Africa’s 1.2b market to go live amid uncertainty over tariffs and trading blocs
African businesses are gearing up for the opening of the 1.2 billion people market, amid challenges on tariff concessions, rules of origin and trade in services.
The African Continental Free Trade Area (AfCFTA), which brings together 55 countries with a combined gross domestic product of $3 trillion, had initially been scheduled to be launched on July 1. The implementation was postponed for six months due to the Covid-19 pandemic that led to restricted movement and lockdowns.
The 13th Extra-Ordinary Session of the Assembly of the Union (AU) held on December 5, under the chairmanship of President Cyril Ramaphosa of South Africa, stressed the need to quickly operationalise trading under AfCFTA to break the dominance of South Africa, Egypt and Nigeria that control 50 per cent of the African market.
However, The EastAfrican has learnt that while African traders are eager to start exploring new markets, full implementation of the proposed agreement is facing teething problems including non-completion of discussions on tariff concessions, Rules of Origin and schedules of commitments in trade in services.
In addition, Eritrea has not signed the continental trade agreement, while 20 countries including Tanzania, Burundi and South Sudan have signed but have not ratified it.
Hindrances to implementation
Other hindrances to the effective implementation of AfCFTA, according to the Kenya Association of Manufacturers, include overlapping membership to regional trade blocs, underdeveloped transport infrastructure (road, rail and air), unfamiliar or different Customs and trade procedures, and weak value chains.
Tanzanian senior trade officer in the Ministry of Trade Ombeni Mwasha said the country has delayed ratifying the agreement because the pact had to undergo the “laid down” formal procedure of confirmation, which coincided with the October general-election.
In Kenya, the government said the country is doing all the necessary internal preparations to exploit trade opportunities, including training businesses on how to trade in AfCFTA.
“AfCFTA is a young baby, and this baby is facing a lot of challenges, from Covid-19 to the economic consequences of the pandemic. Although AfCFTA has come into force, there are a number of areas that are still not concluded. These areas are important for the full realisation of the AfCFTA,” Kenya’s Principal Secretary in the State Department for Trade and Enterprise Development, Johnson Weru, told The EastAfrican in an interview last week.
“We have made some progress on Customs, trade facilitation, rules of origin, tariff schedules and non-tariff barriers, but there is still some outstanding work,” he added. Intra-Africa trade has remained low, at 15 per cent, — comparing unfavourably with Europe at 68 per cent, North America at 37 per cent, and Latin America at 20 per cent — largely due to trade barriers, and poor transport and telecommunication connectivity.