It’s still up in the air whether the African Union can keep its promise to deliver a continental passport by the end of the year. The travel document would allow visa-free travel between the Union’s 55 member countries.
The potential economic impact is huge. Recently-released data show that intra-African travel continues to lag the world. The continent’s 1.2 billion people made far fewer intra-continental trips—in total, and per person—than Europeans, Asians and Americans.
In addition, as Europeans and Asians increasingly travelled to nearby countries, in recent years, African figures remained mostly the same.
Globally, intra-continental travel was a far more common practice than inter-continental travel. The amount, however, differs drastically from region to region. Sixty-five trips in Europe crossed into another European country for every 100 Europeans in 2016. Just four trips for every 100 Africans were to other African countries.
The data account for international travel by air, land and water transportations from 2011 to 2016. Ettore Recchi, the lead researcher behind the project, attributed the ease of traveling in certain regions to three factors:
- Geographic proximity. Clusters of countries that occupy small areas—like in Europe—make it easier to take international trips.
- Economic prosperity. People with disposable income and places with a growing middle class—like Asia—are able to make more trips because they have the money to do so.
- Political integration. When political and administrative barriers to travel are removed—like in the European Union—it makes citizens more mobile.
Africa lagged behind on all these dimensions, according to Recchi.
In 2016, the African Union promised to deliver a continental passport to “help realize the dream of visa-free travel for African citizens within their own continent by 2020.” A number of prominent Africans, including some heads of state and diplomats, have been issued the passport. Through August 2019, 33 member states have signed the protocol to establish a pan-African economic body, the first step toward the free movement of people.
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Let’s zoom in on the rice issue. In 2018, Benin, a country of 11 million people, was the sixth largest importer of rice in the world and the largest rice importer from Thailand. More recently, Benin’s rice imports have been steadily rising while Nigeria’s have been falling at a similar pace, suggesting large re-exports of rice from Benin to Nigeria (Figure 1). Why might that be the case? Because import tariffs in the two countries are widely different. In 2013, Nigeria’s tariff on rice imports was set at 70%. In 2014, Benin reduced its tariff on rice imports from 35% to 7%. This makes the practice of re-exporting extremely attractive to both formal and informal operators. They can import rice to Benin at a low cost and smuggle it into Nigeria to sell at a much higher profit margin. One of the most straightforward ways to combat this behavior would be to agree on a common external tariff, which could help make re-exporting less profitable. But this incident between Nigeria and Benin highlights some of the other non-tariff trade barriers that could still provide incentives for re-exporting. Below, we focus on three of the major technical challenges that need serious consideration as governments negotiate the terms of their participation in the AfCFTA.
Tension between national industrial policies and AfCFTA ambitions: The AfCFTA will only succeed if member countries make the regional strategy part of their national policy and proactively address the tensions that arise between the two. Countries should find the sweet spot that reinforces national economic goals and ensures maximum gains from increased integration, looking beyond a static assessment of their priorities. In addition, countries need to make the case to their people as to why integration is useful in the long term – this is particularly important in the larger countries, which may have greater influence on regional decisions.
Lack of capacity to monitor and safeguard against illicit practices, including smuggling, dumping, and violation of the rules of origin: Given the African Union’s ambitious industrialization agenda, we expect to see even more of these types of disputes on rules, particularly the rules of origin, once trade under AfCFTA becomes more widespread. With this on the horizon, countries need to think through how to address origin fraud, setting clear and simple rules that are monitored and enforced at the national and regional levels.
Trade dispute settlement mechanisms: One of the key challenges to the AfCFTA we identify in our forthcoming book, is the need for an effective dispute resolution mechanism with the authority and institutional capacity to mediate and enforce decisions within and across countries in Africa and with parties outside the continent. This body should be complementary to the traditional diplomatic/political approach to resolve disputes. [The authors: Woubet Kassa, Albert Zeufack; tradebarriers.africa: Despite closed borders, Nigerian manufacturers begin online registration for AfCFTA]
An online platform developed by UNCTAD and the African Union to help remove non-tariff barriers to trade in Africa became operational on 13 January.
Traders and businesses moving goods across the continent can now instantly report the challenges they encounter, such as quotas, excessive import documents or unjustified packaging requirements.
The tool, tradebarriers.africa, will help African governments monitor and eliminate such barriers, which slow the movement of goods and cost importers and exporters in the region billions annually.
An UNCTAD report shows that African countries could gain US$20 billion each year by tackling such barriers at the continental level – much more than the $3.6 billion they could pick up by eliminating tariffs.
