A comprehensive set of AfCFTA updates:

The operational phase of the African Continental Free Trade Area was launched yesterday after a day-long summit of Heads of State and Government of the AU in the Nigerien capital. The AfCFTA will be governed by five operational instruments, i.e. the Rules of Origin; the online negotiating forum; the monitoring and elimination of non-tariff barriers; a digital payments system and the African Trade Observatory. [Related: Africa free trade zone to be operational in July 2020; Algeria announces decision to ratify AfCFTA deal] [Allocution de S.E. Issoufou Mahamadou, Président de la République du Niger, lors du 12ème Sommet Extraordinaire sur ZLECAf]

Ghana to host AfCFTA Secretariat. President Nana Addo Dankwa Akufo-Addo in his acceptance speech during the closing session of the Summit, thanked the Assembly for the decision, stating that “it is a privilege that, for the first time in our nation’s history, we have the responsibility of hosting an important pan-African institution”. He expressed his gratitude to President Macky Sall for stepping down Senegal’s candidature in favour of Ghana, and acknowledged also similar gestures of solidarity from the leaders of Egypt and Ethiopia. The President urged the Assembly to direct the AU Commission to prepare and execute a host-country agreement in accordance with the revised Executive Council Decision of July 2005 on hosting AU Organs; and hold consultations with Ghana and key stakeholders to prepare the statutes of the AfCFTA Secretariat with a view toward providing a report for the consideration of the Council of Ministers of Trade. He said Ghana is ready to donate $10m to the African Union to support the operationalisation of the Secretariat, adding that an inter-Ministerial Committee of his government had been set up to work with the AU Commission towards that end.

Selected reactions:

President Kagame said Rwanda was in full agreement with the report by Niger’s President Mahamadou Issoufou on the way forward on the AfCFTA agreement. Among the proposals in the report include catering for the interest of small-to-medium cross-border traders by simplifying trade regimes applicable to them. “We particularly concur on two points. One, the need to cater for small-to-medium cross-border traders, by simplifying trade regimes applicable to them. I (also) agree with the proposal of the Executive Council designating Ghana as our choice to host the AfCFTA Secretariat. I congratulate them as well.”

UNCTAD’s Secretary-General Mukhisa Kituyi: “Tariff cuts through the AfCFTA will have a twofold effect: Intensifying existing trade relations within Africa (the intensive margin), and paving the way for the establishment of trade relationships among new country pairs or for new products (the extensive margin). In the short term, businesses that are already supplying ‘Made in Africa’ products to the regional markets are better placed to take advantage of the opportunities unlocked by the AfCFTA, as it is easier to expand existing trade relations on the intensive margin than it is to discover and test new export opportunities. In the longer term, however, a broader array of enterprises will be able to fully harness the extensive margin…Some policymakers are calling for implementation of the AfCFTA to start in 2020. But it’s impossible to say with a high degree of accuracy, until the negotiation of key elements of the AfCFTA such as tariff schedules and rules of origin are completed. Also, Phase II Protocols on Investment, Competition and Intellectual Property Rights still need to be negotiated.”

President Buhari: “We fully understand the potential of the AfCFTA to transform trade in Africa and contribute towards solving some of the continent’s challenges, whether security, economic or corruption. But it is also clear to us that for AfCFTA to succeed, we need the full support and buy-in of our private sector and civil society stakeholders and the public in general.”

UNECA’s flagship publication: Assessing Regional Integration in Africa – Next steps for the African Continental Free Trade Area

In answering, the report recognizes that it is not enough for the AfCFTA to be merely negotiated, concluded and ratified. It must also change lives, reduce poverty and contribute to economic development. For this, the AfCFTA must be effectively operationalized, but also supported with complementary measures that leverage it as a vehicle for economic development. Among the most important of the next steps is the phase II negotiations scheduled to commence on intellectual property rights, investment and competition policy in late 2019. These policy areas are the core focus of this report, which takes stock of the current situation across the continent in each of these areas and identifies recommendations for substantive provisions in the AfCFTA. In looking ahead, the report also considers e-commerce and integration in a digitizing Africa, and how the digital economy can interact with the AfCFTA and trade in Africa. Extracts:

1. The RECs and Africa’s internal trade coherence. Only 12 African countries belong to a single REC; 33 belong to 2 RECs, 8 to 3 RECs and 1 to 4 RECs. Four RECs operate free trade areas. Some have islets of deeper integration, including customs and monetary unions. Others have free trade arrangements entirely alongside and above the REC groupings. Figure 2.11 demonstrates the results of this by showing the share of intra-African imports in 2017 that flowed into each country through existing intra-African FTAs (grey bars), the share that could have been covered by the TFTA (orange bars) and the share that could have been covered by the AfCFTA (blue bars). The multiple and overlapping membership of countries across RECs and trading arrangements means that more than half of intra-African trade in 39 African countries is already covered by existing FTA arrangements. Still, the AfCFTA has an important role in bringing forward in intra-African trade liberalization those countries, particularly in northern, central and western Africa, that lag behind. The agreement, were it in force, could have covered 21% of the intra-African imports in 2017 that were not covered by existing intra-African FTAs or would have been covered by the TFTA. But the AfCFTA is likely to have a far smaller impact in several countries, particularly in eastern and southern Africa, that currently import only a small share of their imports from African countries that do not share FTA arrangements with them.

