The fanfare announcement that trade under the African Continental Free Trade Area (AfCFTA) would start on January 1 did not herald the actual commencement of all trade under the agreement as negotiations on tariffs and rules of origin have not yet been finalised.
However, Trade Law Centre executive director Trudi Hartzenberg said in an interview that the announcement was of symbolic importance and a reminder that implementation of the Acfta is a “challenging exercise”.
On December 5, at the 13th extraordinary session of the AU assembly hosted by SA, it was agreed that trade will start on January 1.
However, tricky negotiations on tariffs and rules of origin — essential for a free trade area — still have to be concluded and are only expected to be finalised by mid-2021. These negotiations were delayed in 2020 by the Covid-19 pandemic. Negotiations on trade in services have also not been completed though agreement has been reached on easier issues such as trade remedies, customs and border management and dispute resolution.
Hartzenberg says so far 41 countries have made opening tariff offers providing the basis for reciprocal negotiations. Rules of origin on sensitive products such as clothing, textiles, automotive components, sugar, edible oils and a few others have not yet been concluded.
Rules of origin are important to prevent wholly imported goods from non-AfCFTA countries from benefiting from the continent’s tariff arrangements. Effective border management is essential to ensure rules of origin are complied with.
Political progress has however been made since the agreement was presented for signature by African heads of state in March 2018. The agreement has been signed by 54 of the 55 AU member states and 34 countries, including SA, have already deposited their instruments of ratification to the AU commission and become state parties.
“A number of the signatory countries have begun to put the domestic administrative arrangements in place to enable trading under the new terms. These will be progressively expanded within the next few months,” the department of trade & industry said in a statement.
Implementation of the AfCFTA has the potential to radically transform African economies, creating a common market of more than 1.2-billion people with a combined GDP of up to $3- trillion. It could increase intra-African trade by more than 50% according to the UN Economic Commission for Africa. Intra-African trade accounts for only about 16% of total trade but this is projected to reach 25% by 2040 as a result of the implementation of the agreement.
The successful implementation of the agreement and its rules of origin will require substantially stronger customs and border management by African countries. Weak and outdated paper-based systems have until now been an impediment to intra-African trade causing long delays and a lack of competitiveness. Hartzenberg cautions that modernising these systems and improving governance will take time.
The aim, in terms of tariff liberalisation, is to have a phased approach with least developed countries such as Malawi being given 10 years to achieve this and developing ones such as Kenya five years. This would give the least developed countries the opportunity to prepare for increased imports into their domestic markets and to develop their own local industries, Hartzenberg noted.
The AfCFTA has been long in the making with the decision to establish it first being taken in 2012 with a framework agreement being signed in 2018. Ratification by states took place before the tariff and rules of origin negotiations had been finalised and the agreement came into force in May 2019.
January 1 also saw the commencement of the post-Brexit economic partnership agreement between six southern African countries — SA, Lesotho, Eswatini, Namibia, Botswana and Mozambique — and the UK. This replaced trade with the UK under the EU partnership agreement and retains the same terms of trade.
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