The secretary General of the African Continental Free Trade Area (AfCFCTA) His Excellency Wamkele Mene delivered the keynote address at this year’s AfCFTA policy network summit on the state of AfCFTA trading Africa products awards held in Accra.
The main objectives of the AfCFTA, are to create a single market for goods and services, facilitate the movement of persons, promote industrial development and sustainable and inclusive socio-economic growth. It lays a foundation for the establishment, in future, of a Continental Common Market.
After almost five-year period of negotiations, which were started in February 2016, the Agreement was signed on 21 March 2018, and entered into force on 30 May 2019. Based on progress made, the AU Summit in December 2020 provided the legal basis for the operationalization and commencement of preferential trading under the AfCFTA on 1 January 2021.
The processes to negotiate, ratify and operationalize the AfCFTA have progressed at fast speed – not just by African standards but by world standards for trade agreements. In a matter of one year, from 2018 to 2019, the Agreement was signed by 54 of 55 African Union Member States, ratified by 34 countries as at end- 2020, with trading commencing on 1 January 2021. Thus, from 1 January this year, it became possible for State Parties whose customs procedures are ready to trade under the AfCFTA.
In this regard, some trade has already taken place.
We all recall with pride the exporting of products via air and sea freights by Kasapreko Company Limited, a manufacturer of alcoholic products and Ghandour Cosmetics Limited, in early January 2021, marking the start of trading under the AfCFTA preferences the secretary General said in his address.
Notwithstanding the challenging circumstances, exacerbated by the impact of the Covid-19 pandemic, the results achieved in the implementation of the Agreement and execution of work programme of the AfCFTA Secretariat are a source of satisfaction.
Currently, 37 countries (almost 69% of Member States) have deposited their instruments of ratification at the African Union Commission, with few more that have completed the ratification process also about to do so.
It is important at this juncture to pay tribute to the AU Assembly of Heads of State and Government for their leadership and unflinching political commitment that has brought us this far. I also want to put on record the support extended graciously to the Secretariat by our host country, Ghana. All our development partners have also contributed to the progress achieved so far.
Thus, while the modest success achieved is worth celebrating, there is still much more to do. There remain outstanding negotiations that must be finalized for effective trading under the AfCFTA preferential trading regime. Negotiations are still underway across various aspects of the AfCFTA, since as you may well know, the AfCFTA is being negotiated over multiple phases.
Phase I negotiations produced the AfCFTA Agreement, Protocol on Trade in Goods, Protocol on Trade in Services and Protocol on Rules and Procedures on the Settlement of Disputes and their annexes and appendices. These legal instruments entered into force on 30 May 2020.
However, negotiations on some issues of Phase I are ongoing, namely, rules of origin, schedules of tariff concessions, and schedules of specific commitments on the five priority service sectors (business services; communications; finance; tourism and transport). These outstanding issues are expected to be concluded by June 2021.
Phase II negotiations will cover IPRs, investment and competition policy, while Phase III covers E-Commerce. The AU Assembly has set 31 December 2021 as the deadline for the conclusion of Phase II and III negotiations.
The negotiations are supported by the AfCFTA Tariff Negotiations online portal which facilitates the negotiations on tariff liberalization between State Parties, Customs Unions or Regional Groupings under the AfCFTA. Accessible in all four languages (Arabic, English, French, Portuguese), it is a secure, collaborative platform that enables duly authorized users to define and share official product lists (non-sensitive, sensitive and exclusion lists).
Status of Negotiations:
- Phase I: Trade in Goods Negotiations;
As earlier indicated, trade in goods under the AfCFTA commenced on 1 January 2021 based on legally and agreed tariff schedules and concessions, rules of origin and customs declaration. However, there remain negotiations on rules of origin and the remaining tariff offers.
The 13th Extraordinary Session of the AU Assembly held in December 2020, directed Member States to conclude the remaining work on the Rules of Origin by June 2021. Currently, the agreed Rules of Origin has improved from 81.0% in December 2020 to 86.04%. What remains outstanding pertain to textile, apparels, and Automotive Chapters (Subheadings), highlighting the need for urgent steps to be taken to engage key stakeholders in these sectors to facilitate speedy completion of the outstanding negotiations on the Rules of Origin.
