AFCTA What You Know

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African Trade Policy Centre

AfCFTA
What you need to know

Frequently Asked
Questions & Answers

Issue 1: March 2023


To order copies of The AfCFTA – What You Need to Know: Frequently Asked Questions & Answers,
please contact:

Publications Section
Economic Commission for Africa
P.O. Box 3001
Addis Ababa, Ethiopia
Tel: +251 11 544-9900
Fax: +251 11 551-4416
E-mail: ecainfo@uneca.org
Web: www.uneca.org

© 2023 Economic Commission for Africa


Addis Ababa, Ethiopia

All rights reserved


First printing March 2023

Material in this publication may be freely quoted or reprinted.


Acknowledgement is requested, together with a copy of the publication.

The designations employed in this report and the material presented in it do not imply the
expression of any opinion whatsoever on the part of the Secretariat of the United Nations
Economic Commission for Africa or the African Union concerning the legal status of any country,
territory, city or area or of its authorities, or concerning the delimitation of its frontiers or
boundaries.

Designed and printed in Addis Ababa, Ethiopia by the ECA Printing and Publishing Unit. ISO
14001:2015 certified. Printed on chlorine free paper.

Cover photos: https://www.shutterstock.com

ii
The AfCFTA – What You Need to Know: Frequently Asked Questions & Answers

Contents

Introduction.................................................................................................................. 1
1) What is the AfCFTA? What is it about, and what does it aim to achieve? ..................... 3
2) When was the AfCFTA created?............................................................................... 5
3) What does the AfCFTA aim to achieve?..................................................................... 7
4) What does the AfCFTA cover?.................................................................................. 8
5) How does the AfCFTA work? What does its institutional structure look like?............... 10
6) Who is responsible for the implementation of the AfCFTA?....................................... 11
7) What is the relationship between the Abuja Treaty and the AfCFTA?.......................... 12
8) How many African Union Member States have signed the AfCFTA?........................... 13
9) How many countries have ratified the Agreement?.................................................. 13
10) Is there anything that Countries need to do after ratification or is ratification
enough for the AfCFTA Agreement to achieve its objectives? ................................... 15
11) What is the scope of trade policy and regulatory reforms that countries
must undertake to implement the Agreement?........................................................ 16
12) How many State Parties have submitted tariff offers so far?..................................... 19
13) Can we say that the Agreement is now in operation?............................................... 20
14) Has trade under the agreement started?................................................................. 20
15) Is there a plan to complete outstanding negotiations soon?...................................... 21
16) Why does Africa need the AfCFTA? ....................................................................... 22
17) Will the Agreement do anything for African Industrialization? ................................... 23
18) So, can we say that the Agreement will help diversify Africa’s export markets?.......... 25
19) From a broader economic perspective, what can the AfCFTA do for Africa?............... 27
20) Is it correct that the AfCFTA benefits the largest African countries
at the expense of the smallest ? ........................................................................... 28

iii
Contents

21) At the sectoral level, where are the largest gains expected?..................................... 29
22) Will the AfCFTA benefit Africa’s young people?........................................................ 30
23) Will the AfCFTA benefit Africa’s women?................................................................. 31
24) What will the AfCFTA do for Africa’s global voice?.................................................... 31
25) What does the AfCFTA mean for climate change and the environment?..................... 32
26) How does the AfCFTA benefit the African private sector?.......................................... 33
27) What about Non-Tariff Barriers (NTBs)? Will the AfCFTA address these?................... 34
28) What else does the agreement do for Africa’s cross-border traders?......................... 35
29) Much of the Agreement seems to be focused on trade in goods.
What about services?........................................................................................... 35
30) The AfCFTA is about intra-African trade; is there space for international investors?.... 38
31) What about digitalization? Does the AfCFTA help bring Africa forward
into the fourth industrial revolution?....................................................................... 38
32) What are the challenges that African governments, businesses,
and consumers need to be aware of and prepare themselves for?............................ 40
33) What are the internal roadblocks, if any, that stand
in the way of fully implementing the Agreement?..................................................... 41
34) What does the AfCFTA bring to the ordinary African citizen....................................... 44

