By Francis Mangeni
Introduction: Contextualizing the Game Changer
Many people ask what the African Continental Free Trade Area (AfCFTA) means for Africa and the world. After all, by seeking a continental free trade agreement, Africa is going against the grain in a period when regional integration is generally waning in other parts of the world. By pursuing the AfCFTA, African states intend to address the challenges of economic balkanization with game-changing finality. Today, with Africans comprising up to 17.8 percent of the global population—a median age of 18.8 years, growing to 25 percent of the world’s population by 2050—a trade regime enhancing Africa’s agency shall only amplify Africa’s 28 percent of the votes at the United Nations General Assembly, 30 percent of the world’s critical minerals, and 60 percent of the world’s unused arable land. A fully implemented AfCFTA shall take on the existential priorities of a stable global order on Africa’s behalf by tackling trade in goods and services, investment, competition, intellectual property, digitalization, inclusion, and dispute settlement. The AfCFTA also directly impacts food and energy security and inclusion, public health, climate change, and artificial intelligence and shall play an increasingly significant role in the fourth and fifth industrial revolutions. And then, since economic growth happens more through the continuous introduction of new products and industries, the AfCFTA should help with unemployment and wealth creation.
The Game Changer Itself
Those who know the tedium of negotiations recognize the ‘game changer’ qualities of the AfCFTA. Starting June 15, 2015, Africa’s continental trade regime was negotiated in under three years. By March 21, 2018, when the Framework Agreement and the three Protocols on Goods, Services, and Dispute Settlement were opened for signature, this agreement had morphed into a game-changing African asset. Unlike the spaghetti bowl of regional arrangements and economic communities, the AfCFTA enjoys high political momentum and ownership across the continent and at the highest levels of African government and industry. Presidents and institution heads refer to the AfCFTA in their programs and speeches; each implements or prepares to implement AfCFTA activities in their respective countries and organizations.
Thus far, fifty-four out of the 55 African Member States have signed the Agreement, and as of December 2023, 47 have ratified it. Negotiations on the major associated protocols on investment, intellectual property, and competition have also been concluded. The protocols adopted, and one should expect the February 2024 Session of the African Union Summit to adopt the remaining protocols on Digitalization and Women and Youth in Trade.
Some suggest that the AfCFTA took just one year, month, week, and day to enter into force. And there’s truth to that. The Agreement entered force on May 30, 2019—just over a year from when it was opened for signing. This is a record in Africa’s history. Shortly after that, the pioneer secretary-general was elected through a competitive process, and arrangements for the seat of the permanent secretariat were completed through a rigorous bidding process. Starting with two officials—the secretary-general, Wamkele Mene, and his assistant, Paul Okech—the Secretariat now has 222 people, with 50/50 gender parity and an average staff age of 35 years.
Relatively, the AfCFTA’s assets are coming online in a period when intra-Africa trade is growing organically. Despite previous estimates of below 20 percent, true estimates that include informal small-scale cross-border trade show that total trade stands at 28.4 percent. Intra-African trade is up to 42 percent for landlocked countries and anywhere from 30 percent to 80 percent for some 13 individual countries. Relatively, it is the population of 1.47 billion Africans—more than 1.425 billion Chinese and 1.433 billion Indians—that catalyze the growth of intra-African trade. They invest in economic cross-border infrastructure and promote regional value chains, industrialization, and socioeconomic transformation. The rates of return on these socio-economic investments are 10 to 20 percent, with firm mark-ups in the region of 11 percent. And the welfare impact is expected to be high.
The AfCFTA is also a game changer because academia and knowledge generation organizations have taught the social-political processes for building trade capacity. The global agency and outreach have had an indelible impact, for it is increasingly impossible to say anything meaningful about Africa without mentioning the AfCFTA. This is a significant achievement for a young regime that bore the coronavirus. Strathmore University in Kenya, for instance, established an AfCFTA Policy and Development Centre in September 2023 to augment the UN Economic Commission for Africa, the Trade Policy Training Centre in Africa, the Trade Law Centre, and various universities. Other institutions, including the United Nations Conference on Trade and Development (UNCTAD), the World Bank, and the International Monetary Fund, have produced trail-blazing work supporting the AfCFTA.
Implementing the AfCFTA shall result in policy reforms that continuously improve Africa’s business environment, explicitly reducing business costs, harmonizing the rules and policies, and reducing transaction costs. As a rule-based and continental trading system and order, the AfCFTA promotes predictability and facilitates long-term planning and investment. It also addresses the binding constraint of a small market. It responds to Africa’s longstanding failure to attract critical levels of investment and achieve diversification of the production base and export markets. Still, it deals with behind-the-border challenges through trade facilitation, regulatory disciplines in goods and services, and competition and investment regimes.
