May 26, 2024

The 2023 AU Summit will focus on driving trade growth within the AfCFTA.

Adoption by the African Union of the theme for 2023 as the “Year of AfCFTA: Acceleration of the African Continental Free Trade Area Implementation”, will generate greater political commitment and accelerate the effective implementation of the agreement

Mildred Mbira in Ethiopia (Addis Ababa)

To enhance trade among African countries, the continent has started removing tariffs on 90 percent of goods and lowering trade barriers for services. This initiative aims to boost Africa’s income by $450 billion by 2035.

The effective execution of the AfCFTA will result in the generation of higher quality jobs, enhanced well-being, and an improved standard of living for all individuals, as well as sustainable growth.

The AfCFTA aims to promote the involvement of women and youth, particularly those in rural areas, and to support the growth of Small and Medium Enterprises (SMEs), as well as the overall industrialization of the continent, alongside its policy changes and reforms.

By February 2022, eight countries from different areas of the continent – Cameroon, Egypt, Ghana, Kenya, Mauritius, Rwanda, Tanzania, and Tunisia – were involved in the AfCFTA’s Guided Trade Initiative (GTI). The GTI aims to promote trade among AfCFTA state parties that have satisfied the minimum trade requirements outlined in the Agreement.

This program facilitates connections between businesses and products for export and import among State Parties. The products designated for trade within the Initiative consist of ceramic tiles, batteries, tea, coffee, processed meat products, corn starch, sugar, pasta, glucose syrup, dried fruits, and sisal fiber, among others, in alignment with the AfCFTA’s emphasis on developing value chains.

In 2023, the focus of the AfCFTA Guided Trade will also include Trade in Services within five key areas: Tourism, transportation, Business Services, Communication Services, Financial Services, and Tourism and Travel-related Services.

The African Union’s decision to make 2023 the “Year of AfCFTA: Accelerating the Implementation of the African Continental Free Trade Area” is predicted to increase political dedication and speed up the successful execution of the AfCFTA to fully serve the African population and accomplish the aims of Agenda 2063.

The activities planned for the year will strengthen the current partnerships between member states, Regional Economic Communities (RECs), AU institutions, the private sector, development partners, and other stakeholders. These partnerships aim to initiate and carry out initiatives that promote trade within Africa, especially in value-added production and across all sectors of the continent’s economy.

The AfCFTA will continue the advancements made by the eight RECs in their customs unions, free trade areas, and other trade agreements.

Since February 2023, member states, including four from the Customs Unions, have submitted a total of forty-six Provisional Schedules of Tariff Concession.

Since the AfCFTA Agreement came into effect in May 2019, there have been increased efforts to speed up the implementation and improved utilization of operational tools to enable effective and significant trade within the AfCFTA.

The completion of the AfCFTA Phase One and Two Protocols paves the way for the implementation of the trading agreement.

The Phase Two Protocols that have just been completed focus on Investment, Competition Policy, and Intellectual Property Rights, and will help to further advance economic integration in Africa.

In the first phase of the trade agreement, participating countries have agreed to gradually decrease tariffs on 90% of traded goods over 5 years for non-least Developed Countries and 10 years for Least Developed Countries. Tariffs on ‘Sensitive’ goods will be removed for non-LDCs within 10 years and for LDCs within 13 years, with an additional 7% of goods included in the elimination.

In Phase II, the Protocol on Women and Youth in Trade and Digital Trade will be completed by 2023.

The creation of the AfCFTA Guided Trade Initiative aims to facilitate trade between member countries by linking businesses and products for import and export.
Igire Coffee received the first AfCFTA Certificate of Origin for Rwanda, allowing it to export coffee products to Ghana. Kenya successfully shipped its initial products, Exide batteries, to Ghana.

The implementation of the Initiative mandates that participating states produce AfCFTA trading documentation such as certificates of origin, and importer and exporter declaration forms, and also ensure that their customs laws and systems comply with AfCFTA regulations.

The goal of implementing the AfCFTA Adjustment Fund is to assist both member states and the private sector in effectively engaging in the new trade environment created by the AfCFTA.
Like other large trade agreements, the AfCFTA Agreement will cause short-term disturbances as it reduces tariff revenues for State Parties, disrupts industrial sectors, reorganizes businesses and supply chains, and displaces employment in unforeseen ways.

The projected cost of ensuring the seamless implementation of the AfCFTA Agreement and reducing the associated costs is around $10 billion over the next six to ten years.

The Adjustment Fund can benefit a country that is facing difficulties in its textiles and clothing industry by providing support for worker retraining, recapitalization, purchasing machinery, and improving competitiveness. The fund includes a Base Fund, a General Fund, and a Credit Fund.

The Base Fund will be funded by State Parties through voluntary contributions, grants, and technical assistance funds to compensate for lost tariff revenue resulting from the gradual elimination of tariffs. It will also assist countries in implementing the different provisions of the AfCFTA Agreement, along with its Protocols and Annexes.