“Non-tariff barriers are the main obstacles to trade between African countries,” said Pamela Coke-Hamilton, director of UNCTAD’s trade division.
“That’s why the success of the African Continental Free Trade Area depends in part on how well governments can track and remove them,” she said, referring to the agreement signed by African governments to create a single, continent-wide market for goods and services.
The AfCFTA, which entered into force in May 2019, is expected to boost intra-African trade, which at 16% is low compared to other regional blocs. For example, 68% of the European Union’s trade take place among EU nations. For the Asian region, the share is 60%.
The agreement requires member countries to remove tariffs on 90% of goods. But negotiators realized that non-tariff barriers must also be addressed and called for a reporting, monitoring and elimination mechanism.
The online platform built by UNCTAD and the African Union is a direct response to that demand.
Complaints logged on the platform will be monitored by government officials in each nation and a special coordination unit that’s housed in the AfCFTA secretariat.
The unit will be responsible for verifying a complaint. Once verified, officials in the countries concerned will be tasked with addressing the issue within set timelines prescribed by the AfCFTA agreement.
UNCTAD and the African Union trained 60 public officials and business representatives from across Africa on how to use the tool in December 2019 in Nairobi, Kenya.
They practiced logging and responding to complaints, in addition to learning more about non-tariff barriers and their effects on trade and business opportunities.
“The AfCFTA non-tariff barriers mechanism is a transparent tool that will help small businesses reach African markets,” said Ndah Ali Abu, a senior official at Nigeria’s trade ministry, who will manage complaints concerning Africa’s largest economy.
Justin Bayili, a business representative who heads the Ghana-based Borderless Alliance, agreed. “The online tool will play a key role in helping my organization effectively and efficiently tackle the challenges faced by the companies we represent,” he said.
Following the official presentation, they conducted multiple simulation exercises with business and government representatives to identify any possible operational challenges.
Lost in translation
One of the challenges was linguistic. Africa is home to more than 1,000 languages. So the person who logs a complaint may speak a different language from the official in charge of dealing with the issue.
Such would be the case, for example, if an English-speaking truck driver from Ghana logged a complaint about the number of import documents required to deliver Ghanaian cocoa to importers in Togo – a complaint that would be sent to French-speaking Togolese officials.
“For the online tool to be effective, communication must be instantaneous,” said Christian Knebel, an UNCTAD economist working on the project.
The solution, he said, was to add a plug-in to the online platform that automatically translates between Arabic, English, French, Portuguese and Swahili – languages that are widely spoken across the continent. More languages are being added.
UNCTAD’s work on the AfCFTA non-tariff barriers mechanism is funded by the German government.
Authors: Maximiliano Mendez-Parra, Sherillyn Raga, Lily Sommer]
This report highlights the opportunities and challenges facing UK firms when investing or conducting business in Africa, with a particular emphasis on the non-extractive sector. It highlights the mutual benefits for Africa, in terms of economic transformation and growth, and for the UK, in diversifying investments in rapidly expanding markets. The study draws from data on UK investments in Africa, and information provided by more than 75 UK companies operating in Ghana, Kenya, Nigeria and South Africa.
Currently, UK foreign direct investment (FDI) in Africa is heavily focused on the extractive sector and in South Africa. The low penetration of UK FDI beyond mining and financial services and in other countries suggests that there are opportunities as well as challenges to increase the role of British investors in boosting African economies.The increasing population and growing middle class in Africa – expected to account for over 40% of the population by 2030 – bring growth and increased sophistication in consumption, presenting substantial opportunities in sectors where the UK has a strong comparative advantage, including financial services and insurance.
By: James Karuhanga
When asked what single word can best describe the African Continental Free Trade Area agreement’s journey through 2019, Carl Oshodi, the Executive Director of Nigeria’s Africa Industrialisation Group, said; “progressive.”
Indeed, nearly 22 months after the African Continental Free Trade Area (AfCFTA), was signed by African leaders on March 21, 2018, in Kigali, a lot of ground has been covered in an attempt to create a single continental market for goods and services, with free movement of business persons and investments.
At the onset, 44 out of the 55 AU member states – except the big boys such as South Africa and Nigeria— signed the consolidated text of the agreement at the Kigali Summit.
The 44 leaders signed the agreement establishing the AfCFTA, a protocol on trade in goods, a protocol on trade in services and a protocol on rules and procedures on the settlement of disputes.
Gathering the 22 ratifications needed to make the agreement operational, however, would take some time, and hard work.
