ITC publication provides guidance for African businesses on how to best take advantage of the Continental Free Trade Area Agreement

The International Trade Centre (ITC) today released a business guide that will help the private sector and policymakers better understand and navigate the recent African Continental Free Trade Area Agreement (AfCFTA).

‘A Business Guide to the African Continental Free Trade Area Agreement’ – which was formally presented to the African Union Commissioner for Trade and Industry Albert Muchanga during the World Export Development Forum (WEDF) taking place in Lusaka, Zambia – captures the current state of play of the provisions and protocols of the agreement. The guide provides insights into the business implications of AfCFTA with a view to equip stakeholders to both anticipate and influence policies.

Aimed in particular to benefit Africa’s business community, the guide supports private-sector stakeholders, including trade and investment support institutions, to effectively engage in advocacy and public-private dialogue mechanisms, and play a key role in negotiating and implementing reforms resulting from the agreement. The elements included in the guide will also be important in helping micro, small and medium enterprises (MSMEs) in Africa map how they can utilise the AfCFTA to increase their regional competitiveness.

Enhanced knowledge of expanding markets and free movement of people provides African business with a unique opportunity to be the first movers in adjusting their business practices and exploring regional opportunities. The guide points out that the AfCFTA already has cooperation mechanisms in place, such as in addressing non-tariff barriers and in resolving disputes, that African businesses can benefit from as they seek to deepen their regional integration.

ITC Executive Arancha González reiterated the importance of the AfCFTA to all stakeholders. “The AfCFTA is a historical agreement that will be crucial in addressing competitiveness issues in Africa,” she said. “At a time when some around the world are turning away from increased integration it is important that Africa sees closer regional cooperation as important in creating jobs, supporting greater value addition and reducing poverty.”

She added that “this guide will prove invaluable for enterprises, entrepreneurs and policy makers who want to deepen their understanding of the AfCFTA and stay ahead of the curve”.

Albert M. Muchanga, African Union Commissioner for Trade and Industry, said: “The Business Guide to the AfCFTA will help ensure that the private sector – especially our MSMEs, women and youth entrepreneurs – take full advantage of the agreement. It breaks down the complexities of the AfCFTA into ideas and concepts that businesses will understand. It is timely, and of great value.”

‘A Business Guide to the African Continental Free Trade Area Agreement’ will also enable policymakers involved in negotiating and implementing the AfCFTA to be more aware of the needs of the private sector and include them in provisions related to trade in goods and services and free movement of people. It also explores forthcoming areas of the agreement such as intellectual property rights, investments and competition policy.

---

Roles and opportunities for the business community

Risks of trade liberalization

It has been observed that sometimes African institutions borrow policies from other regions without examining their institutional capacities.[1] Furthermore, trade liberalization on its own does not lead to lower poverty levels in the absence of financial sector development, rising education levels and strong governance structures.[2] This will require focus on providing social safety nets and safeguards for any negative effects of trade liberalization resulting from implementation of the AfCFTA, such as possible loss of tariff revenue, loss of jobs and livelihoods especially in the agricultural sector.[3]

According to UNECA and WTO (2017)[4], such initiatives may need intervention by development partners to ensure that tariff liberalization is implemented in tandem with trade facilitation reforms as envisaged in the BIAT and Agenda 2030 frameworks. When implementation of the AfCFTA includes trade facilitation, intra-African trade will be more sophisticated with increased share of industrial goods in total trade rather than agri-food exports or commodities.[5]

This has led some to be critical of the potential of the AfCFTA to integrate the continent given the mixed success in the achievement of integration for both goods and people at the REC level. Indeed, Nigeria delayed signing the AfCFTA Agreement in March 2018 partly due to the perception that there had not been enough consultations at the national level. Consequently, the Nigerian presidency directed the Nigerian Office for Trade Negotiations to carry out a nationwide, sectoral and industry-wide consultation and sensitization exercise from 15 March to 14 June 2018 across Nigeria’s geo-political zones.

These concerns may be justified given that the AfCFTA Agreement has not incorporated critical measures that promote beneficial relationships between government, private sector agencies and intermediary bodies to achieve trade facilitation, specifically notification requirements as provided for in Article 1 paragraphs 1.1 and Article 4 of the TFA, and opportunity to comment on new and amended legislation, and consultations as provided for in Article 2 of the TFA.

In terms of a business approach to the AfCFTA negotiations, the business sector needs to argue in favour of outcomes that are likely to be of benefit to the private sector and the countries in which they are situated. As Andriamahatana and Chidede (2018) say, ‘business communities are the actual traders and investors; responsible for moving goods and services across borders.’ This makes them key stakeholders whose views should be sought during the negotiations, and whose input should be seen as critical to the success of the AfCFTA.

