COP27 and the win for climate vulnerable nations

COP27 and the win for climate vulnerable nations

From the devastating impact of Russia’s war on Ukraine to the FIFA World Cup being hosted by a country accused of human rights violations to the atrocities committed against Iranian protestors, those who believe in true social justice have little to celebrate as 2022 draws to a close. This is, of course, apart from the agreement on a loss and damage fund, which was reached in the early hours of the (new) final day of the 27th session of the United Nations Framework Convention on Climate Change (UNFCCC) Conference of Parties (COP27).

Between 6 and 20 November 2022 (originally meant to close on the 18th) members of the UNFCCC gathered in Sharm El-Sheik for what was vastly regarded as the “African COP”. Given its informal billing (as the African COP), representatives from African countries, and those countries that hold a similar perspective on climate action and climate justice, were expected to turn up with a unified voice on these issues. And, to a degree, they did just that.

Among the most crucial wins for lower-income nations was the establishment of the loss and damage fund, which aims to provide financial assistance to those countries that are vulnerable to the negative impacts of climate change, which include, inter alia, rising sea levels, ocean acidification, prolonged heat waves, and desertification.[1] The importance of the loss and damage fund stems from the fact that richer countries are historically responsible for most of the anthropogenic greenhouse gases (GHGs) present in the atmosphere (see Figure 1), while poorer countries, are least responsible for historical GHG emissions,  but are forced to endure the devastation of extreme climate events. In this vein, it is important to note that the establishment of the loss and damage fund was deadlocked for decades due to wealthy nations’ fears of the degree of liability they may face.

Figure 1. Per Capita GHG emissions, 1990-2019. HERE

Source: Consultants computation using data from Our World in Data.

To put it into perspective, Pakistan, which emits less than 1% of global emissions has seen USD 30 billion worth of damages, more than 1500 lives lost, and a third of the country plunged underwater from severe flooding. Similarly, it is estimated that Africa, which contributes the least to climate change, will see its countries spending five times more on climate adaptation than on healthcare.[1] Thus, the establishment of the loss and damage fund will serve as a beacon of hope in mitigating the financial impacts of catastrophic climate events.

Despite the creation of the fund, however, several decisions have been postponed to next year. Representatives from 24 countries will work to determine, among other aspects, the fund’s form, which countries qualify for the funds, and which countries will contribute to the fund. Within this context, the United States (US) and European Union (EU) are advocating for China to contribute to the fund and not receive from it due to its position among the largest economies and leading emitters in the world.[2] The world waits with bated breath to be informed of the full outcome of the agreement at COP28.

Ultimately, COP27 represented a win for lower-income countries as much was done to assist in adapting to the impacts of climate change. Conversely, the outcomes may represent a loss for those countries advocating for reduced fossil fuels reliance as little was done to further the commitment to curbing emissions. This puts on display the differing perspectives on climate change and climate action that perpetuates between developed countries and those of a less developed status.

Nevertheless, it makes little sense for rich countries to prevent fossil fuels-driven prosperity in poor countries (particularly in those abundant in these resources) while their own riches were obtained via the same means. It makes even less sense when one considers that those at the fore of the phase-out fossil fuels agenda have recently green-lit the development of a new coal mine.[3]

Unless those advocating for reduced fossil fuels use can provide all which is necessary to secure lives and livelihoods, including infrastructure to meet growing energy demands and FDI to secure jobs lost in traditional energy sectors, time should be given to lower-income countries to prosper from the use of fossil fuels – albeit using cleaner technologies – and naturally, transition to renewable energy sources in a manner that is akin to rich countries.

[1] https://www.unep.org/news-and-stories/story/what-you-need-know-about-cop27-loss-and-damage-fund#:~:text=What%20does%20it%20mean%20exactly,species%20extinction%20and%20crop%20failures.

[2] https://www.nytimes.com/2022/11/19/climate/un-climate-damage-cop27.html.

[3] https://edition.cnn.com/2022/12/07/europe/uk-coal-mine-cumbria-energy-climate-intl-gbr/index.html.

[1] https://www.unep.org/news-and-stories/story/what-you-need-know-about-cop27-loss-and-damage-fund#:~:text=What%20does%20it%20mean%20exactly,species%20extinction%20and%20crop%20failures..