iv
The AfCFTA – What You Need to Know: Frequently Asked Questions & Answers

Introduction
Exercising its mandate to promote more effectively in trade negotia-
the economic and social develop- tions at the bilateral, regional, and
ment of its member States and fos- multilateral levels. ATPC also works
ter intra-African integration, the closely with key stakeholders in the
United Nations Economic Com- field of trade policy, including the
mission for Africa (ECA) has been private sector, civil society, and ac-
relentlessly supporting the effort ademia, to ensure that trade policy
to establish and operationalize the serves the interests of the general
African Continental Free Trade public for sustainable and inclusive
Area (AfCFTA) since the inception development.
of the idea in 2012. ECA’s support
to the AfCFTA project is led primar- Using its research and policy anal-
ily by the Regional Integration and ysis function, ATPC has established
Trade Division (RITD), which works itself as the authoritative source of
closely with all other ECA divisions, original insights on Africa’s trade
sub-regional offices (SROs) and the policy options, scenarios, and likely
African Institute for Economic De- outcomes. ATPC has assisted the
velopment and Planning (IDEP). AfCFTA process from its inception
by making the case for it, technical-
The African Trade Policy Centre ly supporting the negotiations, and
(ATPC) is a specialized centre of ex- engaging in relentless campaigns to
cellence within RITD that conducts get the agreement ratified follow-
cutting-edge trade policy research ing its adoption. Since the AfCFTA
and analysis, offers capacity building Agreement entered into force, too,
support to member States, and pro- the ATPC has been supporting State
motes consensus building around Parties to develop and execute in-
key strategic ideas. Established clusive national AfCFTA implemen-
in June 2003, the ATPC works to tation strategies.
strengthen the human and institu-
tional capacities of African Govern- Now that AfCFTA has become – at
ments to formulate and implement least technically – part of national
sound trade policies and participate law and regulation in over 85% of

1
Introduction

the AU member States, ATPC is cur- the opportunities created by the Af-
rently focusing on how to take the CFTA. This information asymmetry
AfCFTA a step closer to the ground needs to be bridged over time.
so that the ordinary African citizen
can make sense of what the free In this regard, ECA is pleased to
trade area is all about and exploit its launch this information booklet,
opportunities. Indeed, the AfCFTA titled AfCFTA: What You Need to
will realize its potential to the full Know, which asks sometimes highly
only if Africans, and particularly the technical questions about the Af-
African business community, under- CFTA and attempts to answer them
stand, own and take advantage of it. in a language that is accurate but
However, we also know that the Af- also non-technical and accessible at
rican business landscape is predomi- the same time. The overall objective
nantly made up of small and medium of this information booklet is to help
enterprises (SMEs), including wom- enhance awareness about the Af-
en-owned businesses, who lack the CFTA among the business commu-
capacity to invest in understanding nity and the general public.

2
The AfCFTA – What You Need to Know: Frequently Asked Questions & Answers

The Framework of the African Continental Free Trade Area


(AfCFTA)

1) What is the AfCFTA? What is it about, and what does


it aim to achieve?

The ‘AfCFTA’ stands for the African with free movement of goods across
Continental Free Trade Area which borders within the customs union
was established in 2018 via the Af- and a common external trade regime
CFTA Agreement as negotiated by towards third parties2. Put differ-
Member States of the African Union ently, a customs union is a trade ar-
(AU). To understand what the Af- rangement in which a group of coun-
CFTA is one must first understand tries charge a common set of tariffs
what a Free Trade Area (FTA) is. to those countries outside the union
while granting free trade among
An FTA is an arrangement between themselves. Like an FTA, therefore,
two or more countries which seeks a customs union also aims to create
to create conditions for the free conditions for the free movement
flow of trade amongst themselves.1 of goods among the parties to the
In practice this means countries es- agreement that established the cus-
tablishing FTAs agree not to charge toms union. However, unlike an FTA,
import tariffs, i.e. taxes on imported a customs union establishes a com-
goods, or other barriers from other mon external trade regime, which
members of the FTA bloc. means all the parties to the customs
union apply the same tariffs and re-
To better understand an FTA, it is lated regulations on goods coming
useful to compare it with the related from outside the customs union. As
concept of a customs union. A cus- a result, a customs union is deeper
toms union is defined as the substi- and more ambitious than an FTA.
tution of a single customs territory
for two or more customs territories
See GATT Art. XXIV:8(b).
1

