by Catherine Grant Makokera | Nov 22, 2021 | Blogs
The African Continental Free Trade Area (AfCFTA) is one of the most ambitious regional integration initiatives taking place in the world today. Full implementation is still at least a decade away but there is significant value for the countries participating in the process of engagement itself. Beyond market access preferences, the AfCFTA is a potential catalyst to strengthen productive capacity, build trade-supporting infrastructure and prepare the required institutions for achieving inclusive economic development across the continent. It will bring together 54 countries, some of which are not members of the World Trade Organization and have limited experience in negotiating trade agreements, like Ethiopia and Sudan. The majority of the world’s least developed countries (LDCs) will be part of the AfCFTA and it will be the first time that some of these countries are required to make significant changes to their tariff structures as well as negotiate rules in areas such as investment and electronic commerce.
The framework agreement of the AfCFTA has been ratified by 38 countries as at the beginning of September 2021 while it entered into force on 7 July 2019. It sets out an overall ambition to remove duties on 97% of all goods traded in the AfCFTA over a two-stage implementation process. Trade in services and non-tariff barriers are also the focus of Phase 1 of the agreement. Although it was possible for trade to commence from 1 January 2021, negotiations are ongoing with rules of origin still to be finalized for key sectors, such as clothing and textiles. All of this is happening at a time when it has not been possible for in-person interactions and negotiators have had to adapt to a virtual process.
It is not surprising therefore that some tensions are starting to emerge in the negotiations of the AfCFTA. First, there is a tension between the political ambition to complete this agreement in a short period of time and the technical process that is needed to achieve consensus on the complex rules that will govern African trade going forward. On the one hand, the strong political commitment to the AfCFTA is welcome and has been an important contributor to the momentum behind the process. There are however challenges when the technical process cannot keep up and meet the deadlines set by African leaders. In these circumstances, negotiators could run the risk of cutting corners and not agreeing on the level of detail required for the smooth implementation of the agreement. Following high profile events to mark milestones in the AfCFTA process and the announcement of trade commencing from the beginning of 2021, the fact that the negotiations are ongoing is causing confusion among traders about the status of the agreement. The advice to under promise and over deliver comes to mind.
A second area of tension is between the vision of the AfCFTA and the national economic development priorities of the participating countries. This is not unique to this trade agreement and is often at the heart of any modern negotiation process. Where the AfCFTA has a particular test is in the way that the process has unfolded with few specifics included in the framework agreement. It is in the ongoing phase 1 negotiations that countries and customs unions are required to put forward offers that meet the framework criteria. This requires, for example, identifying 3% of goods that will be excluded from AfCFTA tariff reductions. In those African countries that rely on tariff revenue as a key part of domestic resource mobilization or that use tariffs as a tool of industrial policy, this could involve some difficult choices – a situation that is further complicated by an increasing focus on local content requirements and import substitution by African policymakers.
The framework agreement of the AfCFTA has also left some key concepts to be fleshed out as the negotiations proceed. For example, it is not clear how ‘reciprocity’ will be assessed in terms of the trade in goods negotiations – on a product by product basis, in terms of commercial benefit or based on a broad overall balance in commitments. In terms of the time available to implement tariff reductions, the provision of 10-13 years for LDCs is now being used by more developed countries that are taking up the longer implementation period as a member of a customs union. Special and differential treatment is an important principle of the AfCFTA but LDCs will only have the same period for adjustment to the liberalization impact of the agreement as their more advanced neighbours.
Thirdly, there is also a tension between the reality emerging of how the AfCFTA will be implemented and the overarching objective to create a more streamlined and less complex trade architecture in Africa. The AfCFTA will not replace the existing regional trade arrangements, such as the Common Market for Eastern and Southern Africa (COMESA) and the Southern African Development Community (SADC), but will create an additional layer that plugs the gaps where there is no bilateral or regional agreement in place between members of the AfCFTA. This could create additional complexity for traders, especially where there are differences in the rules applied.
In conclusion, the AfCFTA has enormous potential to progress the integration of African economies but it should be viewed as a long term initiative. There are difficult issues that still need to be resolved under phase 1 of the negotiations, and implementation of commitments is likely to only be delivered in 10-15 years’ time. This needs to be clearly communicated to stakeholders, including the private sector. Greater transparency would go a long way to ensuring that the process is better understood. The tensions emerging require African trade ministers and officials to recommit to the overarching aims of the AfCFTA. There is room for the more developed, larger economies on the continent, such as South Africa, Kenya and Nigeria, to lead by example by opening up their markets in line with the original ambition.