AU Summit: A Continental Imperative to Industrialize

AU Summit: A Continental Imperative to Industrialize

The Extraordinary Summit of the African Union (AU) on Industrialization and Economic Diversification in Africa took place between the 20th and 25th of November 2022 in Niamey, Niger. The Summit’s aim was to commemorate Africa Industrialization Day – an annual occasion proclaimed by the United Nations General Assembly in 1989 to raise awareness about the importance of African industrialization and the challenges faced by the continent.

According to Africa’s Industrial Revolution report, the continent’s industrialization drive stands to benefit from an innovative policy mix that combines the focus on traditional manufacturing with a forward-looking focus on new and emerging sophisticated opportunities. African leaders have long echoed the need to reverse the dependence on the global north by accelerating the process of industrialization on the continent by strengthening the institutional frameworks underpinning intra-African trade.

With this imperative in mind, the Summit was attended by leaders across the AU Member States who engaged under the auspices of devising cooperative pathways in order to mobilize industrialization efforts as a fundamental pillar of economic growth, development, and the expansion of employment opportunities. All of these serve the achievement of the African Development Agenda 2063.

In particular, the Summit discussed important issues such as activating the African Continental Free Trade Agreement (AfCFTA) and its relationship with industrialization, employment, technological renewal, and organizational capacity in order to improve industrial performance and make it competitive, as well as making the most of regional value chains.

The Summit also took note of the progress made so far on the AfCFTA and adopted a Draft Decision of the Extraordinary Session on the AfCFTA and three Operational Tools including the AfCFTA E-Tariff Book, AfCFTA Rules of Origin Manual, and the AfCFTA Guided Trade Initiative.

The AU Summit further incorporated the Extraordinary Ordinary Session of the African Union on the AfCFTA on November 25th, where several key points of commitment were made. Central to these was a reaffirmation of their determination to ensure that Africa’s industrialization and economic diversification are financed in a predictable manner and with the urgency of identifying and addressing the impediments to productivity and growth through infrastructural development, energy, access to finance, digitalization, innovation, and skills development to achieve economic diversification.’

The Summit also helped to highlight some of the shortcomings that have hampered economic recovery and the continent’s ability to realize the full potential of a market of 1.3 billion people with a combined GDP of $3.4 trillion. In particular, some leaders noted in their addresses the lack of a clear and coherent continental policy on industry and industrialization as an impediment to the operationalization of the AfCFTA.

Other key outcomes of the Summit included consideration of the Report of the joint meeting of the Ministers of Industry and Economy that took place on November 7th in Niamey. The meeting also considered and adopted the Declaration and Decision of the AU Extraordinary Summit on Industrialization and Economic Diversification.

The recent AU Summit provided another opportunity for national, regional, and continental stakeholders from both the public and private sector to discuss areas of cooperation to facilitate sustainable development in Africa. A recurring theme championed by leaders throughout the Summit echoes the broader discourse around the need for trade and industrial policy alignment – especially between the overlapping policy approaches at the levels of the Member State, Regional Economic Community (REC), and the AU – in order to unlock intra-African trade and inclusive growth.

On behalf of USAID’s African Trade and Investment program, Tutwa was able to deliver a private sector-focused hybrid seminar as a side event at the AU Summit in Niamey, titled ‘Beyond Trade in Goods and Services: Preparing for Phase II of the AfCFTA’. With the support of expert trade and development practitioners, Tutwa’s consultants were able to successfully deliver presentations that spoke to a range of issues that explored policy approaches that could help optimize policy responses to the Phase II and Phase III AfCFTA protocols which include digital trade, investment, intellectual property rights, and the role of women and youth in trade.