The AU recognizes that a partnership approach will be required for success of the AfCFTA, the reason behind the holding of the AfCFTA Business Forum in Kigali, Rwanda, a day before the signing of the AfCFTA Agreement. The forum was co-sponsored by the AU and the African Import-Export Bank, and brought together government officials, representatives of the private sector, civil society and academia.

Engagement opportunities for African business

There are opportunities for African business to engage on issues related to the AfCFTA. For example, the AfroChampions Initiative is a set of innovative public-private partnerships and flagship programmes designed to galvanize African resources and institutions to support the emergence and success of African private sector multinational champions in the regional and global spheres. The Pan-African Chamber of Commerce & Industry (PACCI) is the focal point for 50 chambers of commerce and industry in the continent, which was established in 2009 to serve Africa’s business by promoting policies that foster continental economic integration, competitiveness and sustainable growth. Since implementation of both Phase 1 and Phase 2 AfCFTA issues will require innovation and leveraging technology, it would be important to involve the African Alliance for Electronic Commerce (AAEC), which brings together 18 member countries to promote and share experience about Single Window initiatives in Africa. In this regard AAEC has developed Guidelines for Single Window Implementation in Africa.

At the REC level, organizations such as the East African Business Council (EABC), the COMESA Business Council, the Association of SADC Chambers of Commerce & Industry (ASCCI) and the Federation of West African Chambers of Commerce & Industry (FEWACCI) continually engage with RECs and member chambers for inclusive dialogue to canvass private sector interests. Some organizations are specific to constituencies e.g. the Federation of National Associations of Women in Business Eastern and Southern Africa (FEMCOM).

These organizations, with the assistance of intergovernmental and international organizations such as UNCTAD, ITC, UNECA and AfDB, can help create and sustain partnerships for negotiating the AfCFTA. On issues of IPR, the two existing African IPR organizations (African Regional Intellectual Property Office, headquartered in Harare; and the Organisation Africaine de la Propriété Intellectuelle, headquartered in Yaoundé, will be expected to play an important role in addition to RECs and national intellectual property administrations.

In the words of Rwanda President and AU Summit Chair for 2018 at the AfCFTA Business Forum, to ‘raise ambitions even higher by focusing on implementation of Agenda 2063 after seeing what AU Member States can achieve when they come together, ratify the agreement and its protocols in accordance with national laws, and reform laws, procedures and practices at the national level to align them to the continental framework.’

The above extract is taken from Chapter 7 of A Business Guide to the African Continental Free Trade Area Agreement. The Guide provides context for the AfCFTA agreement, highlights on protocols, and the way forward for trade in goods and services as well as for subsequent negotiation areas that include investment, intellectual property rights and competition policy.

---

[1] Draper P, Chikura C. & Krogman H. (2016). Can Rules of Origin in Sub-Saharan Africa be Harmonized? A political economy exploration, Discussion Paper 1/2016. German Development Institute. Available at https://www.die-gdi.de/en/discussion-paper/article/can-rules-of-origin-in-sub-saharan-africa-be-harmonised-a-political-economy-exploration/

[2] Le Goff M. & Singh R.J. (2014). Does trade reduce poverty? A view from Africa. Journal of African Trade, 1, 5-14, at https://www.sciencedirect.com/science/article/pii/S2214851514000024

[3] UNECA (2016). Response by the African Trade Policy Centre at the United Nations Economic Commission for Africa to the Call for Written Evidence: Inquiry into Africa Free Trade Initiative (AFTi), retrieved from https://www.tralac.org/images/docs/9546/afti-inquiry-written-evidence-by-united-nationseconomic-commission-for-africa-2016.pdf

[4] United Nations Economic Commission for Africa & World Trade Organization (2017). Promoting Connectivity in Africa: The Role of Aid for Trade in boosting intra-African Trade. Available at https://www.tralac.org/images/docs/11872/promoting-connectivity-in-africa-executive-summary-uneca-atpc-wto-july-2017.pdf

[5] Valensisi G., Lisinge R. & Karingi S. (2014). Towards an Assessment of the Costs and Benefits of Implementing Trade Facilitation Measures in Africa. Trapca Working Paper, August. Retrieved from http://new.trapca.org/wp-content/uploads/2016/04/TWP1405-Towards-an-assessment-of-the-costs-and-benefits-of-TF-in-Africa.pdf