The African Continental Free Trade Area
As mentioned in a previous article published by the Future Citizen Institute, the African Continental Free Trade Area (AfCFTA) was concluded on March 2018. On 30 May 2019 the AfCFTA entered into force following its ratification by 24 countries. The AfCFTA is being overlooked in current discussions on tariffs and trade seen as insignificant. Still, the 54 countries taking part to the AfCFTA represent a market of over a billion people and a combined GDP of over $3.4 trillion.
The main objectives of the AfCFTA are to create a single market for goods and services, business and investments. The creation of an intra-African single market will help develop and increase trade between African States and improve the competitivity of African industries and companies and create jobs through scale production and better reallocation of resources. The next steps are the creation of the Customs Union and later a further integration of the single market with harmonized monetary, financial and fiscal policies, of free movement of persons as well as the right of residence and establishment.
It is foreseen that 90% of the tariffs on goods will be liberalized and the residual 10% will cover sensitive products for which States will have more time to implement tariffs´ liberalisation as well as excluded products which will not be included under tariffs liberalisation. It has been agreed that only a maximum of 3% of tariff lines could be fully excluded and these 3% cannot represent more than 10% of a country´s imports coming from Africa. This makes it harder for a State to exclude crucial products such as petroleum, cotton or cocoa while still giving them flexibility.
The implementation will be slow as negotiations on different issues, such as rules of origin, are still ongoing. This is a key point as rules of origin are determining which goods are qualified to obtain preferential tariffs. Moreover, the fact that Nigeria is not participating in the AfCFTA is a weakness as the country is not only the most populous but also a major economy on the continent. However, the projections are optimistic. According to the United Nations Economic Commission for Africa, the implementation of the AfCFTA will lead to an increase of 15 to 25% of inter-African trade by 2040. The International Monetary Fund also projects that, under the AfCFTA, Africa’s extended and more effective goods and labour markets will considerably increase Africa´s global position on the Global Competitiveness Index. Economists trust that tariff-free access to a vast and united market will lead to an increase in demand which will prompt an increase in production, which consecutively will lower unit costs. In consequence, products and services will be cheaper for the consumers but also cheaper to produce so more workers can be hired to respond to the increasing demand.
The ratification of the AfCFTA is a breakthrough for African unity. It will now be contingent on the extent and scale of the stipulations and pledges presently being negotiated. The negotiation results will echo the political promises African States have made in the direction of intra-African trade liberalization and continental unity. African States should be attentive to the core idea of enhancing intra-African trade as a way to eliminating poverty and promoting sustainable and inclusive development in African in line with Africa's 2063 agenda and the 2030 Agenda for Sustainable Development and Sustainable Development Goals.
Author: Dr. Fanny Tittel Mosser