Nonetheless, by March 21, as countries marked the anniversary of the agreement’s signing, there was cause for celebration, especially as, among others, 21 countries had not only signed but had also ratified the agreement.
Finally, the 22-country threshold in conformity with legal provisions was reached on April 29 when Sierra Leone and the Saharawi Republic deposited their instruments of ratification.
The agreement eventually entered into force on May 30, 30 days after 22 countries deposited their ratification instruments, for all the 24 countries that had by then deposited their instruments of ratification.
The coming into force of the Agreement, on May 30, experts said, was a turning point for the continent, as the pact then became a binding international legal instrument.
More than a month later, on July 7, the operational phase of the pact was launched during the extraordinary session of the AU Assembly in Niamey, Niger.
The AU Commission Chairperson, Moussa Faki Mahamat, hailed the launch as a “historic moment” in Africa’s history.
“The speedy entry into force of the AfCFTA has been a major pride to all of us,” Faki said.
During the same Niamey session, the President of Niger and leader of the AfCFTA process, Issoufou Mahamadou, presented his second report – the first was presented in February – on the status and progress made.
He noted that a lot of work was done to conclude major issues of the agreement.
Member states were at advanced stages in preparing their schedules of tariff concessions.
On AfCFTA rules of origin, Mahamadou observed, the remaining rules pertained to member states’ policy and investment interests. This, he said, required political intervention and guidance.
At the time, technical submissions were exhausted without consensus on areas pertaining to fisheries; edible oils; sugar; leather; textiles and apparel; machines and machinery; and motor vehicles.
Failure not an option
The July session in Niamey launched the operational phase of the AfCFTA, supported by key instruments.
These are the agreed Rules of Origin; a dashboard of the AU Trade Observatory, a Trade in Goods Password Protected Dashboard, a Pan-African Payments and Settlements System; an AfCFTA Mobile or Web-based application, and the Online Mechanism for Reporting, Monitoring and Elimination of Non-Tariff Barriers.
In addition, the Niamey meeting also made a number of important Decisions which included that: the AfCFTA be hosted by Ghana and that July 1, 2020, be the date to start trading within the AfCFTA regime.
It was also decided that AU Commission should ensure that the AfCFTA Secretariat is operational no later than March 31, 2020; and that July 7 every year be designated “the Africa Integration Day” without being a public holiday to commemorate the operationalization of the agreement.
Prudence Sebahizi, Chief Technical Advisor on AfCFTA at the AU Commission, said: “When the Heads of State and Government met in Niamey in July 2019, they launched the operational phase of the AfCFTA and decided that dismantling of tariffs shall start not later than July 1, 2020, to allow the start of trading within the AfCFTA regime on the same day.”
Sebahizi added: “We are working around the clock to ensure that this decision is fully implemented. Failure is not an option.”
Cameroon approved ratification on July 19.
Fast forward, on December 14-15, Ministers of Trade met in Accra, Ghana and decided that the positions of AfCFTA Secretary-General and three Directors for the AfCFTA Secretariat be advertised immediately to allow completion of recruitment by March 2020.
As of December 17, 54 AU member states had signed the AfCFTA Agreement.
Efforts are ongoing – by the AU Commission – to engage with Eritrea, the only country yet to sign, as the former prepares to sign and ratify the agreement.
So far 28 countries have deposited their instruments of ratification with the AUC and hence became state parties.
These are Burkina Faso, Chad, Congo Republic, Côte d’Ivoire, Djibouti, Egypt, Eswatini (Swaziland), Equatorial Guinea, Ethiopia, Gabon, Gambia, Ghana, Guinea, Kenya, Mali, Mauritania, Mauritius, Namibia, Niger, Rwanda, Saharawi Republic, São Tomé and Príncipe, Senegal, Sierra Leone, South Africa, Togo, Uganda, and Zimbabwe.
The Agreement will be governed by five operational instruments: the rules of origin; the online negotiating forum; the monitoring and elimination of non-tariff barriers; a digital payments system and the African trade observatory.
The rules of origin, the criteria needed to determine the national source of a product, derive their importance from the fact that duties and restrictions in several cases depend upon the source of imports.
For Andrew Mold, the Acting Director of UN Economic Commission for Africa- Eastern Africa sub-regional office in Kigali, one of the main moments in 2019 was reaching 28 ratifications – more than half the continent’s countries.
The date the agreement will come into force, July 1, 2020, Mold said, “Is a major target that has been set.”