AU Extraordinary Summit on industrialization and economic diversification

COMMITMENTS

  1. To accelerate commodity-based industrialization as an engine of growth, productive jobs, and economic diversification through regional value chains on the continent’s natural resources endowments, with priorities on health and pharmaceutical, automotive, minerals beneficiation, food and nutrition, and apparel of cotton industries to reduce the continent’s external dependency. In this regard, the African Union Commission will now draft a report with clear recommendations for strengthening regional value chains.
  2. To increase investments in infrastructure and energy with the support of financial institutions and partners to reduce production costs and boost the competitiveness of the African economies.
  3. To enhance domestic resource mobilization to ensure sustainable financing on Africa’s industrialization and allocate a minimum of 5 – 10% of the national budget dedicated to industrial development.
  4. To develop sustainable Special Economic Zones and Industrial Parks as well as work with and support existing ones in member states as a means to overcoming existing industrial infrastructure constraints and become hubs for regional value chain integration.
  5. To ensure inclusive and sustainable industrialization, the Heads of State and Government and other stakeholders will have regular dialogue with the private sector to scale up high-level engagement in industrialization. The African Union Commission in collaboration with other institutions will strengthen support to Member States in creating an enabling business environment for the private sector to thrive.
  6. The leaders endorsed the African Union Small Medium Strategy. Relatedly, the African Union Commission is tasked with establishing and operationalising the Africa Enterprise Network. The African Union Commission will also work with the African Regional Standards Organization (ARSO) and the Pan-African Quality Infrastructure (PAQI) to expedite the finalization of the Made in Africa Standards and Guidelines.
  7. The leaders have committed to reserve a minimum of 10% of public procurement to local enterprises, to strengthen the private sector development and industrialization.
  8. At the Summit, the leaders agreed to establish, at the national level, programs for industrial linkages between the educational system and the labor market, aimed at promoting the competitiveness of the private sector through the development of soft and hard skills necessary for industrialization in the areas of science, technology, engineering, and mathematics (STEM); technical and vocational education and training (TVET), and robotics and artificial Intelligence. Relatedly, the African Union Commission and the African Capacity Building Foundation (ACBF) will prepare a feasibility study on the establishment of an African Manufacturing Institute to support Member States and the private sector in the development of modern manufacturing skills and fostering innovation in the manufacturing sector that will accompany the ongoing structural economic transformation in Africa.
  9. E Mohamed Bazoum, President of the Republic of Niger, was appointed the African Union Champion on Inclusive and Sustainable Industrialization and Productive Transformation, to provide political leadership and awareness, and ensure a follow-up on the progress regarding the industrial development on the continent to achieve Africa’s transformation under Agenda 2063. The African Union Commission will set up an Inter-Institutional Coordination Mechanism to provide technical assistance to the AU Champion.
  10. With prevailing exceptional circumstances that justify the extension of the TRIPS Agreement to cover therapeutics and diagnostics for a comprehensive response for COVID-19, and to diversify production, the Heads of State called on all WTO Members to support the extension of the TRIPS waiver to cover the production and supply of COVID-19 diagnostics and therapeutics no later than 17 December 2022. Africa accounts for less than 5% of global production of all medical products, exposing the continent to vulnerabilities and fragility during pandemics.

Source: African union press release

Trade Network Inaugural Webinar: “Current and Future Prospects of the AfCFTA”

Trade Network Inaugural Webinar: “Current and Future Prospects of the AfCFTA”

On 17 October 2022, Tutwa Consulting Group launched the TradeNetwork with its inaugural webinar under the theme: “Current and Future Prospects of the AfCFTA”. Trade Network is an initiative by Tutwa Consulting Group whose starting point is to work in Sub-Saharan Africa, leaning into the network of academics, practitioners, and consultants across the fields of law, economics, and trade. The purpose of the initiative is to ensure cooperative research and advice in the complex area of international trade, investment, intellectual property, and dispute resolution for trade and investment matters.

The webinar was the first in a series to discuss the practical and legal implications of the AfCFTA for intra-Africa trade. Some of Africa’s great policy thinkers, drawn from international organizations, think tanks, and academia, were invited to participate in the discussion. The speakers discussed the status of the AfCFTA, new generation issues that predominantly define Industry 4.0, such as Investment, Intellectual Property (IP), Competition, and E-commerce that make up protocols of Phase II of the AfCFTA. The webinar also dived into a deeper unpacking of the issues and challenges that face the AfCFTA negotiators as the preparations for the AfCFTA Phase II negotiations are underway. The dialogue was cross-disciplinary including lawyers and economists, practitioners, and academics.

This webinar presented an opportunity for participants to engage in a dialogue to understand the significance of AfCFTA Phase II associated regulations and policies that can enable the Member States to fully access and utilize their benefits to promote intra-African trade.

The webinar featured intellectual giants who delivered some remarkable presentations. These distinguished guests included Mr. Hamed El-Kady, Program Coordinator and Senior Investment Policy Officer, UNCTAD; Dr. Martin Cameron, Trade Advisory, North-West University; Professor Wilma Viviers, North-West University, and Professor Patricia Lenaghan, University of the Western Cape. Tutwa Consulting Group’s Senior Legal Associate, Rafia Akram, moderated the session and introduced the participants to the Trade Network. Tutwa’s Advisory Director, Mr. Ravi Pillay delivered here the opening and closing remarks. In his opening remarks, Mr. Pillay walked the participants through Tutwa’s shared objective of promoting trade and the role of Tutwa. I had the privilege to present the key takeaways from the presentations and the discussions.

