Despite the wave of popular support expressed for the African Continental Free Trade Area (AfCFTA), concerns have grown over the slow progress of its implementation in recent months. Contrary to expectations, 2021 has not started with a bang, but with skepticism from top trade officials, which has also spilled over to the private sector. Trade was suspended as negotiations dragged on, particularly on rules of origin and tariffs – an accusation that processes at the technical level had not kept pace with political decisions.
So what should happen to take the AfCFTA to the next stage and become a working agreement? We offer the following:
1. Don’t wait for negotiations to conclude.
In line with the decision of trade ministers in February 2022, trade should not wait until the outstanding rules of origin on textiles and clothing, automobiles and sugar (which represent only around 12% of total exchanged products) are resolved. It would be relatively easy for customs officials to exclude these items (on a temporary basis) from benefiting from AfCFTA tariff reductions. In the meantime, the ongoing negotiations should be accelerated by adhering to the new work program to be completed this year.
2. Initially focus on the biggest continental traders.
Studies agree that large corporations are responsible for the bulk of global trade (e.g. Freund, 2016 and OECD, 2017). This is also true on the African continent: exports tend to be highly concentrated, with a few “super-exporters” dominating trade volumes (Matthee et. al., 2018). According to a study undertaken by the United Nations Industrial Development Organization using transaction-level trade data over the period 2009-2013, the richest 1% of business enterprises in Africa account for more than 75% of the total value of exports (Edwards, 2020). Given this degree of concentration, governments and business associations should form representative groups to enable these large companies to meet the challenges they face in trading across borders. In this way, they could form a powerful lobbying body for the full implementation of the AfCFTA, just as big business did when creating the European single market in the 1980s and 1990s (Mold, 2021 ).
3. Prioritize the removal of import barriers.
The perception among many observers and member states of the African Union is that the AfCFTA is primarily aimed at promoting exports. But in fact, it is just as much about promoting imports— each additional US dollar of intra-African exports must correspond to a dollar of intra-African imports. Indeed, in all the simulation work done on the AfCFTA, the calculation of social benefits relies on larger (and cheaper) volumes of imported goods and services (see Abrego et. al (2020) for a discussion on the how different studies calculate social benefits). Another consideration is that several African countries enjoy large positive trade balances with the rest of the continent and can thus manage the political economy by immediately increasing their imports from the rest of the continent (Table 1).
Table 1: Countries with the highest number of positives intra-african commercial scales (>$100 million), 2019 (merchandise trade only)
|Congo, Dem. Rep. from||3,946||2,805||1141|
|Tanzania, United Republic of||1,767||1,332||435|
Source: Calculated from UNCTADStat (2021).
4. Launch more public awareness campaigns.
To provide a coordinated response to the new trade and investment opportunities opened up by the AfCFTA, with the assistance of the United Nations Economic Commission for Africa and other international organizations, the signatory States have developed national strategies and regional AfCFTA – more than 45 of Africa’s 54 AfCFTA signatories have completed or are in the process of completing them. Although they are important documents, they have nevertheless remained largely confidential in many countries. Greater attention should be given to disseminating these strategies through social and traditional media platforms to sensitize all stakeholders about the AfCFTA (e.g. chambers of commerce, private sector associations and the general public).
5. Take some simple operational steps.
Some simple operational steps could be taken to visibly accelerate the implementation of the AfCFTA. For example, the logistics and supply chain industry could be encouraged to use AfCFTA documents for their operations. Similarly, customs authorities may require companies to register for export in accordance with the AfCFTA rules of origin. Member States of regional economic communities with free trade zones such as the Common Market for Eastern and Southern Africa, the East African Community, the Economic Community of West African States and the Southern African Development Community can immediately agree to add the AfCFTA logo to customs documents used for regional trade. This will demonstrate to all traders that the AfCFTA is up and running.
6. Lead by example.
There needs to be a “demonstration effect” once the AfCFTA is implemented to prove that it can rapidly foster greater intra-African trade. As Mold (2020) pointed out, many countries that have already ratified the agreement have contiguous borders. Tariff reductions could quickly lead to improved trade between these neighboring countries. Which brings us to our last point…
7. Present success stories.
The upcoming African Union mid-year summit, to be held in July, can give the AfCFTA a boost by showing the continent’s willingness to trade. Countries that have in place the documents and procedures for handling shipments under the AfCFTA regime should be publicly acclaimed by the world as being open for business. The summit is expected to stress the importance of value addition and diversification in intra-African trade, and request regulatory authorities (especially customs) to operationalize the AfCFTA export and import procedures.
This list is not exhaustive and there are surely many other things that AfCFTA institutions, member states, private sector groups and other stakeholders can do to accelerate the implementation of the ‘AfCFTA. The important thing is to maintain the rhythm. Regional integration is like riding a bicycle – if the momentum is lost, you fall. The key is not to lose sight of the long-term goal of liberalizing intra-African trade and investment over the next decade and to continue to take firm steps in the right direction.
Note: The opinions expressed here are those of the authors and do not necessarily reflect the views of the United Nations or the AfCFTA Secretariat.