“There will be an intensification of the negotiations in a lot of areas over the first semester of 2020. Services trade negotiations have to be initiated – there is enormous potential in terms of increased intra-African services trade,” Mold said.
“In contrast with its deficit on merchandise trade, for instance, Rwanda posted a positive balance in services trade for the first time last year. Five other countries in eastern Africa actually have positive service trade balances. So, the region potentially has a lot to gain from the successful conclusion of the service trade negotiations.”
Also yet to be concluded are the rules of origin negotiations, a very important area for an effective AfCFTA, Mold noted.
The rules of origin will need to be as flexible as possible in order for poorer African countries to be able to significantly increase their intra-African trade under the AfCFTA, he said.
“I think we will find discussions also focusing on the protocols on competition, investment, intellectual property and free movement. Ultimately, for citizens to benefit from the AfCFTA there are crucial areas in the construction of the continental market.”
“Take competition policy, for instance. A recent COMESA study shows that consumers in the region typically pay 25-30 per cent more than prevailing prices globally for a set of 12 staple goods. This is ascribed to anti-competitive behaviour.”
Clearly, Mold said, if the agreement can make a positive impact in this kind of domain, by increasing intra-regional trade and investment, creating new employment opportunities and reducing prices to consumers, “it will gain a lot of popular support.”
Once implemented, the agreement which connects 1.3 billion people across 55 countries with a combined Gross Domestic Product valued at $3.4 trillion will create the largest free-trade area in the world measured by the number of countries participating.
Ghana’s president, Nana Addo Dankwa Akufo-Addo, has urged African trade ministers and experts working on the AfCFTA implementation, to conclude all outstanding issues on time for trading to start on 1 July next year as planned. He said meeting all the deadlines set by the AU Heads of State and Government at their extra-ordinary summit in July this year, would allow the new African market commence smoothly and bring about the much anticipated socio-economic impact on the continent. “Similarly, for the effective implementation of the AfCFTA, African trade ministers must ensure that the institutional structures, that are established to support the AfCFTA, are based on practical approaches that work in Africa. Existing, as well as new AU programmes and projects aimed at supporting trade, investment and economic development in Africa, at national, regional and continental levels, must all be properly coordinated to support the implementation of the AfCFTA, and, thereby, fast track regional integration, economic growth and development,” he said.
President Akufo-Addo was speaking at the 10th meeting of African Ministers of Trade and 2nd Meeting of the AfCFTA Council of Ministers in Accra on Saturday. It was for stakeholders to continue discussions towards AfCFTA implementation. Various governments, he said had the responsibility to assist this process by fashioning and implementing a comprehensive set of policies that will empower the private sector to achieve its goal. “Appropriate fiscal, monetary, financial, energy, exchange rate, tariff and non-tariff policies must be co-ordinated to enable African enterprises to be competitive, and, where possible, achieve comparative advantage.” [The Gambia hosts technical workshop on National AfCFTA Implementation Strategy].
The government of The Gambia, in collaboration with the United Nations Economic Commission for Africa (ECA) are holding a technical workshop on the Gambia’s national AfCFTA implementation strategy. Experts from the public and private sector, representing government, civil society, young people, women and academia will meet from 17-18 December in Banjul, the Gambia.
This National AfCFTA Implementation Strategy for The Gambia identifies priority actions to be undertaken by the government to effectively realize the potential benefits of the AfCFTA. The strategy identifies the following: priority products for export into various African markets, the export potentials for these priority products in various markets, opportunities for regional value chain development.
In addition, the national strategy highlights other cross-cutting issues including gender, youth, MSMEs as well as environment and climate change in order to ensure inclusivity and sustainability. Finally, it recommends a National Implementation Committee (NIC) whose overall mandate is to oversee implementation of the strategy and a monitoring and evaluation framework that will track progress on the implementation of the Agreement.
“The National AfCFTA Implementation Strategy for the Gambia seeks to support the objectives of Gambia’s National Trade Policy of 2018-2022, which aims to focus on measures that support key productive sectors of the economy, enhance capability for increased market access, address trade facilitation issues and enhance consumer protection and welfare. The AfCFTA Strategy does this by providing a blueprint to advance The Gambia’s deeper integration at the continental level.” says Mundunge Ghitu, Economic Affairs Officer at the United Nations Economic Commission for Africa (ECA).