The presentations for the day kicked off with a Keynote address by Mr. Hamed ElKady under the title “The reform of the international investment agreements regime and the African continent”. This presentation unpacked the challenges African countries are facing within the investment legal framework as the investment Protocol is anticipated. One of the key challenges in the African investment climate is that some of the investment agreements signed by and between African countries are old and the investment commitments in most cases are too complex for most African countries.

COVID-19 highlighted the friction between commitment obligations under investment treaties and health priorities. In addition to this, the Ukraine war is another example that the global crisis slows down the capacity to react, particularly within the current investment legal environment. The speaker, therefore, noted the need to balance the global investment regulation system and allow countries to balance commitments to investment agreements with reaction to the crisis. This is what one would also expect to be part of the conversations at an AfCFTA level as the Investment Protocol is anticipated.

Despite the above-highlighted challenges, this presentation ended with an outline of some of the opportunities from the Investment Protocol. The anticipated protocol is going to consolidate a vast network of investment treaties and replace bilateral investment treaties between African countries. Further, it is anticipated that the protocol will simplify and consolidate the investment framework in Africa for the benefit of both the public and private sectors. Overall, the protocol is anticipated to give legal clarity to the State and investors and create a modern framework stipulating both commitments from Member States and obligations by the investors.

On a rather more practical and technical note, the second presentation was delivered by Dr. Martin Cameron under the title “The AfCFTA – from words to action: real-world logistics matters”. While the AfCFTA is necessary, Dr. Cameron’s presentation showed that it was not a sufficient condition for economic growth in the region. The focus should include enabling infrastructure and considering private sector rights and interests. On its own, the AfCFTA will not provide any impetus to the private sector.

The presentation also showed that the success of the AfCFTA is dependent on Phase II. Overall, this will include the implementation of an effective dispute settlement mechanism. This is particularly important for the protocol on investment. Generally, international trade needs predictability and ease of access. To achieve this, the Protocols should be negotiated with a view to ensuring effective trade facilitation measures are also incorporated. The AfCFTA Agreement has already made provision for the establishment of an online Non-Tariff Barriers reporting mechanism founded on the SADC-EAC-COMESA tripartite mechanism.

The AfCFTA trade in goods will have a limited impact, especially within and between regional economic communities (RECs). The presenter argued that tariffs are not the major issue that hinders trade in Africa. Logistics and infrastructure have much impact as that tariffs, but the impact is hidden to an extent. Countries can achieve the biggest economic value by cutting drastically the time spent within the proximity of ports of entry and exit. In a nutshell, Dr. Cameron’s presentation brought out an argument that what is key to the success of the AfCFTA is to never let physical infrastructure and logistics be a bottleneck.

The last presentation was delivered by Professor Patricia Lenaghan under the title “The AfCFTA: Variable geometry and gradualism, as a suitable response to the challenges of integration?” Her presentation gave a general and more theoretical overview of the AfCFTA from a South African perspective. In understanding the AfCFTA, it is important to understand the exact nature of the agreement which according to this presentation is a member-driven agreement. One would also at this point ask what the legal status is and what the implications are for the agreement’s implementation.

Lastly, the relationship between RECs and the AfCFTA is also significant. An assessment of the RECs will show that they have been playing a significant role in integrating Africa. This is a good starting point for the AfCFTA as it seeks to integrate the region further economically. However, the same challenge of infrastructure deficiency remains a challenge even for the AfCFTA. There is, therefore, as was noted earlier on, a need to ensure that as the protocol on investment is concluded, it should also provide for investment in infrastructure as well.

Access the recording from the webinar here.

SADC Summit: Leaders call for sustainable development, peace across the region

SADC Summit: Leaders call for sustainable development, peace across the region

The 42nd Ordinary Summit of the Southern African Development Community (SADC) took place in Kinshasa, the capital of the Democratic Republic of Congo, on 17th and 18th August 2022. Under the theme of “Promoting industrialization through, agro-processing, mineral beneficiation, and regional value chains for inclusive and resilient economic growth”, the Summit was attended by heads of state and government who came together to discuss a broad spectrum of issues centered on the need for a collective framework to strengthen regional economic integration, promote sustainable development, and an end to conflict in the region.