Phase 2 and 3 negotiations on investment, competition policy, intellectual property rights and electronic commerce will be particularly challenging. There is however value in the process and not just in the end outcome. African countries should continue to build on the momentum created by the AfCFTA to strengthen productive capacity, build trade-supporting infrastructure and prepare the required institutions for achieving inclusive economic development.
The views and opinions expressed in this blog are solely those of the author. These views and opinions do not necessarily represent those of Tutwa Consulting Group and/or the Tutwa editorial team.
Blog first published: https://www.tradeexperettes.org/blog/articles/emerging-tensions-in-the-african-continental-free-trade-area
Image Rights: https://archive.uneca.org/afcfta/pages/online-course-making-african-continental-free-trade-area-afcfta-work
by Catherine Grant Makokera | Aug 13, 2020 | Blog
Authors: Catherine Grant and Anna Ngarachu
If you’re a bit like most people, Zoom and other digital platforms have become your go-to meeting point, not only in the professional space but for social get-togethers, work outs and education. This trend will likely continue to be the modus operandi even after lockdown because digital platforms have proved to be so efficient and a major timesaver for many.
The events we also frequented in the past, to learn and network, have since pivoted to webinars and online functions. As we continually use and become more familiar with these platforms, it is worth asking the question whether anyone has noticed what this transition will mean for women’s participation on webinars and other online events. Are their perspectives put forward effectively using these virtual platforms?
We need to bear in mind the importance of ensuring women have a voice in the online engagements that are replacing traditional events for exchanging views and contributing to policy development. It is essential that we don’t lose the momentum around getting more women to speak on economic and policy issues that was slowly building before the coronavirus pandemic. Here is a bit of a backstory, alluding to a previous blog, to illustrate the importance of this question.
Including women as speakers at events, not only brings in different perspectives and experiences, such as the constraints they may face while trading or conducting business, but their views have been seen to be more inclusive. Having an environment that includes others who appreciate women’s point of view will allow women to speak up more and raise questions. Therefore, while speaking on online platforms like Zoom, it is helpful if women can relate with their fellow Zoom panellists, moderators, and have some assurance that the Zoom Master (who controls the technical side of the Zoom event) will assist them should they have any technical glitches.
Harvard Business School, in an article on Racism and Digital Design: How Online Platforms Can Thwart Discrimination, called for further reflection on the essence of gender discrimination on online platforms. The article considers the design of other platforms like Uber and Airbnb and whether their design excludes the black population from being accepted for their booking requests. Adding anonymity to booking requests proved to be the solution in this case. Some of the article’s recommendations, which resonate here, include building awareness, which we hope to have done by calling for the end of ‘manels’. It is also important for organisers to be transparent about concerns of gender discrimination at their events and employ choice-architecture (as described in the HBS study) when selecting their panellists. Seeing as it is difficult to incorporate anonymity in video conference-style events, it would take a deliberate effort by organisers to ensure balanced representation.
AS SADC Senior Officials meet this week, ahead of 40th Ordinary Summit and Council of Ministers via a digital platform, it would be interesting to see whether the engagements are well balanced and not made up of digital ‘manels’. To achieve the objectives of inclusive, sustainable economic development, women must contribute because their experiences and opinions ensure a level of inclusivity in policymaking that, unfortunately, is still elusive.
by Catherine Grant Makokera | Jun 15, 2020 | Blog
Catherine Grant Makokera and Deidre Penfold
The focus of the Covid-19 pandemic has been firmly on dealing with the health crisis in the short term. This has meant limiting not only the movement of people, but also goods, with potential long-term implications for the region. However, this is not the time to abandon a regional integration or cooperation agenda. Now is the time to be planning a package of support measures that can assist South African exporters. We need to strengthen the trade ties among African countries and ensure coordination of the trade response of the continent. It is time to ramp up trade among ourselves in Africa as the disruption to global value chains continues.
Globally, the response has been to ensure the continued flow of essential goods such as medical supplies, food and energy. In South Africa, the International Trade Administration Commission (ITAC) introduced a full rebate of customs duties and a VAT exemption on certain critical supplies, from immune boosters containing vitamin C to diagnostic testing instruments. South Africa also introduced export control regulations on some essential goods. To assist traders, the European Union (EU) and South Africa have relaxed requirements presenting documents so that electronic versions can now be used in order to speed up the delivery of traded goods.
These trade-related measures are important as we need to make sure that every job in the economy that can be retained, is retained. It has long been proven that firms engaged in international trade are likely to employ more people. Exports typically have high economic value and low health risks. Sectors in the South African economy are interconnected both within the country, but also with global supply chains.