The AfCFTA entered into force on 30 May 2019 having been ratified by the required 22 countries. Currently, 54 countries have signed, and 29 countries have ratified the AfCFTA. The AfCFTA provides the opportunity for Africa to create the world's largest free trade area, with the potential to unite more than 1.2 billion people, in a $2.5 trillion economic bloc and usher in a new era of development. The AfCFTA has the potential to generate a range of benefits through supporting trade creation, structural transformation, productive employment and poverty reduction.
The work in the Gambia on implementing the AfCFTA is part of a comprehensive project aimed at deepening Africa's trade integration through effective implementation of the AfCFTA. Financially supported by the European Union, ECA has been working with its partners including the African Union Commission (AUC), International Trade Centre (ITC), United Nations Conference on Trade and Development (UNCTAD) and a selection of independent trade experts to ensure effective AfCFTA implementation strategies.
Ghana, under the auspices of its Ministry of Trade and Industry, will from Monday, December 09, start hosting series of meeting for African Trade Ministers and Senior Trade Officials to advance the cause of the African Continental Free Trade Area (AfCFTA).
The 17th Meeting of the African Continental Free Trade Area (AfCFTA) Negotiating Forum, will begin the seven-day meetings to be held at the Accra International Conference Centre.
An official statement, issued by the Public Relations Office of the Ministry of Trade, and copied to the Ghana News Agency on Saturday, said the three-day meeting, will be followed by
the 10th meeting of the Committee of Senior Trade Officials (12th-13th December, 2019).
The African Ministers of Trade Meeting and the AfCFTA Council of Ministers Meeting will follow from 14th to 15th December, 2019.
“The 17th African Continental Free Trade Area (AfCFTA) Negotiating Forum will seek to finalise outstanding works on phase one negotiations which deals with the trade in goods and services protocols as well as dispute settlement mechanisms,” the statement explained.
“Technical Working Groups on investments, competition policy and intellectual property rights will also be established”.
It said, the report of the Negotiating Forum will form the agenda for the meeting of the Senior Trade Officials from the 12th-13th December.
“At the Council of Ministers Meeting, attention will be paid to the consideration of the report of the meeting of the Senior Trade Officials as well as consideration of work plans and budgets of the interim AfCFTA Secretariat and the permanent Secretariat.
“These meetings are of particular relevance to the country considering the fact that Ghana is the host of the AfCFTA Secretariat”.
The African Continental Free Trade Area (AfCFTA) is a Single Market (Duty-free, Quota-free) covering the entire African Continent with a total population of 1.2 billion and a combined GDP of almost USD 3 trillion.
“The AfCFTA is the single most significant development in Africa since the establishment of Organization of African Unity (OAU) in 1963, ” the statement underlined.
“It is considered as the flagship project under the AU Agenda 2063. It is the world’s largest Free Trade Area, second only to the World Trade Organisation (WTO) in terms of the number of member states”.
The AfCFTA seeks to increase intra-African trade through better harmonisation and coordination of trade within the African continent. It is estimated that intra-African trade will increase by as much as $35 billion per annum or 52% by 2022;
The Free Trade Area also aims at addressing the challenge of small fragmented markets in Africa by creating a single continental market which will lead to economies of scale; add value to Africa’s abundant natural resources and promote economic diversification and industrialization.
It is also envisaged to develop regional value chains and facilitate cross border investments; enhance access to an expanded market for SMEs in Africa on preferential trade terms; attract Foreign Direct Investments (FDI) into Africa with strong regional and local content; facilitate the integration of Africa economies into global markets and thereby significantly improve the Terms of Trade for African countries; among others.
“The AfCFTA is operational, with Ghana as the host country, at a time when Ghana is implementing a comprehensive industrial transformation plan to diversify the production base of the economy to take advantage of the enormous market access opportunities available under preferential terms for Ghanaian and other producers in Africa,” the statement.
“In addition to focusing on harnessing the benefits of the AfCFTA, Government has set up an institutional coordination and support framework, which includes an Inter-Ministerial Facilitation Committee, a National Steering Committee and Seven (7) Technical Working Groups to implement a Programme of Action to Boost Intra-African Trade, all to be supported by a National Coordination Office for AfCFTA.
“It is instructive to note that despite Ghana’s pioneering role in the struggle for independence in Africa and subsequent contributions to the integration of the African continent, Ghana has not had the honour and privilege of hosting any AU Organ.
“Although it has been long in coming, it has come at a time when Africa is rising and Ghana is rising. Full implementation of the Free Trade Area, in the knowledge and wisdom of the African Union and its leadership, is scheduled to commence on July 1, 2020 to, rightfully so, coincide with the day Ghana attained a Republican Status”.