‘Africa needs the CFTA to prosper economically’

President of the Ghana National Chamber of Commerce and Industry, Nana Dr. Appiagyei Dankawoso I, has stated that Africa needs the Continental Free Trade Area (CFTA) in order to prosper economically.

Speaking at the 2017 African Prosperity Conference on the theme “The Continental Free Trade Area (CFTA) – Exploring Possibilities for Business Engagement across Africa” at the Kempinski Hotel Gold Coast City in Accra on September 12, Nana Dankawoso I said the CFTA constitutes a unique opportunity to drive Africa’s transformation and development so it is his dream to secure a high-quality trade that delivers real results.

According to him, the implementation of the CFTA will create jobs, boost income and prosperity and also put Africa on the world stage.

He further indicated that there is so much to gain from free trade, therefore urging businesses to take advantage of it by working hard in the export sector.

The Continental Free Trade Agreement (CFTA) is a key African initiative aiming to urgently take forward the continent’s long-standing integration and development agenda. The CFTA represents a significant opportunity to redress the vulnerabilities of Africa’s economies within the global economic order that have been manifest in and deepened by the imbalances of the World Trade Organisation as well as other multilateral and bilateral trade agreements. 

The establishment of the CFTA aims to create a continental market for goods and services in Africa covering over a billion people and a GDP of over USD 3 trillion.

The two-day conference, which ended on the 13th of September 2017, was organised by the Pan African Chamber of Commerce and Industry and hosted by the Ghana National Chamber of Commerce and Industry. It was supported by the African Union and the United Nations Economic Commission for Africa.

The Conference was opened by Ghana Minister of Trade and Industry Honorable Alan Kyeremanten; Mr. Albert Muchanga, Commissioner for Trade and Industry at the African Union Commission; and PACCI President Nana Dr. Appiagyei Dankawoso. He was followed by Dr. David Luke, coordinator of the African Trade Policy Center at UNECA.

Mr. Prudence Sebahizi, Chief Technical Advisor on the CFTA and Head of the CFTA Unit at the African Union Department of Trade and Industry, provided an update on the status of the CFTA negotiations.

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Update on the Continental Free Trade Area negotiations

 Extracts from the presentation by Mr. Prudence Sebahizi, African Union Commission

Opportunities of the CFTA

The CFTA seeks to combine the economies of 55 African states under a pan-African free trade area comprising 1.2 billion people in a market with a combined GDP of $2.19 trillion.

Africa is the world Second largest and second most populous continent with about 1.2 Billion people and by 2050 Africa’s population is projected to reach 2 billion. About 70% of Africans are under 30 years of age and over half are females.

It is envisaged that the Continental Free Trade Area will double intra-African trade from 12% (2012) to 25% (in 2022).

Africa has approximately 30% of the earth’s remaining mineral resources. The Continent has the largest reserves of precious metals with over 40% of the gold reserves, over 60% of cobalt, and 90% of platinum reserves.

Africa is the world’s poorest and most underdeveloped continent with a continental GDP that accounts for just 2.4% of global GDP and accounts for only 4% of global Trade. In addition, Africa accounts for around 60% of the world’s uncultivated arable land.

The CFTA will result in total welfare gains of US$16 billion (+0.97% GDP and +1.17% employment).

Challenges of the CFTA

• Different speed and priorities and membership in different Regional Economic Communities;

• Overlapping Membership, Most African countries are parties to more than one REC, and convergence between different RECs should be made compatible with the goals and timelines set for the CFTA;

• Multitude and varied trade commitments undertaken by African countries.

• Institutional, organizational, and productive Capacities;

• Sensitive issues such as RoO, Level of ambition, Services Regulations, etc.

Background to the Establishment of the CFTA

The Continental Free Trade Area (CFTA) initiative is in line with the Abuja Treaty (signed on 3rd June 1991) – the Treaty Establishing the African Economic Community.

The 18th Ordinary Session of the AU Assembly held in January 2012 in Addis Ababa, adopted an Action Plan for Boosting Intra-African Trade (BIAT) and agreed on a roadmap for the establishment of a CFTA by 2017.

Reaffirming its commitment to continental market integration as provided under the Abuja Treaty, the AU Assembly launched the CFTA negotiations at the 25th Ordinary Summit of Heads of State and Government on 15 June 2015 in Johannesburg, South Africa.

At the same time, the Summit also adopted the and Endorsed the following documents:

• The Objectives and Negotiating Principles for the CFTA
• Institutional Arrangements for the CFTA negotiations
• The Terms of Reference for the CFTA-NF
• The Indicative Roadmap for the CFTA negotiations.