There have been some unfortunate consequences for trade from the regulations adopted by the government in attempting to control the spread of Covid-19 in South Africa. Instead of a top-down approach that allows trade to flow freely unless it is directly contributing to the spread of the disease, the government has worked from the bottom up and become caught up in defining detailed exceptions to an effectively closed economy.
With more complex regulations, there are bottlenecks created that hamper the free flow of goods and services.
Right now, we should not be blocking exports, but rather encouraging those firms that can keep production running safely to fill their existing orders. This requires an approach to cargo management that is more rational and allows for congested storage facilities to be cleared.
Ships are starting to pass by South African ports, and this could compromise both our ability to export, and also access to important products and inputs.
All borders of the republic are closed for the movement of people and are likely to remain so until we reach lower lockdown alert levels. There are exceptions for transporting fuel and essential goods. Importantly, South Africa is working with neighbouring countries in the Southern African Development Community (SADC) to harmonise and facilitate cross-border transport operations across the region during the Covid-19 pandemic.
Initial SADC regulations are aimed at keeping value chains operational in the areas of food and agricultural production, medical equipment and medicines, fuels, and humanitarian relief. We should not undermine these regional processes with complicated regulations in South Africa that make it difficult for transporters to efficiently move around.
South Africa’s medium-term response to the Covid-19 crisis needs to factor in our role as a regional player. For example, ensuring stability of revenue flows for members of the Southern African Customs Union (SACU).
At a time like this, it is easy to concentrate on national or even local level issues and to lose sight of South Africa’s role in the world, especially in our region of southern Africa. The World Trade Organisation’s recent trade outlook for 2020 indicates that the volumes of global trade in goods could tumble by 13{fdf3cafe0d26d25ff546352608293cec7d1360ce65c0adf923ba6cf47b1798e1} in an optimistic scenario, or by as much as 32{fdf3cafe0d26d25ff546352608293cec7d1360ce65c0adf923ba6cf47b1798e1}. South African exporters will need access to markets regionally if they are to continue to be able to employ workers.
President Cyril Ramaphosa is continuing to lead the African Union during this critical period. It has been particularly encouraging to see his willingness to involve the business community and engage in both the health and economic implications of Covid-19 for the continent. Unfortunately, the implementation of the African Continental Free Trade Agreement (AfCFTA) is likely to be delayed until 2021. That does not mean we should lose sight of the overall objectives of increasing intra-African trade and strengthening regional value chains.
South Africa’s medium-term response to the Covid-19 crisis needs to factor in our role as a regional player. For example, ensuring the stability of revenue flows for members of the Southern African Customs Union (SACU).
The global financial crisis of 2008 showed us the confusion and uncertainty in SACU that can result from drastic changes to trade flows. We also need to support the health responses in neighbouring countries by making sure there is a supply of essential equipment and products where possible.
Now is the time to be planning a package of support measures that can assist South African exporters. We need to strengthen the trade ties among African countries and ensure coordination of the trade response of the continent. If anything, the Covid-19 crisis has highlighted the importance of access to traded goods, built on strong policies to encourage trade in services and electronic commerce. Let’s not waste this opportunity for South Africa and the region.
Deidré Penfold is the Executive Director of the Chemicals and Allied Industries Association. Catherine Grant Makokera is Director at Tutwa Consulting Group.
This blog was first published in the Daily Maverick
by Catherine Grant Makokera | Mar 12, 2020 | Blog
The day that trade is supposed to start under the African Continental Free Trade Agreement (AFCFTA) is fast approaching. It is now a little more than 3 months until the deadline of 1 July 2020 that has been set by African Union Heads of State. This is ambitious as there is much that still needs to be done.
Here is what was on the agenda for African trade negotiators in order to try to meet this deadline. These plans were set up before the full force of the COVID-19 pandemic was felt by African countries. It is now unlikely that there will face to face meetings taking place any time soon. This raises questions about the ability of a complex trade negotiation like the AFCFTA to progress using technology to facilitate engagement. An electronic platform has been set up to allow for the capturing of offers on goods, which is an important innovation. This could provide the basis for further virtual discussions as these offers are interrogated by trading partners.