Ibid
2

3
The Framework of the African Continental Free Trade Area (AfCFTA)

FTAs and customs unions are col- Note, however, that the above de-
lectively referred to as regional scription focuses exclusively on
trade agreements (RTAs), or prefer- trade in goods because the Gener-
ential trade agreements (PTAs). The al Agreement on Tariffs and Trade
AfCFTA establishes an FTA among (GATT) of 1947 that first estab-
its State Parties in the sense that lished the multilateral trading sys-
each country that is a party to the tem – and therefore first introduced
AfCFTA Agreement works towards these concepts – was limited in its
creating conditions for increasingly ambition to goods. The AfCFTA is
free flow of trade. But the AfCFTA much more ambitious; it already
is not a customs union yet because covers goods, services, and dispute
each of the State Parties retains settlement, and aims to bring sev-
the policy space to freely set their eral new areas of regulation into its
own external tariffs and other reg- remit – including investment, intel-
ulations vis-à-vis third countries, lectual property, competition policy,
i.e. non-African countries as well as digital trade, and women and youth
African countries that are not yet in trade. More will come on each of
parties to the AfCFTA Agreement. these below. Indeed, a key objective
of the AfCFTA is to lay the foun-
dations for a Continental customs
union and a single market.

4
The AfCFTA – What You Need to Know: Frequently Asked Questions & Answers

2) When was the AfCFTA created?

The Agreement Establishing the Af- ment. Barely 14 months later, by 30


rican Continental Free Trade Area May 2019, 24 States had ratified the
(AfCFTA Agreement) was conceived Agreement, surpassing the minimum
during the 18th Ordinary Session of threshold of 22 ratifications required
the Assembly of Heads of State and for it to enter into force3.
Government of the African Union
(AU) in January 2012. The negotia- As of February 2023, 54 countries
tions for the Continental Free Trade have signed the Agreement, which
Area (CFTA) - as it was then called - means they have taken a political
were launched on 15 June 2015 at commitment to support it, while 46
the Johannesburg summit of the AU countries have ratified it, meaning
Assembly. they have gone a step further and
taken the necessary constitutional
The first meeting of the AfCFTA Ne- steps at the national level to imple-
gotiating Forum, composed of the ment the Agreement as a matter of
Chief Trade Negotiators from the binding law on the state.
governments of the Member States,
was held in February 2016. When Trading under the AfCFTA formal-
the negotiations concluded on 21 ly commenced on 1 January 2021;
March 2018, the AfCFTA Agreement however, it is important to note
and its three protocols - goods, ser- that until July 2022 no meaningful
vices, and dispute settlement - were trade had taken place. In July 2022
adopted. On the day of its adoption, a program titled the ‘AfCFTA-Guid-
44 AU member states signed the ed Trade Initiative’ was announced
Agreement, thus sending the most and trade officially began in October
powerful political signal possible 2022 as a pilot amongst 8 participat-
about the significance of the Agree- ing countries4.
3
Article 23 of the Agreement specifies that the Agreement would enter into force 30 days after the
deposit of the 22nd instrument of ratification. On 30 April 2019 the Democratic Republic of Congo
deposited its instrument of ratification making it the 22nd country to deposit and entering the 30
day period. Over the course of the 22 day period Sierra Leone and Zimbabwe also deposited their
instruments of ratification thus making 24 countries by the date of entry into force.
4
Cameroon, Egypt, Ghana, Kenya, Mauritius, Rwanda, Tanzania and Tunisia

5
6
Timeline & Milestones of the AfCFTA

Feb. Agreement & Adoption of Feb.-July


2016 12 Negotiating Guiding 2017
Negotiations
Principles
Begin

First AfCFTA Negotiating Negotiations &


June Forum held May
Agreement on 90% Tariff
2015 2016 Liberalization

Feb. March
2020 2018
Trading formally AfCFTA Enters
begins into Force

Decision taken to add Phase I Negotiations


Jan.
Protocol on Women and May
Concludes
2021 Youth in Trade & Protocol 2019
on Digital Trade

AU Assembly adopts
Oct. three protocols:
2022 Competition, Intellectual
AfCFTA Guided Trade
Initiative Announced Property and Investment
The Framework of the African Continental Free Trade Area (AfCFTA)

AfCFTA Guided Trade


July Initiative Officially Feb.
2022 Launched 2023
The AfCFTA – What You Need to Know: Frequently Asked Questions & Answers

3) What does the AfCFTA aim to achieve?

