Building capacity to help Africa trade better

Why is it so difficult to start trading under AfCFTA Rules?


Why is it so difficult to start trading under AfCFTA Rules?

Why is it so difficult to start trading under AfCFTA Rules?

The simple answer to this question is that the task at hand is a daunting one. It should not be underestimated. The modus operandi employed for completing the African Continental Free Trade Area (AfCFTA) design and adopting the outstanding legal instruments is another relevant factor. The AfCFTA involves a member-driven process. Fifty-four countries (Eritrea does not participate in the AfCFTA negotiations) at different levels of economic development must agree on the rules for opening their markets and establishing a continent-wide Free Trade Area (FTA) for goods and services. Only after they have finally done so and all legal disciplines are in force, will the AfCFTA be ready for implementation, provided the required domestic procedures are also in place.

The AfCFTA Agreement and the Protocols on trade in goods and services, as well as dispute settlement, have entered into force more than a year ago. However, essential aspects have not yet been agreed. This is not surprising. The outstanding negotiations are about complex tariff reductions, rules of origin and conditions for trade in services in the priority areas. As long as the instruments for these disciplines remain outstanding, AfCFTA-based preferential trade is not possible. The officially declared target date of 1 July 2020 could not be met. It has recently been suggested that trade under AfCFTA rules could (perhaps) start at the beginning of 2021.[1] However, there is no formal decision yet about this important date.

The COVID-19 pandemic has derailed the workplan for completing the outstanding AfCFTA negotiations. The first confirmed COVID-19 case in Africa was reported on 14 February 2020 in Egypt. The first confirmed case in sub-Saharan Africa was in Nigeria. Since then African Governments had to shift their priorities and focus on urgent national emergency health measures and serious economic contraction. COVID-19 has become a global pandemic and public health facilities in most African nations are not equipped to deal with it.

Legal certainty is vital for reaping the benefits that the AfCFTA could bring. There are vast benefits associated with liberalizing trade in goods and services among African nations, if this process can unfold in a certain and predictable manner. If the AfCFTA would amount to business as before, but only on a larger scale, private firms, importers and exporters, service suppliers and investors will see little to embrace. They need evidence that the AfCFTA will be different. This is an opportunity to bring about vital trade governance reforms and should not be wasted. Better and modernized customs clearance procedures, trade facilitation improvements and the harmonization of transport and regulatory regimes are examples of what is required. There must be a workplan for how this will happen.

As matters stand individual AfCFTA State Parties will have to carry the can. This is not a suitable approach. The promises that the Secretariat will assist them with technical and capacity constraints are important, but the detail as to how this will happen remains unclear. The remaining work required to make the AfCFTA implementable is about more than only concluding outstanding tariff and rules of origin negotiations.

Before the AfCFTA can ultimately be implemented, the State Parties must also undertake important preparatory work at home. They must adopt the required new national legislative and administrative instruments and structures and must establish (or adjust) domestic institutions and frameworks. This includes new columns in national Tariff Books, training of customs officials and procedures to give effect to the rules of origin of the AfCFTA. National services regulators must be informed and empowered to implement the schedules to the AfCFTA Protocol on Trade in Services. There must be better compliance with standards, surveillance and how remedies will be implemented. This amounts to the pursuit of better trade governance, which will bring global benefits too. The AfCFTA should be seen as an opportunity with the potential to secure benefits beyond intra-African trade liberalization.

It will also be essential to ensure that the AfCFTA regime will co-exist with the RECs, customs unions and regional trade arrangements to which the State Parties presently belong, and which have attained among themselves higher levels of integration. Article 19(2) of the AfCFTA Agreement and Article 8 of the Protocol on Trade in Goods specifically so require.

The AfCFTA needs a plan for dedicated follow-up action. It will not in one dramatic swoop alter existing commercial and economic realities. The AfCFTA can gradually usher in a new dispensation, which will bring benefits in tandem with private sector responses, infrastructural development and industrialization. In some sub-regions and in specific markets there might be more immediate results, while in others the facts on the ground (such as existing retail chains and distribution networks) will continue to shape firm behaviour, investment choices and trade flows. The improvement of customs administration and trade facilitation governance may turn out to be the vital link in respect of improved market access benefits.

The establishment of the AfCFTA is about a process; not an event. Governance reforms and additional follow-up action will be required across the continent. Individual governments will have to drive these efforts; the AfCFTA does not provide for supra-national institutions. The AfCFTA’s potential lies in the improvement of trade governance and the lower transaction costs that will ensue, not the signing of legal instruments, which are not ready for implementation.

[1] https://afrikanheroes.com/2020/05/04/why-afcfta-implementation-was-postponed-till-2021/

About the Author(s)

Gerhard Erasmus

Gerhard Erasmus

Gerhard Erasmus is a founder of tralac and Professor Emeritus (Law Faculty), University of Stellenbosch. He holds degrees from the University of the Free State, Bloemfontein (B.Iuris, LL.B), Leiden in the Netherlands (LLD) and a Master’s from the Fletcher School of Law and Diplomacy. He has consulted for governments, the private sector and regional organisations in southern Africa. He has also been involved in the drafting of the South African and Namibian constitutions. He grew up in Namibia.

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