A notable outcome of the Summit was the election of DRC President Félix Tshisekedi Tshilombo who replaced President Lazarus Chakwera of the Republic of Malawi as the chairman of the intergovernmental organization, with Angolan President João Manuel Gonçalves Lourenço chosen as the subsequent in-coming chair.

Peace across the region – or rather the lack thereof – remained a cause for concern amongst the attendees. Two conflicts in particular – in Mozambique and the DRC, respectively – have dominated the regional political zeitgeist of late, carrying with them corrosive socio-economic and political consequences for these countries and neighboring states.

In the case of Mozambique, the Summit approved the extension of the SADC Mission in Mozambique (SAMIM) to support the government’s efforts to maintain security in the Cabo Delgado province; whilst paying tribute to the nine SAMIM personnel who passed away in the line of duty. The renewed emphasis on SAMIM is indicative of the bloc’s commitment to addressing security concerns in the region, realizing the extent to which instability and violence houses the potential for cross-border spillover, and hence requiring a multilateral solution that includes military and technical assistance, but extends into the national and regional policy arena where governments are tasked with ensuring that local communities are incorporated into inclusive growth initiatives. In the latter, leaders expressed concern over the alarming rise in violence amongst armed groups in the mineral-rich eastern region of the Summit’s host country, with an increase in civilian casualties and displacement setting the stage for a renewed humanitarian crisis.

In keeping with its theme of taking a regional approach to fostering peace in Member States, the Summit also highlighted the need for a resolution to security challenges in the Kingdom of Eswatini, mandating the creation of an Extra-ordinary Summit of the Organ Troika to work with the government of Eswatini towards finding a peaceful and sustainable solution. President of South Africa Cyril Ramaphosa, as the SADC Facilitator to the Kingdom of Lesotho, gave an update on the implementation of reforms recommended by SADC to bring an end to recurrent political instability in Lesotho.  Whilst acknowledging the progress that has already been made, the Summit called on the Kingdom to act with greater urgency and expedite the process which involves strengthening the institutional pillars of democracy.

Reaffirming its geopolitical stance, SADC vocalized its vehement opposition to a proposed new United States law that seeks to prevent Russia from bypassing US and EU-led sanctions via a network of allies. The Countering Malign Russian Activities in Africa Act, which SADC’s 16-state membership has complained would make Africa “the target of unilateral and punitive measures”, was passed on April 27th by the US House of Representatives and would enable its government to monitor Russian foreign policy in Africa where it identifies what it deems a “malign influence”. The move was roundly rebuked by SADC’s leaders who reaffirmed their non-aligned position to conflicts occurring outside of the African continent.

Overall, the 42nd Ordinary Summit, while not as consequential as previous meetings, was indicative of the bloc’s commitment to defending the region from within – demonstrating a willingness to defend the region from within, by committing resources to upholding the peace and stability needed to serve as the basis for sustainable development – and from external influence, standing firm on its refusal to be drafted into increasing geopolitical polarization. Perhaps the most important achievement outside of the theme of peace and security was the approval and signing of the Agreement Amending the SADC Treaty on Transformation of the SADC Parliamentary Forum into a SADC Parliament – a move that gives the organization greater powers that could increase the potency of decisions reached in future meetings.

The 43rd SADC Summit will be held in Luanda, Angola in 2023.

“Africa Is not for Sale. Africa is open for business, not for sale or looting. We must defend what is ours and make sure that no one takes from us what is ours…If the world wants what we have they must buy in a fair trade so that we use proceeds to build ourselves new cities, new universities, new infrastructure, industries and new programmes that lifts people out of poverty and vulnerability.” Lazarus Chakwera, President of the Republic of Malawi

Regional integration: A Federation for the EAC?

Regional integration: A Federation for the EAC?

In Africa, regional economic communities (RECs) are known as the ‘building blocks that integrate Member State (MS) economies into an eventual African economic union – according to the Lagos Plan of Action for the Development of Africa (1980) and the Abuja Treaty of 1991. Regional initiatives have advanced economic and political objectives, bolstering the African Continental Free Trade Area’s (AfCFTA) aim of economic inclusion. RECs’ actions have articulated numerous rewards for more domestic and foreign direct investment (FDI), which have brought continental reforms such as stabilisation, market policy, and liberalisation to increase public and private investments. The East African Community (EAC) is one of the African Union (AU) recognised RECs and a building block of the AfCFTA.