2. The AfCFTA must now take six steps to establish a continental customs union and evolve into a unified single African market, consolidating the REC FTAs (Table 2.1). This roadmap mirrors the six stages proposed in the Abuja Treaty but addresses the delay in achieving customs unions in several RECs. Instead of waiting for each REC to achieve a customs union—the approach of the Abuja Treaty—the roadmap divides the continental customs union into its two constituent parts—a free trade area and a common external tariff. In step 2, the liberalization achieved by the AfCFTA deepens through successive rounds until it reaches the level of the most liberal preferential trade schemes in Africa. In step 3, the AfCFTA is used to consolidate a unified free trade area in Africa. Only then, in step 4, is a common external tariff cast around the continent to form the African continental customs union (residual tariffs remain—see Box 2.4). As freedom of capital, labour and services are achieved (processes that started with the AfCFTA), an African common market is created, and with further harmonization of economic policies, the African single market arrives. [Downloads:  pdf Assessing Regional Integration in Africa IX (4.43 MB) ;  pdf Visual Summary (8.41 MB) ]

Jump-starting the African Monetary Fund (Boston University, University of Pretoria)

In a new policy brief, Jumpstarting the African Monetary Fund (pdf), the authors call on African Union leaders to use their Niamey meeting to reinvigorate their efforts to create an African Monetary Fund. An operational African Monetary Fund would encourage African states to engage more actively in regional trade by offering them financial support for managing the risks associated with closer regional integration and expanded intraregional trade. The African leaders signed a treaty to establish this fund in 2014. Unfortunately, progress towards its entry into force has stalled. The treaty has been signed, but not ratified, by 11 AU member countries to date. Fifteen member countries must ratify the statutes for the African Monetary Fund to become operational. Once operational, the African Monetary Fund will have a capital subscription of up to $22.64bn and the ability to provide member countries with loans equivalent to two times their contributions to the Fund’s capital. The AfCFTA offers states new growth and employment opportunities. But by increasing economic linkages between African states, it may also increase the risk that economic problems in one country will have a strong negative effect on growth, trade, investment and employment in other African states. In their policy brief, the researchers argue that the African Monetary Fund could provide a much needed regional buffer. [The authors: Hadiza Gagara Dagah, William N Kring, Daniel Bradlow]

ECOWAS has posted the final communiqué from its 55th Summit (29 June, Abuja). Extract (pdf): “The Authority takes note of the 2018 macroeconomic convergence report. It notes the worsening of macro-economic convergence and urges member states to do more to improve on their performance, in view of the imminent deadline for the establishment of a monetary union.”

SACU, EFTA move closer to update of free trade agreement (EFTA). Delegations from the Southern African Customs Union and the EFTA Member States convened in Geneva (1-4 July) to continue their talks on the update and modernisation of their free trade agreement. The SACU delegation was headed by Niki Krüger, Chief-Director at the Ministry of Trade and Industry, South Africa, while Lars Erik Nordgaard, Senior Adviser at the Norwegian Ministry of Trade, Industry and Fisheries acted as the EFTA spokesperson. In the fifth review meeting, discussions continued on all the topics under review, namely market access for goods, rules of origin and customs issues, trade facilitation as well as trade and sustainable development. Detailed follow-ups for all the areas covered by the update will be carried out before the sides meet again for the sixth review meeting foreseen for autumn 2019. [ pdf SACU-EFTA Free Trade Agreement - 26 June 2006 (66 KB) ]

Abdul Tejan-Cole: One small step for fair trade (Politico)

The announcement last week by the governments of Côte d’Ivoire and Ghana to suspend forward sales of cocoa beans for 2020/21 until further notice and to demand the implementation of a floor price of $2,600 per metric tonne of cocoa beans is revolutionary and must be welcomed by all those interested in fair and greater equity in international trade.

Tanzania sisal glut steeply cuts price for Kenyan exporters (Business Daily)

The price of Kenyan sisal has dropped since April as cheap commodity offered by Tanzania in the world market continues to take a toll on local producers. Data by the Directorate of Fibre Crops show earnings dropped from Sh177 per kilogramme in April to Sh156 for the same quantity last month. In comparison to the same period last year, the value has dropped from Sh163 in June 2016 to Sh157 in the period under review. Interim head of the directorate Naomi Kamau said Tanzania, which is the second leading producer of the fibre after Brazil, offered relatively low prices for the commodity to the world market, leading to depressed cost globally.

IATA’s May updates: African airlines. Air freight volumes: African carriers posted the fastest growth of any region in May 2019, with an increase in demand of 8.0% compared to the same period a year earlier. This continues the upwards trend in FTKs that has been evident since mid-2018 and makes Africa the strongest performer for the third consecutive month. Capacity grew 13.4% year-on-year. Strengthening trade and investment linkages with Asia have underpinned a double-digit increase in air freight volumes between the two regions over the past year. Passenger demand: African airlines posted a 2.1% traffic rise in May compared to the year-ago period, which was up from just 1.1% growth in April. Capacity climbed 0.1% and load factor increased 1.3 percentage points to 67.0%. Traffic between Africa and Europe continues to expand strongly, but economic growth in South Africa – a key regional economy and air transport market– contracted sharply in the first quarter and this is adversely impacting air passenger demand.