The General Fund will gather subsidized funding, while the Credit Fund will gather commercial funding to support both the public and private sectors, allowing them to adapt and capitalize on the opportunities brought about by the AfCFTA.

The current Pan African Payment System (PAPSS) serves as a centralized financial market infrastructure that facilitates the smooth and secure transfer of funds between African countries.
PAPSS partners with central banks in Africa to offer a payment and settlement service that commercial banks, payment service providers, and fintech organizations across the continent can join as participants.

The platform offers an affordable, straightforward payment clearing and settlement system with risk management. It also works to increase financial inclusion for the informal sector and monitor funds transfers to reduce the billions of dollars lost to money laundering in the continent each year.

By June 2022, the PAPSS network will include 8 central banks, 28 commercial banks, and six switches. It will have a presence in all five regions of Africa by the end of 2023.

By the end of 2024, all central banks must be registered, and all commercial banks must complete their registration by the end of 2025. PAPSS will greatly decrease the expenses of converting 42 different currencies in Africa and save the continent around $5 billion every year.

The goal of the AfCFTA Private Sector Strategy is to achieve economic recovery and make a tangible impact in the post-pandemic world. This will be accomplished through collaboration with a wide range of stakeholders from both the private and public sectors, spanning the entire continent, to ensure that the implementation of the AfCFTA is inclusive.

To decrease the continent’s susceptibility to outside disruptions and enhance trade and economic growth, the AfCFTA is working on establishing regional value chains through the Private Sector Engagement Strategy. This presents African nations with the chance to leverage their regional strengths to enhance competitiveness, broaden their range of products, and export goods with greater value-added benefits.

The strategy emphasizes four key sectors or value chains at the outset: agro-processing, automotive, pharmaceuticals, and transportation and logistics. This is based on the potential for replacing imports and the current production capabilities within the continent.

In November 2022, the introduction of the AfCFTA e-Tariff Book enabled digital trade facilitation, making it simpler for Trade and Customs Authorities to access tariff concession schedules.
The Tariff book contains guidelines for determining where products originate and the customs processes that pertain to them, enabling users to gain a better understanding and competency in using tariffs, classifying commodities, and managing tariff-related tasks within Customs agencies and other relevant parties.

The customs unions have provided tariff concessions, which will be nationalized once agreed upon, allowing traders to engage in full trade activities.

Performing regulatory audits under the AfCFTA to pinpoint any barriers to market access and fair treatment that may hinder the provision of services by the AfCFTA Trade in Services Protocol.
The report provides specific descriptions of every trade restriction along with its corresponding legal citation. One specific area where this data is extremely valuable is within the tourism industry.

As a result, this could contribute to the economy by generating more income from tourism.

Creating the Automotive Fund to support investments aimed at advancing local content development within the automotive industry. The money will also be used to provide access to consumer finance and develop insurance products in response to consumer demand.

A thorough plan has been created for automotive production in Africa. The plan highlights the urgent necessity of completing the Rules of Origin (ROO) and creating a Task Force to speed up the creation of a significant advanced automotive value chain in Africa.

It is crucial to complete the rules of origin for the automotive industry, as it will enable the development of regional and continental value chains through strategic planning. It would support the creation of national programs and facilitate increased collaboration and commerce among members who have implemented national programs and want to enhance trade in vehicles and components within the AfCFTA.

The Dispute Settlement Body (DSB) became operational in April 2021, playing a crucial role in ensuring the effective implementation of the AfCFTA Agreement. The Appellate Body is made up of ten members serving on the board.
The establishment of the DSB indicates that the AfCFTA dispute resolution system is prepared to handle any potential trade disputes among the member countries.

The AfCFTA SME Financing Facility aims to make it easier for small and medium-sized enterprises to obtain funding for their business activities. This is aimed at ensuring that small and medium-sized enterprises, women, and young Africans have the opportunity to benefit from market access under the AfCFTA, rather than it being monopolized by large corporations. It aims to support their business growth and participation in trade.

The AfCFTA has established a 13-member Trade and Industrial Development Advisory Council to guide the AfCFTA Secretariat on trade integration and the promotion of impactful industrialization as a key component of the AfCFTA’s implementation.
The Advisory Council’s main focus is on implementing the AfCFTA, including negotiations and trade facilitation, as well as improving industrial development and inclusivity in the region.

The removal of non-tariff barriers through the NTB mechanism. Removing non-tariff barriers (NTBs) is essential for increasing trade within Africa and reaching the goals of the AfCFTA. It will lower the expenses of conducting international trade and simplify the movement of goods across borders.
The majority of the benefits of the AfCFTA will come to fruition if member states effectively handle and remove non-tariff barriers (NTBs).

The Trade in Goods Protocol creates a system for reporting, monitoring, and removing trade barriers that traders may encounter when moving goods and services across borders. It allows traders to file complaints about specific obstacles they face during this process.