One year of free trading in Africa calls for celebration despite teething problems

By:  Kingsley Ighobor

Free trading under the auspices of the African Continental Free Trade Area (AfCFTA) officially started in January 2021. One year later, several aspects of the trade pact are being successfully implemented as negotiations are ongoing in other areas. In part one of this interview with Kingsley Ighobor, the Secretary-General of the AfCFTA Secretariat Mr. Wamkele Mene discusses progress, ongoing negotiations and provides a sneak peek of what to expect in 2022. These are excerpts.

What is your assessment of the journey so far since the beginning of free trading in January 2021, and what are your top three accomplishments?

The African Heads of State declared that we start trading under the rules of the AfCFTA on the 1st of January 2021. And since then, we’ve reached several important milestones.

First, the number of countries that ratified the agreement increased. We now have 39 state parties to the agreement. This makes it the fastest instrument to be ratified in the African Union. It demonstrates the seriousness and commitment that our Heads of State have for market integration.

Second, we have reached about 87.8 per cent agreement on the rules of origin, which is a very high consensus threshold. There are close to 8,000 products under the World Customs Organisation’s Harmonized System of rules of origin and tariffs, and we have reached agreements on more than 80 per cent of those products.

Going forward, for products where we have agreements, people will be able to trade with certainty and predictability based on the rules of origin that apply. This is important for industrialization and the certainty and predictability of the market.

Another important milestone is that we have operationalized the Protocol on Dispute Settlement. We are in the process of negotiating rules for appointing members of the appellate body of the dispute-settlement body. This sends a signal that Africa is ready to be bound by the rules of trade law, which will boost intra-African trade and investment.

So, we’ve made progress, but of course, much remains to be done.

What key challenges have you encountered?

The biggest challenge is that we have 55 countries on the African continent with differentials in levels of economic development and differentials in levels of industrial capacity. Some countries are ready from an industrial capacity point of view to export immediately under AfCFTA rules and some countries will need more time.

Also, we have an annex on trade facilitation, on transit, and on harmonized customs procedures rules. But when it comes to enforcement capacity of the harmonized rules, countries are at different levels of readiness.

So, we must keep working to build the capacity of our customs authorities so that they can enforce the rules of origin.

But what do you say to a trader in Accra who wants to export goods to Cote d’Ivoire and still encounters considerable tariff and non-tariff barriers? 

In February 2022, we will publish what we call the AfCFTA tariff book, which will include rules of origin and the customs procedures that apply to products. Traders will be able to identify in that tariff book their specific products, know what rules of origin apply to each product and associated tariffs.

You may ask why it wasn’t done earlier. That’s because negotiations were still ongoing. Now that we have reached agreements on over 87 per cent of tariff lines, I think that we are in a good position to start trading based on what we have agreed on.

I would also say that no trade agreement is ever concluded and implemented at the same time. Typically, trade agreements are negotiated in phases and implemented in phases. And so, this [AfCFTA] will not be any different from trade agreements around the world. Trade agreements are very complex, very technical, and have far-reaching obligations for countries that negotiate them. Countries tend to take a lot of time to deliberate on the implications and the obligations that they are undertaking. So, I’m not particularly worried. On the contrary, I think that we have a lot to celebrate.

On the rules of origin, you do not have to wait until you reach 100 per cent agreement on all the products ? 

No, because that can take even longer. The Heads of State were very clear: start trading based on the progress that you have achieved. And we intend to do that with the publication of the AfCFTA tariff book early in 2022.

What about e-commerce and intellectual property rights? How are negotiations going?

We have started the preliminary process, the technical working groups are convening, the meetings, the negotiating sessions are going on. Phase Two negotiations comprise competition policy, investment protection and intellectual property rights. Of course, COVID-19 has been a barrier. We are meeting virtually, where possible, but we have a clear directive to conclude the negotiations on Phase Two, including the rules that are required for intellectual property rights, by the end of 2022. This is very important as we’ve seen with the pandemic in digital trade—we’ve seen the importance of e-commerce and of having rules that govern trading on digital platforms.

How much impact has the pandemic had on your operations as a Secretariat and the implementation of the AfCFTA in a broader sense?

The pandemic has had a very severe impact on the operations of the Secretariat. I was elected at the start of the pandemic, and I spent the first seven-and-a-half months of my tenure in a lockdown situation. We were not able to do much. Some 42 countries in Africa were in a full or partial lockdown. But we kept pushing, and we are making progress.

There are two lessons that we should draw: the first lesson is, the pandemic has underscored the importance of Africa accelerating industrial development, self-sufficiency and the establishment of regional value chains across the continent. We are not saying that we need to disconnect from global value chains, but we need to accelerate our self-sufficiency so when there are these border restrictions, when there are export restrictions on germ-killing products, on masks, on personal protection equipment required to fight a pandemic, that we are self-sufficient.

The second lesson would be to make sure that the rules on intellectual property rights serve Africa’s industrial development and Africa’s public health imperatives; that the legal framework of the AfCFTA, of the intellectual property rights, supports the capacity to produce vaccines without patent violations and enables Africa to establish its generic drug industry without the constraints presented by intellectual property rights.

What is the status of the Pan-African Payment and Settlement System (PAPSS), a platform that should facilitate free trading?

We will launch the PAPSS on the 13th of January 2022 in Accra, Ghana. We have been working with Afreximbank to establish the PAPSS, and we started with a pilot in six countries in West Africa. Afreximbank is providing liquidity for the settlements and the technology. We’re providing the legal framework for the platform that will be legally tied and anchored in the AfCFTA.

We are very excited about the potential that this payment system has. We have over 42 currencies in Africa. The cost of currency convertibility annually is estimated to be about $5 billion. We want to reduce and eventually eliminate that cost because it constrains our SMEs’ competitiveness and makes trade costly and inaccessible to many SMEs and young entrepreneurs.

Do you mean from January 2022 traders will be able to use that platform? 

That is correct. At Afreximbank and the AfCFTA Secretariat, we want to make sure that from January 2022, African countries that intend to switch to the platform can do so. We want to start in earnest trading in local currencies.

Recently, the AfCFTA Secretariat and UNDP released The Futures Report 2021, which identifies value chains that African entrepreneurs can take advantage of. Is it not too early to canvass these value chains, given that free trading is not necessarily in full swing? 

I don’t think it’s too early to start looking at those value chains, because if you are a trader or an exporter, or an economic operator, it can take a year or two to establish supply chains into new markets.

As you know, we hosted, along with the Afreximbank, the Intra-African Trade Fair in Durban [South Africa] in November 2021 and one of the objectives of the trade fair was to facilitate the process of traders in Africa establishing supply chain networks and business connectivity so that with a tariff book in front of them for a particular market, they would already have the right networks to start trading.

So, we are very excited about the collaboration with the UNDP. We identified about 10 value chains in the report for our young entrepreneurs and SMEs run by women. The success stories from the surveys carried out leading to the launch of the report are very encouraging.

The next step is to match the young entrepreneurs, the SMEs, with investment opportunities in new markets. Early in 2022, we will host a summit where we will be doing that. We will identify certain value chains and say, here’s an SME run by a young woman or a young entrepreneur, we want investors to help, to invest in the value chain, and to create export opportunities.

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