Africa is now the world’s largest free trade area under the African Continental Free Trade Agreement (AfCFTA) with trading under this agreement.
All African countries have signed the AfCFTA agreement and 54 out of 55 African Union (AU) Member States have formally committed to the establishment of the AfCFTA (except Eritrea).
The AfCFTA agreement has been ratified by 30 AU Member States: Algeria, Burkina Faso, Cameroon, Chad, Republic of Congo, Côte d’Ivoire, Djibouti, Egypt, eSwatini, Equatorial Guinea, Ethiopia, Gabon, Ghana, Guinea, Kenya, Mali, Mauritania, Mauritius, Namibia, Niger, Rwanda, Saharawi Republic, Sao Tome & Principe, Senegal, Sierra Leone, South Africa, The Gambia, Togo, Uganda and Zimbabwe.
The Agreement
Negotiations have been coordinated by the African Union Commission and its Department of Trade and Industry.
The talks started on 15 June 2015 in Johannesburg and the ACFTA treaty was signed in Kigali in March 2018. It entered into force on 30 May 2019. The operational phase was launched on 7 July 2019 in Niamey for commencement of trading within the AfCFTA on 1st July 2020.
The agreement features protocols on trade in goods, trade in services, investment, intellectual property rights, competition and dispute settlement.
The structure
Intra-Africa level
- The AfCFTA Secretariat (art 13) will be an autonomous institutional body with an independent legal personality. It will work with the African Union Commission. The Secretariat will be funded by the budget of the African Union and hosted by Ghana. An interim Secretariat is provided by the African Union Commission in Addis Ababa.
- The African Business Council, which will represent the views of the private sector
- The Trade Observatory will carry out monitoring and evaluation.
- The Dispute Settlement Body is set up by The Protocol on Rules and Procedures for Settlement of Disputes.
- AfCFTA Committee of Senior Trade Officials consisting of Regional Economic Communities (RECs) who will be implementing partners. They will coordinate the implementation and measures for resolving non-tariff barriers, harmonising standards and monitoring implementation.
National level
- Governments will develop a national AfCFTA strategy and dedicated institutional arrangements in place to carry out implementation.
- Operational phase
- The operational phase of the AfCFTA was launched in Niamey on 7th of July 2019 and consists of five instruments.
- The Rules of Origin governing the conditions under which a product or service can be traded duty freely across the region
- The Tariff concessions will result in 90% tariff liberalisation from the expected implementation date on 1st July 2020. A transition will allow an additional 7 % for products defined as sensitive.
- The online mechanism monitoring, reporting and elimination of non-tariff barriers (NTB) with the aim to reduce and eliminate them.
- The Pan-African payment and settlement system to facilitate payments and ensure certainty that payments can be on time, in full, in local currencies without year end net settlements in foreign exchange.
- The African Trade Observatory will be a trade information portal that will provide data on opportunities, trade statistics as well as information about exporters and importers in countries.
Impact on businesses
The AfCFTA will provide new business opportunities for African companies to trade intra-Africa.
- Tariffs: With average duty rates of 6.1 per cent African businesses often face higher tariffs for export to African countries than other international market. The agreement will progressively eliminate duties on 90 per cent of goods.
- Single market and Customs Union: The agreement creates a single continental market for goods and services with free movement of capital and business travellers. Service suppliers will have access to the markets of all African countries.
- The AfCFTA also creates a customs union with common customs tariff and Rules of Origin. Cooperation between customs authorities on trade transit and facilitation, will make it easier for goods to flow between Africa’s borders.The facilitation of trade between African countries will help develop regional value chains in which inputs are sourced from different African countries to add value before exporting externally.
- Technical Standards: Mutual recognition of standards, licensing and certification will make it easier for businesses and individuals to satisfy the regulatory requirements of operating in each other’s markets. Harmonisation of trade standards form a key part of implementing AfCFTA. However, harmonising trade standards, test, certificates, inspections among 54 national countries will be a difficult project. A Pan-African Quality Policy is being drafted supporting the development African Quality Assurance Centres across the continent, including regional reference laboratories.
- Trade Defence Instrument: To protect against unanticipated trade surges, countries will have recourse to trade remedies to ensure that domestic industries can be safeguarded, if necessary.
There are still many challenges to be tackled to facilitate Intra-Africa trade and reduce transaction costs. Improvement in infrastructure, not only transport but also water and electricity as well as digital infrastructure to support manufacturing innovation and trade. These are nevertheless very exciting times for Pan-AU traders.
For help and advice on borders requirements, customs law and obligations in Africa, contact us or login to your alegrant.com account (or register) and contact our colleague Beauclair Njoya Nkamga, leading trade and customs lawyer in the region.