The overarching goal of the AfCFTA e) To promote sustainable and


is to establish an integrated African inclusive socio-economic de-
market that enables the free flow of velopment considering gender
goods and services across Africa’s equality and structural transfor-
internal borders. The Agreement mation
also seeks to boost Africa’s trading f) To increase competitiveness of
position in global markets5. Broadly State Parties both intra-conti-
speaking the AfCFTA seeks to ac- nentally and globally
complish eight strategic objectives6: g) To promote industrialization
and diversification, regional
a) To create a single market for value chain development, agri-
goods and services cultural development, and food
b) To liberalize tariffs in goods and security, and
services markets h) To resolve the challenges of
c) To support the movement of multiple and overlapping mem-
capital and persons whilst facil- berships of countries in regional
itating investments that build economic communities (RECs)
on State Parties and REC initia- and expedite the regional and
tives continental integration pro-
d) To lay the foundation for a Con- cesses.
tinental Customs Union

5
https://au-afcfta.org/purpose-the-afcfta/
6
https://au.int/sites/default/files/treaties/36437-treaty-consolidated_text_on_cfta_-_en.pdf

7
The Framework of the African Continental Free Trade Area (AfCFTA)

Objectives of the AfCFTA

Single Market for Goods


& Services

Resolve Overlapping Tariff


Intricacies of RECs Liberalization

Promote Industrialization, Facilitate Investment and


Diversificatiopn, and Free Movement of Capital
Resilience

Promote Inclusive &


Increase Intra-Continental Gender Sensitive
Competition Socio-Economic
Development

4) What does the AfCFTA cover?

The Agreement Establishing the and three protocols – on trade in


AfCFTA is a package of legal instru- goods, on trade in services, and dis-
ments constituting a framework pute settlement in March 2018.
agreement and several protocols;
each protocol may have its own re- However, negotiations are still con-
spective annexes and appendices. tinuing on a number of technical
The negotiations to establish the instruments, such as the annex on
AfCFTA have been conducted in two rules of origin (RoO), national sched-
phases. Phase I of the process start- ules of tariff concessions on goods,
ed in 2015 and concluded with the and national schedules of specific
adoption of the AfCFTA Agreement commitments on services, that are

8
The AfCFTA – What You Need to Know: Frequently Asked Questions & Answers

essential to complete and operation- The draft protocols on the first


alize the Phase I instruments in full. three areas were adopted by the
Phase II of the negotiations, which AU Assembly at its meeting in Addis
are underway today, aim to produce Ababa, Ethiopia, on 19-20 February
protocols in five different but relat- 2023, while the negotiations on the
ed areas – investment, competition remaining two areas are expected
policy, intellectual property rights, to be concluded within 2023. Once
digital trade or ecommerce, and completed, the AfCFTA will cover
women and youth in trade. most facets of trade policy and will
certainly be the most comprehen-
sive economic agreement Africa has
established.

AfCFTA Agreement

Phase I Phase II

 Protocol on Adopted Under Negotiation


Trade in Goods
 Competition Digital Trade
 Protocol on Policy
Trade in Services Women and
 Investment Youth in Trade
 Protocol on
Dispute  Intellectual
Settlement Property Rights

9
The Framework of the African Continental Free Trade Area (AfCFTA)

5) How does the AfCFTA work? What does its


institutional structure look like?

Article 9 of the AfCFTA Agreement Council. The Council of Minis-


lays down an elaborate institutional ters is ultimately responsible
framework to operationalize the Af- for the operationalization of
CFTA. The framework consists of the Agreement and has pow-
four pillars7: ers, amongst others, to es-
tablish standing committees
a) The Assembly of Heads of State for implementing protocols,
and Government; to supervise the work of such
b) The Council of Ministers; committees, to receive and
c) The Committee of Senior Trade consider reports on the activ-
Officials; and ities of the Secretariat, to is-
d) The Secretariat sue regulations and directives
within the limits set by the
• The Assembly is the high- Agreement, and to make rec-
est decision-making body at ommendations to the Assem-
the African Union (AU) that bly for adoption. (Article 11)
provides oversight and guid- • The Committee of Senior
ance on the AfCFTA. The As- Trade Officials is tasked with
sembly has the authority to implementing decisions made
adopt interpretations of the by the Council of Ministers.
agreement that are binding Members of the Committee
on State Parties. (Article 10) are designated by State Par-
• The Council of Ministers is ties and are responsible for de-
designed as a high-level body veloping programmes and ac-
consisting of Trade and other tion plans for implementation
Ministers officially designated of the Agreement. The Com-
by State Parties. The Council mittee also monitors progress,
of Ministers reports to the As- authorizes investigations into
sembly through the Executive any issues arising in relation to