What is Happening in the AfCFTA Implementation Space
With a complete understanding of what is at stake, the AfCFTA negotiators completed seven of the Annexes to the Trade in Goods Protocol in a one-month marathon negotiation session. Significant progress has also been made on the Annex on rules of origin, with 92.3 percent of the tariff lines now with agreed rules of origin. This covers 95.5 percent of the total intra-Africa trade. On market access negotiations, 45 tariff schedules and 22 service schedules have been adopted. Another 26 service schedules are at an advanced stage of finalization. Negotiations on outstanding Protocols have moved at a blistering speed: the Protocols on Investment, Competition, and Intellectual Property have been adopted. Comparatively, AfCFTA organs like the Council of Ministers, Dispute Settlement Body, and the Appellate Body have been activated. Meetings demonstrate vivacity in negotiations, and the Council of Trade Ministers had, by January 2024, held 13 ordinary meetings and three extraordinary sessions while their Senior Trade Officials have met 16 times. Positively, regulatory authorities, such as those responsible for customs, immigration, health, and technical standards, have demonstrated their readiness to comply with the AfCFTA rules and procedures and their Directors-General of Customs meeting seven times.
Following a thorough continent-wide consultative process on its proposed modalities, the AfCFTA Review Mechanism will soon be established to appraise national policy and regulatory frameworks for AfCFTA conformity. All African countries have designated dedicated ministries responsible for AfCFTA affairs, and there is coordination with those responsible for foreign affairs, agriculture, transport, communication, and finance, as well as trade support institutions, particularly the national Chambers of Commerce and export promotion agencies. Some countries have gone on to prepare national AfCFTA strategies and establish national AfCFTA implementation committees as targeted initiatives to make the most of the AfCFTA.
The Taste of the Pudding
The AfCFTA would ring hollow without a top-down program to boost utilization. Enter the Guided Trade Initiative (GTI) of October 2022, a demonstrative but not exclusive enterprise to demonstrate the efficacy of the AfCFTA. By January 2024, 31 African states signed up to export and import products from each other, specifically using AfCFTA certificates of origin, customs declarations, and sanitary and phytosanitary certificates. As Ghana and South Africa have demonstrated, freight charges remain high, and in some cases, consignments from Nairobi, Kenya, took six months to reach Tema, Ghana, by sea. Despite these challenges, the sweet taste of the pudding was the small-holder farmers, primarily women, that supplied the tea. The upshot is that the AfCFTA regime can and should be used for intra-Africa trade, and any product that originates in Africa and is covered by the tariff and services schedules can now be traded under the AfCFTA regime.
Secondly, the AfCFTA Secretariat has developed a private sector strategy, prioritizing automotive, pharmaceuticals, agro-processing, transport, and logistics. Coincidentally, between 2019 and 2023, the Afreximbank’s intra-Africa Trade Fairs (IATFs) have demonstrated tremendous business, trade, and investment opportunities awaiting the bold and brave. The Durban IATF of November 2021 generated over US$ 42.1 billion in deals. Afreximbank has also launched several facilitative tools to boost intra-African trade and investment. For example, the Pan African Payment and Settlement System (PAPSS) shall address non-tariff barriers by partnering with central banks to settle transactions, allowing traders to pay for goods in their currencies. PAPSS shall augment Afreximbank’s Adjustment Facility to assist countries that may experience short-term revenue shortfalls arising from reducing customs duties. There is also an Automotive Fund to assist in developing the automotive sector, given its proven potential for regional value chains, job creation, and structural transformation – a vehicle can have up to 30,000 components. Engagements with other stakeholders, including the youth, parliamentarians, academia, and partners worldwide, have been equally prioritized. African countries have started making community-based incubation or innovation centers priorities so that the young and old alike can turn their dreams, skills, passions, and problems into viable businesses.
The Next Phase of Game Changing
The year 2024 will see the AfCFTA Secretariat’s first mandatory five-year review. The key messages to public and private sector players will be about utilizing the AfCFTA and adjusting business models to take advantage of the continent’s lucrative trade and investment opportunities. African governments shall have to double down on domesticating the AfCFTA by strengthening all trade facilitation institutions to be in constant compliance. Together, they shall stick to the Abuja Treaty stipulations by consolidating the AfCFTA into the Common African Market by 2028.
Underpinning all this must be a secretariat fit for purpose, waging vigorous diplomatic agency on the continent and across the globe. The clarion call to knowledge generation and management institutions must provide evidence for decisions and policymaking. In so doing, the Secretariat must maintain rigor and sophistication but provide usable policy implications (recommendations) and briefs. Some of these include existential priorities like climate change and political economy ideals for institutions and other interest groups.
But more than anything else, the AfCFTA ecosystem must embrace the triple helix of government, industry, and universities under collaborative partnerships that deepen African innovation and policy design. Developmental integration happens through markets, industrialization, infrastructure, political and macroeconomic stability, policy space, and flexibilities. Leadership is necessary, and Africa’s leaders shall drive the African Union’s Agenda 2063 flagship projects. Overall, game-changing is also going to involve rapid changes. Following the 2024 mandatory 5-year review, we must see plans for the Common African Market, followed by the African Economic Community programs between 2028 and 2034. Either way, the AfCFTA shortens the time between today and 2063.