The Secretariat is in receipt of 75 percent of the tariff concessions submitted by 41 State Parties, including customs unions members from the East African Community (EAC), the Economic Community of West African States (ECOWAS), Central African Economic and Monetary Community (CEMAC), and the Southern Africa Customs Union (SACU). Furthermore, individual countries that have also submitted their offers, include Egypt, Madagascar, Malawi, Mauritius, Sao Tome, Seychelles and Zambia.
These offers, so far submitted, have been shared with the other Member States/Customs Unions for their consideration and necessary action. In line with the decisions of the 13th Extraordinary Session of the African Union Assembly on the Start of Trading under the AfCFTA, tariff offers that have undergone technical verification will be published for information of the general public.
Regarding customs preparedness, some countries and regions, have already incorporated the tariff reduction schedule in their customs code and legislation. Many of the State Parties are, however, yet to “operationalise” or codify their tariff reduction offers.
- Trade in Services Negotiations;
Currently, negotiations on the schedule of specific commitments on Trade in Services are ongoing based on the five priority services sectors agreed on. Member States that are ready to negotiate additional sectors, e.g. health and education services, can do so; however it is expected that the remaining seven services sectors would be negotiated after the finalization of the 5 priority sectors. 34 countries have so far submitted initial offers but these offers do not cover all the priority sectors.
- Dispute Settlement Body (DSB)
It may be recalled that Article 20 of the AfCFTA Agreement establishes a dispute settlement mechanism to be administered by a Dispute Settlement Body (DSB) established under Article 5 of the Protocol on Rules and Procedures for the Settlement of Disputes.
The activation and operationalization of the DSB became urgent following the commencement of the start of trading under the AfCFTA. This important institutional structure envisaged in the Agreement was therefore officially inaugurated on 26th of April 2021 in Accra, Ghana. The DSB is composed of representatives of all State Parties and monitors and evaluates the functions of the dispute settlement mechanism.
The inauguration of the DSB in April 2021 therefore signals the readiness of the AfCFTA dispute settlement infrastructure to take up any disputes that may arise in the course of trading amongst the State Parties. Disputes are inevitable in any free trade area and when any such disputes arise under the AfCFTA, the resolution is to be in line with the Protocol on Rules and Procedures on the Settlement of Disputes which forms part of Phase I negotiations.
The Secretariat will be proactive in helping State Parties to resolve disputes as soon as they arise. To this end, the Secretariat’s doors are always open to those State Parties who wish to use the Secretary General’s good offices in the resolution of any disputes that may arise between them. We should all work to build The Africa we want; one in which legal commitments are held in high esteem.
- Phase II: Competition Policy; Investment; IPR; Women in Trade; Digital Trade
In preparation for the commencement of Phase II negotiations, plans are advanced to establish the Committees on Phase II issues, including Investment; Competition Policy; Intellectual Property Rights; Digital Trade; and Women and Youth in Trade, in order to facilitate the negotiations in these relevant Committees.
As requested by Council, the Secretariat is undertaking awareness creation initiatives, working with the African Group in Geneva, on the potential impact and effect of the Multilateral Framework for Investment Facilitation (MFIF) on the implementation of the AfCFTA Investment Protocol.
Progress on other AfCFTA-related Issues
- AfCFTA Adjustment Fund
The AfCFTA Adjustment Facility is one of the instruments aimed at ensuring win-win outcomes in our continental economic integration. The fund is being set up in response to calls for a mechanism for mitigation of costs associated with implementing the AfCFTA. The Facility will thus provide a mechanism for Member States to access financial and technical resources to implement the Agreement and mitigate the near-term disruptions and associated costs.
The Secretariat and the AU Commission have made good progress in the preparation of the Statutes and Resource Mobilization Plan for the Adjustment Facility as mandated by the Assembly of Heads of State. In developing the facility, there has been wide consultations with key stakeholders and I am optimistic that the draft documents would meet the expectations of the Assembly of Heads of State.
There is also the Pan-African Payments and Settlement System (PAPSS), designed to allow African businesses to make cross border payments for intra-Africa trade in national currencies. Significant progress has been made in the development of the platform and currently preparations are ongoing for the launch of the pilot phase in the West African Monetary Zone (WAMZ).
The AfCFTA brings us a step closer to the historic vision of an integrated market in Africa. It is critical that a range of countries develop capacity to manufacture goods for export. For sustainability, the benefits of the AfCFTA must be shared across the continent. And while implementation is underway, we need to remind ourselves that the project is the mission of a generation.