With the debate over the developmental impact of economic integration dominating this decade, the successful launch of the African Continental Free Trade Area’s (AfCFTA) operational phase in May 2019 was perceived as a momentous occasion for the African continent to realise its legitimate aspirations as stipulated in Agenda 2063: The Africa We Want.
In brief, AfCFTA, the world’s largest free-trade area since the formation of the World Trade Organisation (WTO) in 1995, is expected to contribute to sustainable and inclusive socioeconomic development, better gender equality, and, more broadly, enhanced competitiveness and environmentally sound industrial development on the global scene.
This can be attributed to AfCFTA’s significant role in accelerating intra-African trade, boosting Africa’s trading position in the global market, and strengthening Africa’s common voice and policy space in world trade negotiations. AfCFTA will create a single African market worth around $3 trillion in GDP and with 1.2 billion consumers upon its successful implementation. In addition, it also envisages improving the number and quality of employment opportunities and skills development across the continent, as well as further enhancing Africa’s industrialisation aspirations.
In a nutshell, AfCFTA is perceived as a real game-changer for broadening economic integration and inclusion in Africa in a broader sense.
Against this backdrop, Africa has demonstrated increasing and unequivocal political will and commitment to using AfCFTA as a springboard to transform, commercialise, and deepen the economic integration agenda in Africa. There is much evidence showing this. First and foremost, the number of State Parties (countries that have ratified AfCFTA) has increased significantly from 27 in May 2019 to 44 in November 2022. Of the signing parties, only 10 member states have not yet ratified the AfCFTA Agreement, including three in East Africa (Somalia, South Sudan and Sudan), four in Southern Africa (Botswana, Comoros, Madagascar, and Mozambique), two in West Africa (Benin and Liberia), and one in North Africa (Libya). Eritrea is the only country still to sign the agreement establishing AfCFTA.
Moreover, Africa has successfully held several high-level summits to rally for more momentum, partnerships, and alliances at all levels towards the accelerated implementation of the continental free-trade area within its scheduled timeframe. From 20 to 25 November 2022, Niamey, the capital of Niger, hosted the African Union Extraordinary Session on the African Continental Free Trade Area, where African leaders, relevant stakeholders, and development partners reflected on national and regional challenges as well as opportunities to be factored in by member states during the design of their National Development Plans to accelerate the regional integration agenda as envisaged by the AfCFTA Agreement.
To this effect, the 36th Ordinary Session of the African Union Assembly, held last week in Addis Ababa in Ethiopia under the theme of “Powering Trade through AfCFTA”, urged member states to intensify their efforts and leverage the spirit of Pan-Africanism and solidarity by accelerating the operationalisation of AfCFTA. The theme chosen by the African Union for 2023, “Year of AfCFTA: Acceleration of the African Continental Free Trade Area Implementation”, is also predicted to spur further the momentum in favour of the accelerated implementation of both AfCFTA and the Agenda 2063.
Within the same context, as chair of the AUDA-NEPAD Heads of State and Government Orientation Committee (HSGOC) for 2023-25, Egypt will prioritise accelerating the realisation of AfCFTA by completing negotiations on the agreement’s additional protocols, in collaboration with member states. This is likely to take the agreement to a second level.
Prompted by this supportive political context, the countries involved have collectively undertaken tangible steps to live up to their commitments regarding the free movement of goods and services under the agreement. For example, as of November 2022, 46 member states had submitted their provisional schedules of tariff concessions, of which 36 were technically verified and approved by the AfCFTA Secretariat based in Accra.
Moreover, the AfCFTA Rules of Origin covering 88.3 per cent of tariff lines have been agreed upon. Regarding trade in services, the submission and verification of schedules on specific commitments are progressing quickly, and all member states, except Ethiopia, the Saharawi Republic, and Tunisia, have submitted their respective offers for verification.
To ensure that these efforts are put into effect, the AfCFTA Secretariat officially launched the AfCFTA Guided Trade Initiative in October 2022 to spur commercially meaningful trade transactions under the AfCFTA regime. The specific objectives of the initiative include the assessment of the efficacy of the participating countries’ legal and institutional national systems along with the identification of possible future interventions to increase intra-African trade and unleash private-sector engagement in unlocking AfCFTA’s potential benefits.
Within the same vein, in order to technically support the state parties in implementing the agreement, the African Union Commission, in collaboration with the UN Economic Commission for Africa (UNECA) and the EU, has formulated guidelines for developing national strategies for AfCFTA implementation. As of November 2022, 24 countries had drafted and validated their national implementation strategies, of which nine are currently implementing them. Ten countries are presently formulating their national strategies.
The unavailability of statistics remains a critical hurdle to assessing AfCFTA’s real impact on intra-Africa trade since the start of trade under the agreement in January 2021. However, the UN Economic Commission for Africa predicts that the agreement will expand intra-Africa trade by 15 to 25 per cent by 2040. Likewise, the UN Conference on Trade and Development (UNCTAD) expects around a 33 per cent increase in intra-Africa trade due to the implementation of AfCFTA, when compared to Africa without AfCFTA.
A similar prospect is seen by the World Economic Forum, in which AfCFTA could potentially boost intra-continental trade from 18 to 50 per cent of Africa’s total trade by 2030. In addition to the trade impact, the World Bank argues that the AfCFTA’s successful implementation could raise Africa’s GDP by nine per cent and lift around 50 million African people out of the extreme poverty by 2035.
However, it is important to note that such potential gains are not automatic, and much depends on the willingness of individual member states to implement the agreement aggressively. Cognisant of the uneven distribution of AfCFTA-triggered gains and losses across member states, the states party to the agreement are expected to make complex trade-offs to overcome potential challenges and seize the opportunities offered by integrated markets, further highlighting the pertinence of setting up an effective AfCFTA Adjustment Fund.
Another critical factor for the success of AfCFTA is to promote trade integration and economic diversification and transformation agendas side-by-side, with deliberate efforts made to realise the mutually reinforcing interdependencies between the two sides. Due to the incumbent raw material-oriented production structures in Africa, leveraging AfCFTA’s potential impact will rely on the African countries’ ability to embrace appropriate industrialisation pathways and focus on increasing their production capabilities in a highly competitive global landscape.
Equally importantly, the provision of a conducive enabling environment is an absolute necessity in moving AfCFTA forward. This includes, but is not limited to, adequate quality infrastructure networks across the continent, establishing resilient and efficient local and regional value and supply chains, promoting strong standards, conformity, and certification, setting up cross-border trade and payment platforms, supporting trade-facilitation activities including one-stop border post and custom digitisation, and integrating the informal sector and micro, small, and medium enterprises (MSMEs), since they account for around 90 per cent of economic activities in Africa.
The writer is principal economic officer at the African Union Development Agency (AUDA-NEPAD).
* A version of this article appears in print in the 2 March, 2023 edition of Al-Ahram Weekly