Businesses in Africa are preparing for the inauguration of the 1.2 billion people market, despite challenges on tariff concessions, rules of origin, and trade in services.
The African Continental Free Trade Area (AfCFTA), which brings together all the African countries with a combined gross domestic product of $3 trillion, had initially been scheduled to be launched on July 1. The implementation was postponed for six months due to the global Covid-19 pandemic that led to lockdowns and restricted movement.
The 13th Extra-Ordinary Session of the Assembly of the African Union (AU), which was held on December 5, under the chairmanship of President Cyril Ramaphosa of South Africa, stressed the urgent need to operationalise trading under AfCFTA to break the dominance of South Africa, Egypt, and Nigeria that controls 50 per cent of the African market.
However, while African traders are eager to start exploring new markets, full implementation of the planned agreement is facing teething problems, including non-completion of discussions on tariff concessions, rules of origin, and schedules of commitments in trade in services.
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In addition, Eritrea has not signed the continental trade agreement, while 20 countries including Tanzania, Burundi, and South Sudan have signed but not ratified it.
Some of the other hindrances to the effective implementation of AfCFTA, according to the Kenya Association of Manufacturers, include overlapping membership to regional trade blocs, underdeveloped transportation infrastructure, unfamiliar or different customs and trade procedures, and weak value chains.
Tanzanian senior trade officer in the Ministry of Trade, Ombeni Mwasha said the country has delayed the ratification of the agreement because the pact had to undergo the “laid down” formal procedure of confirmation, which coincided with the October general-election.
In Kenya, the government has announced that it is doing all the necessary internal preparations to exploit trade opportunities, including training businesses on how to trade in AfCFTA.
It is estimated that the average tariff on intra-African trade stands at around 6.1 per cent, higher than that imposed on exports outside the continent.
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Under the AfCFTA, liberalisation of trade is being carried out through regional trading blocs which are the East African Community (EAC), Common Market for Eastern and Southern Africa (Comesa), Southern African Development Community (SADC), and the Economic Community of West African States (Ecowas) which run separate Customs unions.
Each bloc is required to prepare its tariff offers, rules of origin, and schedules of commitments in trade and services and submit them to the AfCFTA Secretariat.
However, in East Africa, negotiations on tariff concessions, trade in services and rules of origin for items such as motor vehicles, clothing and textile, sugar and edible oils are yet to be concluded.
In addition, there are conflicts amongst EAC partner states on the modalities of preparing schedules of tariff offers for goods meant for liberalisation.
Also, Ecowas is yet to submit its liberalisation instruments and must do so before the EAC can trade with the region.