The EAC was formed when Kenya, Tanzania, and Uganda signed a treaty in July 2000. Rwanda and Burundi joined in 2007, while South Sudan became the sixth member in August 2016. After submitting Instruments of Ratification on the Treaty for the establishment of the EAC to the EAC Secretary-General on 11 July 2022, the Democratic Republic of the Congo (DRC) officially became the community’s 7th full member[1].

The overall EAC goal is for the seven countries to form a new independent entity called the East African Federation (EAF). The mooted EAF, which would likely be headquartered in the Tanzanian city of Arusha, which would most likely serve as the proposed state’s capital, would be home to approximately 300 million individuals scattered across a territory of 4.8 million square kilometers. According to the Africa Regional Integration Index (ARII), which measures the EAC’s regional integration in five dimensions—trade, productive, macroeconomic, and infrastructural integration, and free movement of people—the region performs best on the free movement of people, but macroeconomic integration is not far behind[2].

However, with the inclusion of the DRC and possible extension of membership to Somalia, vast and challenging geopolitical, regulatory, and economic repercussions have been raised. On the one hand, the DRC stands to greatly accelerate its development, which is battling political turmoil and military incursions from neighbouring states. Through interventions already in place to mitigate these challenges by MS that have signed a troop deployment agreement indicating the official deployment of soldiers to confront rebels in the country’s east along with other interstate interventions.[3]

On the other hand, this may hinder the proposed EAF’s political and economic stability prospects for the region. Also worth noting is that if Somalia is admitted, it would become the bloc’s fifth-biggest state, behind South Sudan, Kenya, Tanzania, and the DRC. However, with a population of 16 million people and a GDP of $7.29 billion according to World Bank estimates, it remains to be seen what Somalia will bring to the table.[4]

Integration to Support Economic Growth

The COVID-19 outbreak, increasing state debt, intensifying inflationary pressures, declining tax collections, and currency depreciation have only exacerbated circumstances the EAC, where problems have been escalating for more than a decade.[5] The region is also confronted with enormous economic issues, many of which have impacted the rest of the globe in the current year. Russia’s conflict in Ukraine, for example, has huge repercussions for East African nations, notably Rwanda, Tanzania, and the DRC. These states buy more than half of the grain their populations consume from Ukraine and Russia. Rwandan Finance Minister Uzziel Ndagijimana stated that the resultant price rises in food imports have already accelerated inflation and hindered the country’s economic progress.

EAC and other African nations are working to maximise the economic advantages of integration. It has already created a free-trade zone. A common external tariff (CET) would impose a standard levy on imports sold in any EAC member state. This tariff has risen to 35%, which some believe is excessively high during high inflation. EAC Secretary General Peter Mathuki notes that the new CET would encourage local manufacturing, value addition, and industrialization. Sustainable economic development also seems to be a priority. The EAC presented a Regional Bioeconomy Strategy in late June 2022 that allows member states to leverage the region’s vast natural resources, including underutilised agricultural waste materials, to produce value-added products for food, health, energy, and industrial goods.

Recently, Kenya’s political and economic dynamics under newly elected President William Ruto has focused on the projected future of the EAC. Uganda’s President Yoweri Museveni has been the most vocal supporter of the EAC Federation, and in the last two years, he has been joined by Kenya’s departing President, Uhuru Kenyatta. It will be important to assess whether Ruto will be as strong a proponent of the EAC’s federation status.

Unquestionably, regional integration consolidation is advancing, although maybe more slowly than some had hoped. Nonetheless, there is optimism that these seven countries, with their rapidly expanding economies, will be able to confront the long-standing issues facing the region via economic growth and development. The growth of Africa’s actual economic might remain an alluring possibility.

[1] Johnson, M. (2022) The East African Federation: A potential new economic superpower looms, International Banker, https://internationalbanker.com/news/the-east-african-federation-a-potential-new-economic-superpower-looms/

[2] African Regional Integration Index (ARII), (2022) EAC: East African Community, https://www.integrate-africa.org/rankings/regional-economic-communities/eac/

[3] The Independent, EAC, DR Congo sign agreement to deploy joint regional force, https://www.independent.co.ug/eac-dr-congo-sign-agreement-for-deployment-of-joint-regional-force/

[4] Musoke, R. (2022) Somalia bids to join East African Community, The Independent https://www.independent.co.ug/somalia-bids-to-join-east-african-community/

Has AfCFTA learnt from the deadlock at the WTO?