7
https://au.int/sites/default/files/treaties/36437-treaty-consolidated_text_on_cfta_-_en.pdf

10
The AfCFTA – What You Need to Know: Frequently Asked Questions & Answers

implementation of the Agree- Its responsibilities include the


ment, and directs the Secretar- convening of meetings, mon-
iat to undertake specific tasks. itoring and evaluating imple-
In addition to State Parties, re- mentation of the Agreement,
gional economic communities and other duties as assigned
(RECs) are also represented to it8. (Article 13)
in the Committee in an advi- • Thematic committees: In ad-
sory capacity. The Committee dition to the above, each of
meets at least twice a year and the protocols has its own bod-
submits its reports, findings, ies created by the protocols
and recommendations to the themselves, such as the Dis-
Council of Ministers. (Article pute Settlement Body (DSB),
12) or established by the Council
• The Secretariat is a function- of Ministers, such as the Com-
ally autonomous body within mittee on Trade in Goods and
the AU system with an inde- the Committee on Trade in
pendent legal personality. Services. In all cases, the pri-
Based in Accra, Ghana, the mary responsibility of these
AfCFTA Secretariat is “the bodies is to facilitate the oper-
administrative organ man- ation of the relevant protocols
dated to coordinate the im- and further their objectives.
plementation of the AfCFTA”.

6) Who is responsible for the implementation


of the AfCFTA?

The AfCFTA is a Continental trade capacity as the one institution man-


arrangement with a strong institu- dated to coordinate implementa-
tional framework. As such, at the tion of the AfCFTA. Yet, at its core,
continental level, the AfCFTA Sec- the Agreement is one amongst sov-
retariat plays a critical role in its ereign states. The ultimate respon-

8
https://au-afcfta.org/secretariat/

11
The Framework of the African Continental Free Trade Area (AfCFTA)

sibility for the Agreement’s imple- identify strategic areas of national


mentation therefore lies with each interest within the framework of
individual State Party to the Agree- the AfCFTA and specify relevant
ment. To implement the Agreement interventions necessary to benefit
as per its letter and spirit, State Par- from the Agreement.9
ties need to have the requisite polit-
ical will and technical capacity. Finally, implementation of the Af-
CFTA will not mean anything until
One way in which State Parties the private sector – manufacturers
are trying to ensure effective im- and farmers, bankers and telecoms
plementation of the Agreement is operators, importers and exporters,
through National AfCFTA Imple- etc. – understand, appreciate, em-
mentation Strategies in which they brace and champion it.

7) What is the relationship between the Abuja Treaty


and the AfCFTA?

The Abuja Treaty, formally known and promote an endogenous and


as the Treaty Establishing the Afri- self-sustained development”11.
can Economic Community, was ad-
opted on 3 June 1991 in Abuja, Ni- In this regard, the Abuja Treaty and
geria10. The treaty was established the AfCFTA have similar aims and,
in order to: in fact, the AfCFTA is an important
tool designed to achieve the in-
“Promote economic, social and cul- tegration vision articulated in the
tural development and the integra- Abuja Treaty. The development of
tion of African economies in order the RECs and subsequent bilateral
to increase economic self-reliance agreements have all been steps to-

9
https://trade4devnews.enhancedif.org/en/op-ed/implementing-afcfta-2021
10
https://au.int/sites/default/files/treaties/37636-treaty-0016_-_treaty_establishing_the_african_
economic_community_e.pdf
11
https://au.int/sites/default/files/treaties/37636-treaty-0016_-_treaty_establishing_the_african_
economic_community_e.pdf

12
The AfCFTA – What You Need to Know: Frequently Asked Questions & Answers

wards African integration. The Af- mentum and help Africa realize the
CFTA seeks to build upon this mo- vision contained in the Abuja Treaty.

AfCFTA State of Play (February 2023)

8) How many African Union Member States have


signed the AfCFTA?

As of February 2023, 54 of the 55 Agreement. Eritrea is the only ex-


AU Member States have signed the ception, so far.

