The agreement on the African Continental Free Trade Area (AfCFTA) has the potential of boosting intra-African trade and supporting Africa’s economic development. Yet some are still sceptical about its implementation. The PSC Report spoke to Carlos Lopes, Professor at the University of Cape Town, a member of Rwandan President Paul Kagame’s African Union (AU) reform advisory team and former executive secretary of the United Nations Economic Commission for Africa.
What progress has been made with the ratification of the AfCFTA? Will it enter into force by the end of the year as planned?
To date, 12 countries have ratified the AfCFTA. We need another 10 for it to enter into force. Note that since the signing ceremony in Kigali on 21 March 2018, 49 AU member states have signed up. Following the signing, countries now have to follow the legislative processes in their countries and then every member state has to deposit the instruments of ratification with the AU Commission. A roadmap towards the implementation of the AfCFTA will then be drawn up.
Most countries are still at the level of deliberations within the executive or legislative arms of government. We expect that enough countries will ratify in order for the agreement to enter into force no later than March 2019.
The AfCFTA is often presented as a panacea for Africa’s economic woes. But how, concretely, will it achieve that? Is it not only for big multinationals trading across borders?
Commerce is as old as humanity itself. From ancient times to the present day, long before the drawing up of borders by the Berlin conference of 1884, trade, both intra-African and overseas, was one of the most lucrative activities that the kingdoms and empires of old were involved in.
The benefits of the AfCFTA are not only for the big economic actors, the importers and exporters. It extends to ordinary citizens in many ways. In this regard it is important to look at the various steps that will be taken to progressively make the AfCFTA a reality and to understand their impact on the various categories of economic actors.
The aim of the AfCFTA is to eliminate tariffs between African countries, to complete the efforts already being made to reduce non-tariff barriers between them, to promote free movement of people and to promote a single air transport market. Concretely, African businesses, traders and consumers will no longer pay customs on a variety of goods that they trade among themselves. Thanks to a progressive liberalisation of services, service providers will also see the extension of their access to African markets.
At the moment the majority of businesses on the continent pay an average of 6.9% tax on cross-border transactions. This is on top of the non-tariff barriers such as excessive bureaucracy and regulatory discrepancies between countries. The cost of the transactions, added to the cost of production, has a huge impact, not only on the competitiveness of the businesses but also on the quality of life of consumers.
The entry into force of the AfCFTA has got enormous potential to strengthen the African market. Beyond that, it will also allow companies to cut costs and promote development through regional value chains. This could have an impact on investments and/or the cost of products and services. Entrepreneurs could reinvest their gains by creating new jobs, thereby also increasing revenue for states. Companies can increase their competitiveness by selling their goods at a cheaper price. This will benefit all consumers.
AU leaders have decided to largely maintain the Africa, Caribbean, Pacific (ACP) framework for negotiations with the European Union (EU) on the post-Cotonou agreement, parallel to the ongoing AU–EU relationship. Is it coherent to envisage the implementation of the AfCFTA without being able to negotiate with one voice?
It is important not to lose sight of the main objective of the AfCFTA, which is to increase intra-African trade while at the same time position the continent to trade with the rest of the world on a new footing. The entry into force of the AfCFTA will mean, at some point, the harmonisation of the various trade agreements that states have entered into.
Already, some countries, notably those of the Economic Community of West African States and the East African Community, have suspended the implementation of their recent economic partnerships, partly due to the important impact of the AfCFTA. Others continue to conclude new agreements until the entry into force of the AfCFTA. These are facts that show that states are moving towards greater coherence that will be crucial to the success of the AfCFTA.
What will then happen to the ACP–EU negotiations within the context of the signing of the AfCFTA?
Contrary to the Cotonou ACP–EU agreements, which do not include all African countries, the AfCFTA is a continental and inclusive initiative led by the AU. It is important to note that this changed paradigm set out in the AU–EU Abidjan agreement [of November 2017] places particular emphasis on trade and investment, as well as regional unity and integration.
The negotiations about a future ACP–EU agreement come more or less at the same time as the finalisation of the AfCFTA. Thus the AfCFTA, under the leadership of the AU, is the elephant in the room. It is the new reality that no one can ignore.