Has AfCFTA learnt from the deadlock at the WTO?

On the 3rd of June, the Secretary-General (SG) of AfCFTA, Wamkele Mene, spoke at the 6th International Chamber of Commerce (ICC) Africa Regional Arbitration Conference. He addressed the Dispute resolution body at the AfCFTA. The crux of his message was that the AfCFTA had learned from the deadlock at the WTO and that dispute resolution would open Africa as a continent for business.

The SG highlighted that the emphasis is to improve the rule of law to allow for the resolution of costly and time-efficient disputes with a level of confidence in the system’s objectivity.[1]

This to Mene means allowing for a state-to-state arbitration system only, albeit a tiered system.[2] In his view, arbitration under the AfCFTA is, undoubtedly, integral to the successful implementation of the agreement.[3]

Three key institutions are provided for under the Dispute Settlement Mechanism (DSM), namely:

  1. The Dispute Settlement Body (DSB),
  2. The Adjudicating Panels, and
  • The Appellate Body for second-tier review

The idea is to have a wide-ranging dispute settlement body that will oversee all the disputes that arise under the AfCFTA agreement, whether they are investment-related, trade in goods, trade in services, or market access-related disputes.[4]

It is worth noting that, in addition to the adjudicative process feature in the DSB, Adjudicating Panel, and the Appellate Body, State Parties may also choose to settle their disputes through the good offices of the Secretary-General or conciliation, mediation and arbitration, which may provide even faster track to resolve conflicts.[5] Many believe this will be the most used mechanism, as past practice clearly shows a preference for non-confrontational mechanisms.[6]

Mene sets out the Dispute Settlement Mechanism as a panacea to the deadlock at WTO, which will push African states to utilise African solutions and become the an example for other regions. However, the question to be addressed is will investors in the African economy believe that the rule of law is at the core of the AfCFTA? Will investors be reassured once this dispute resolution mechanism is set up even though it would only allow them to have indirect access to dispute resolution. Some investors may welcome any dispute resolution especially if it is to be found within a regulated environment where investors and states have responsibilities.

Two issues are at the heart of the efficacy of the system. The first is that the process only allows for state-to-state dispute resolution. Investors may prefer to utilise the AfCFTA as a second bite at the cherry. They may rely initially  on ISDS in Free Trade Agreements (FTAs), Bilateral Investment Treaties (BITs), and perhaps even on the application of the Pan African Code on Investment in their home state and then proceed to utilise the dispute resolution mechanism at the AfCFTA.

The second linked issue is that there is no place for setting out conciliation and meditation with private actors as essential first steps before resorting to arbitration. The coming into operation of the Singapore Convention on Mediation has passed the continent relatively unnoticed, which is surprising as it would allow for longevity of investment and compromised solutions to ensure the least disruption to economic growth.

Despite Mene’s optimism, this dispute resolution mechanism may be no different from WTO, perhaps less used due to the African state’s preference to settle issues at the ministerial level through political means. AfCFTA has not taken the lessons of the deadlock to improve the system it has, utilizing a similar approach. The AfCFTA missed the opportunity to focus on commercial mediations and set up a plan that will be sidestepped in favour of investor-state dispute systems under the Pan African Code for Investments, FTAs, and BITs. Finally, the purpose for which the system was created, that is, creating a rule-based system that could be trusted, is absent.

The only solution would be to add an investor-State dispute system linked to the specialized negotiated texts in Phase II, especially investment negotiation, ensuring that the international law preference for lex specialis would ensure that private actors are confined to choosing a system and that they are encouraged to utilise conciliation and mediation.

[1] This follows the definition by Lord Bingham, the preeminent British authority on the Rule of Law.

[2] Article 20 read articles 6 &7 of the Protocol on Rules and Procedures on the Settlement of Disputes.

[3] Article 4 of the Protocol on Rules and Procedures on the Settlement of Disputes

[4] Article 4 of the Protocol on Rules and Procedures on the Settlement of Disputes

[5] Article 8 of the Protocol on Rules and Procedures on the Settlement of Disputes

[6] https://www.afronomicslaw.org/2019/08/19/a-future-court-without-cases-on-the-question-of-standing-in-the-afcfta-dispute-settlement-mechanism