regional and continental integration.
Independent of the Protocol, regional initiatives have advanced the movement of people as well. In some regional economic communities, for example, countries reciprocate visa-free access with the other members of their economic community— far more so than what their AVOI ranking for the continent would suggest. ECOWAS and EAC have regional movement protocols in place, and SADC has facilitated movement as well, albeit with more focus on sovereignty and bilateral agreements between countries. Regional advances like these can act as stepping stones to further adoption of the Protocol.
For free trade in Africa to become a reality, Africans need to be freer to move across the continent. Cross- border investment, the development of regional value chains, and broad-based economic integration all depend on it. Addressing legitimate concerns about the mechanics of the Protocol, clarifying the Protocol’s roadmap for implementation, and helping countries exchange information more transparently would move the process forward.
