AfCFTA One Year Later: Discussing the Article Presented by H.E. Amb. Albert M. Muchanga African Union Commissioner for Trade and Industry

In this commemorative article, the African Union Commissioner for Trade and Industry outlines what has been achieved since the AfCFTA Agreement was opened for signature on 21st March, 2018 in Kigali, Rwanda and what is expected as the African Union moves to launch of the operational phase of the continental market in July this year.

It’s important to realize how important this agreement is to intracontinental trade and relations.

Africans doing business in Africa potentially stand to gain from ease of movement of goods and services within the continent. Building stronger bonds and sharing resources for mutual growth.

On 21st March this year, the Agreement Establishing the African Continental Free Trade Area marked one year of existence. It was opened for signature on 21st March, 2018 at an Extra-Ordinary Summit of the Assembly of African Union Heads of State and Government in Kigali, Rwanda. At that Summit, forty-four African Union Member States signed the historic Agreement. The number rose to forty-nine at the July, 2018 Nouakchott, Mauritania Summit. Three more signatures were added during the February, 2019 Addis Ababa Summit, bringing the figure to fifty-two as we commemorate the first

Africa is on target to launch the operational phase of the African Continental Free Trade Area in July this year in Niamey, Niger where the AU will hold another Extra-Ordinary Summit for that purpose as well as formally commemorate its First Anniversary.

During the launch, the African Continental Free Trade Area shall be fully supported with well-defined rules of origin; schedules of tariff concessions in trade in goods; an online continental non-tariff barriers monitoring and elimination mechanism; a Pan-African digital payments and settlement platform as well as an African Trade Observatory portal. After July this year, traders across Africa will be able to make use of preferential trading arrangements offered by the Agreement Establishing the African Continental Free Trade Area as long as the trade relations involve the twenty-two or more countries that would have deposited instruments of ratification as well as conform to agreed provisions on rules of origin governing trade in the African Continental Free Trade Area.

The historic African free-trade zone came into force on Thursday 31st of May, 2019, as the African Union celebrated making one more step toward creating a continent-wide market of 1.2 billion people worth $2.5 trillion.

“This is a historic milestone!” tweeted Albert Muchanga, AU commissioner for trade and industry.

“We celebrate the triumph of bold, pragmatic and continent-wide commitment to economic integration.”

This is a historic milestone!

Road to implementation

Fifty-two of the AU’s 55 member states have signed the agreement to establish the free trade area since March 2018, with the notable exception of Nigeria, the largest economy on the continent.

The questions about the benefits and criticisms of this for the Nation would help decision makers. For the largest economy in Africa, the lowering of trade barriers would potentially open up opportunities for exports and trade for most SMEs. However, this could also lead to an influx of speculators which also add to the pressure on the nation’s resources.

Trade within Africa is in a dire state. A mere 17% of African countries’ exports go to other African countries—compare that with intra-regional trade levels of 59% in Asia and 69% in Europe. That means Africa doesn’t feature much in the way of cross-border value chains.

The President of Nigeria Muhammad Buhari, fears that Nigeria could become a dumping ground for finished goods and thus undermining local production.

Despite this valid fear, the free trade area also opens Nigeria’s local manufacturers to a bigger market and opportunities to maximize profit from lower tariffs and duties.

The African Continental Free Trade Area had been ratified by 22 countries by April 29, the requisite number for formally notifying the AU. That paved the way for it to take effect 30 days later as stipulated in its statutes.

Some of Africa’s other economic heavyweights, including Ethiopia, Kenya, Egypt and South Africa, are among the 24 nations that have formally ratified it. In the last month, Zimbabwe and Burkina Faso joined the fold.

There are still a number of outstanding issues to be resolved, including arbitration measures, certifying the origins of goods, tackling corruption and improving infrastructure.

The AU envisions the free trade zone, once fully implemented, driving economic integration and spurring investment within the continent.

It hopes the progressive elimination of tariffs will help boost intra-Africa trade by 60 percent within three years. At present, only 16 percent of trade by African nations is with continental neighbours.

Advocates for the trade zone say it will help develop African economies long driven by a focus on resource exploitation, and provide a platform for negotiating with markets beyond the continent.

But critics say poor infrastructure and a lack of diversity between the various economies could throw up barriers to this envisioned integration.

The African Union hopes a progressive elimination of tariffs will help boost intra-Africa trade by 60 percent by 2022.

Sources: Fortune, African Union

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