The 27th Ordinary Summit of the AU Heads of State and Government that took place in Kigali, July 2016, reaffirmed its commitment to fast tracking of the CFTA by 2017.

The 28th Ordinary Session of the AU Heads of State and Government, held in Addis Ababa, Ethiopia, in January 2017 mandated H.E Mahamadou Issoufou, President of the Republic of Niger to champion the process of the CFTA to ensure that the deadline of the end of 2017 is reached and report on measures taken to the next ordinary session of the Assembly in July 2017.

The 29th Ordinary Session of the AU Heads of State and Government, held in Addis Ababa, Ethiopia, in July 2017 received the Progress Report on the CFTA from the Champion:

• Appreciated the progress made so far; 

• Approved the modalities and reaffirmed the commitment to conclude negotiations of the CFTA by 2017.

• Called upon Member States to undertake nationwide stakeholder sensitization activities so that all citizens of African countries are fully aware and own the process of establishing the CFTA.

Update on the establishment of the CFTA

Since the June 2015 launch of the negotiations, much progress has been made to prepare the ground:

• Analytical Studies to inform negotiations;

• Study on NTBs Elimination Mechanism;

• Capacity Building of Negotiators;

• Establishment of the CFTA Negotiations Support Unit;

• Drafting of the CFTA Model Text;

• Establishment of 7 Technical Working Groups;

• Raising awareness of Stakeholders;

• Appointment of a Presidential Champion on the CFTA, etc.

In November – December 2016, the AUC organized Africa Trade Week that brought together more than 300 stakeholders (CSOs, Private sector, Academia, Researchers, etc.) to discuss the CFTA and culminated into the High Level Trade Facilitation Forum.

• Nine Meetings of the CFTA Continental Task Force to prepare working Documents for the CFTA Negotiating Institutions.

• Six meetings of the CFTA Negotiating Forum (CFTA-NF) were held in February, May, October, November 2016 and March 2017 at the AU Headquarters in Addis Ababa, Ethiopia. The 6th Meeting was hosted in Niamey, Niger by the Champion in June 2017.

• Three meetings of the Technical Working Groups in February (Kigali), April (Nairobi) and August (Durban) 2017.

• Three Meetings of Senior Trade Officials (May, November 2016 and June 2017).

• Three meetings of African Union Ministers responsible for Trade (May, November 2016 and June 2017).

Update on the CFTA: Objectives

Achieve a comprehensive and mutually beneficial trade agreement among the Member States of the African Union.

• Enhance competitiveness at all levels and more specifically at the industry and enterprise level through exploiting opportunities for scale economies, reducing business costs, continental/global market access and better reallocation of resources including through the development of trade-related infrastructure;

• To overcome dependence on exportation of primary products and promote social and economic transformation for inclusive growth, industrialization and sustainable development in line with Agenda 2063;

• Resolve the challenges of multiple and overlapping memberships and expedite the regional and continental integration processes;

• Realize the potential to expand and accelerate the growing diversification and dynamism of intra-African trade including the aim to increase by 50% trade among African countries by 2022 through better harmonization, coordination and implementation of trade liberalization and facilitation regimes and instruments across RECs and across Africa in general; and

• In the context of boosting intra-Africa trade and realizing the transformational potential of increased trade among African countries, to create a freer market for goods and services, building upon the trade agreements within the regional economic communities and associated commitments and thus pave the way for accelerating the establishment of the Continental Customs Union.

Update on the CFTA: Negotiating Principles

The Continental Free Trade Area negotiation process shall be guided by the following overarching principles:

1. The CFTA negotiations shall be AU Member States/RECs/Customs Territories driven with support of the African Union Commission and its structures.

2. RECs FTAs as building Blocs for the CFTA

3. Preservation of Acquis

4. Variable geometry

5. Flexibility and Special and Differential Treatment

6. Transparency and disclosure of information

7. Substantial liberalisation

8. MFN Treatment

9. National Treatment

10. Reciprocity

11. Decisions shall be taken by consensus.

12. Adoption of Best Practices

Update on the CFTA: Key Milestones

Conclusion

It should be emphasized that besides establishing the Continental Free Trade Area, among the fundamental drivers of trade are development of productive capacity and industrial sophistication because a country cannot trade effectively unless it can produce and add value to its raw material endowments.

Trade-related infrastructure and services along with other trade facilitation measures such as removal of non-tariff barriers, simplification of customs procedures and documentation, and flawless operations of Africa’s transport and transit corridors are also fundamental to Africa’s internal trade.

Lastly, given the imbalances in the levels of development in African countries, it would be a remise to talk about creating the CFTA without ensuring equitable outcomes for Member States through compensation mechanisms to address adjustment costs to greater trade opening, and help smaller and weaker countries build their production and trade capacities.