| Phase 1 Negotiations: Goods and Services |
Phase 2 Negotiations: Investment, Intellectual Property Rights and Competition Policy |
| Resolve outstanding rules of origin for clothing and textiles, automotives, sugar, fisheries and machinery (Chapter 84)
By end of March 2020 |
Set up technical working groups for each of the three areas and commence work on drafting texts
March 2020 |
| Exchange tariff offers and respond with further requests
By end of April 2020 |
|
| Comment on services offers received from trading partners
By end of April 2020 |
|
| Finalise rules of origin, tariff schedules, services commitments for adoption by Heads of State
Before Extraordinary AU Summit in South Africa in May 2020 |
Complete negotiations of phase 2 by end of 2020 with aim of protocols being adopted at the AU Summit in January 2021 |
The steps required to progress the AFCFTA cannot be taken by governments alone. Consultations will be needed with stakeholders at the national level and also at the reginal level for those countries, like South Africa, that is a member of a customs union. The Southern African Customs Union (SACU) has to present a joint offer of 90{fdf3cafe0d26d25ff546352608293cec7d1360ce65c0adf923ba6cf47b1798e1} of products on which it is prepared to offer duty free access to other parties to the Agreement.
The establishment of a Secretariat for the AFCFTA in Accra, Ghana will also be taking place at the same time as the negotiations. This will be under the leadership of the former South African trade negotiator, Wamkele Mene, as Secretary General. Mene will have to negotiate a clearly defined mandate for the Secretariat, including its working relationship with the AU Commission Directorate of Trade and Industry in Addis Ababa, as well as secure sufficient human and financial resources to support implementation of the AFCFTA. There is no doubt that COVID-19 will also impact on this process.
As we grapple with our new working reality in many parts of the world, our trade negotiators are also trying to adapt processes that have been built on rounds of meetings and lots of travel. What will be the impact of COVID-19 restrictions on the AFCFTA? Is there enough incentive for countries to meet these ambitious deadlines or are we likely to see a new timetable set by the continent’s leadership? Or is this going to be another case of the African Union over promising and under delivering on regional integration goals? Only time will tell.
by Catherine Grant Makokera | Oct 31, 2019 | Blog
The attention of trade negotiators has been concentrated on progressing the African Continental Free Trade Agreement (AfCFTA) over the last two years. This mega arrangement is not an easy undertaking. It has been billed to create the largest free trade area in the world but is, in reality, a complex web of bilateral and regional negotiations that will supplement existing regional agreements. One of these building blocks is the lesser-known Tripartite Free Trade Agreement (TFTA).
The TFTA seeks to join together Eastern and Southern Africa through the regional blocs of the Southern African Development Community (SADC), the East African Community (EAC) and the Common Market of Eastern and Southern Africa (COMESA). This is an ambitious Cape to Cairo project that began before the AfCFTA but which has lost momentum in the path of the larger initiative. Like the AfCFTA, the TFTA will no replace existing trading arrangements, such as those that South Africa already has in place with other SADC members or the South African Customs Union (SACU). The TFTA does, however, provide the framework for important trade negotiations like those between SACU and the EAC.
There is no doubt that the progress of the TFTA stalled in recent years. It has only be ratified by five countries, including South Africa, and has not yet entered into force (as compared to the 27 countries that have ratified the AfCFTA). The AfCFTA has seen energy and resources diverted away from the process needed to conclude the TFTA. However, the two are closely linked together, containing similar provisions in some areas. As the AfCFTA has been structured as an umbrella covering existing agreements and not as one complete agreement in itself, the TFTA also retains relevance. It is expected to come back into the spotlight again from early 2020 when President Paul Kagame of Rwanda is due to host a Summit on the TFTA.
Some will remember the role played by Kagame in driving forward the AfCFTA when he was Chair of the African Union. The importance of high-level championing of such initiatives cannot be underestimated. It has been one of the reasons given for the success to date of the relatively fast-moving negotiations of the AfCFTA. With Kagame now putting his energy behind the TFTA, it is not the time to write off this agreement.
There are of course a number of other reasons to watch this space that go beyond the political leadership we expect to see from Rwanda. The EAC[1] is one of the fastest-growing regions in Africa with levels of GDP expansion expected of around 6{fdf3cafe0d26d25ff546352608293cec7d1360ce65c0adf923ba6cf47b1798e1} annually in 2019 and 2020. It is under the TFTA that South Africa and her SACU partners[2] have secured preferential market access to this market of over 170 million people. Doing business beyond SADC offers significant unexplored opportunities for South African exporters who need to diversify markets in light of ongoing global uncertainties.
[1] Members of the EAC are Burundi, Kenya, Rwanda, South Sudan, Tanzania and Uganda.
[2] Botswana, Eswatini, Lesotho and Namibia.