9) How many countries have ratified the Agreement?

As of February 2023, 46 countries, history. When it entered into force


or about 85% of the signatories on 30 May 2019 the Agreement
of the Agreement, have ratified it. became legally binding and now, for
These 46 countries represent 94% the 46 countries that have ratified,
of Africa’s GDP, 88% of its popula- the rules and obligations contained
tion and 94% of its total trade12. The in the AfCFTA Agreement are bind-
importance of this cannot be over- ing and supersede any established
stated as the speed of this ratifica- national laws and practices that are
tion process is unprecedented for an inconsistent with the provisions of
agreement of this nature in African the AfCFTA Agreement.

12
Data from UNCTADStat, Accessed September 2022. Note: Total Trade defined as the sum of ex-
ports and imports to/from Africa at the individual country level

13
AfCFTA State of Play (February 2023)

14
The AfCFTA – What You Need to Know: Frequently Asked Questions & Answers

10) Is there anything that Steps Necessary to


Countries need to do after Implement the AfCFTA
ratification or is ratification Agreement
(not linear, not exhaustive)
enough for the AfCFTA
Agreement to achieve its
objectives? Ratification
of AfCFTA

For the AfCFTA to realize its ob-


jectives, ratification is only the first Deposit
instrument of
step. Once they have ratified the ratification
with AUC
Agreement, State Parties need to Chairperson

take several additional steps, both


Translate
individually as well as collectively. Obligations of
Agreement
into National
Laws
Individually, once they have ratified
the Agreement, State Parties need Submit
Schedule of
to translate the rules and obligations Tariff
Concessions
specified by the Agreement into
domestic laws, regulations, institu-
Submit
tions, and administrative practices. Schedule of
Specific Service
These efforts are critical to ensure Commitments

domestic law does not conflict with


the commitments contained in the Technical
AfCFTA Agreement. This is a com- Verification of
Goods & Services
plex undertaking that takes time, Commitments

resources, and perseverance. In


many cases, new institutions may Annexing Goods and Services
have to be established, new practic- Schedules to the AfCFTA Agreement
for each State Party
es introduced, capacities created,
approaches adopted and, in some
cases, political resistance overcome. Giving Effect to Schedules
through National Tariff
Books and Related
Regulatory instruments

15
AfCFTA State of Play (February 2023)

At the continental level, each State barriers must be validated at conti-


Party also needs to submit detailed nental level and applied by national
schedules of tariff concessions on customs authorities and other reg-
the importation of goods and similar ulatory agencies. Only then can we
schedules of specific commitments say the AfCFTA is in fact being im-
on services. These schedules for the plemented to make trading across
reduction and elimination of trade African borders easier.

11) What is the scope of trade policy and regulatory


reforms that countries must undertake to implement
the Agreement?

In implementing the AfCFTA Agree- blocks for the AfCFTA itself. As a re-
ment, different African countries sult, the AfCFTA-inspired reforms
start from different positions de- build on existing regional and global
pending on the kind of policies and frameworks, which should make the
regulations they had prior to the process of AfCFTA implementation
entry into force of the Agreement. at the national level relatively easier
For example, most AfCFTA State to manage.
Parties are already members of the
WTO, which means they are likely Yet, the level of trade liberalization
to have put in place trade policies, envisaged in the AfCFTA is quite am-
regulations, and institutions that bitious. For example, AfCFTA State
aim to create a conducive trade en- Parties have agreed to eliminate
vironment that reflect WTO law. tariffs on 97% of tariff lines over an
In these countries, most of the Af- agreed period of time while they al-
CFTA-inspired changes are only lowed themselves the freedom to
incremental in nature; they are not exclude a maximum of 3 percent of
innovations. Likewise, virtually all total tariff lines from liberalization.
AfCFTA State Parties participate Of the 97% of products whose tar-
in one or more RECs within Africa, iffs are slated for reduction and elim-
which are meant to serve as building ination, there are two categories:

16
The AfCFTA – What You Need to Know: Frequently Asked Questions & Answers

1. For the first 90% of products, Agreement – i.e. by 2033, trade


tariffs will be eliminated over in 97% of all goods originating in
five years in the more advanced Africa should be traded across
African countries (the develop- borders free of any customs
ing countries) and over ten years duties or other charges having
for the less advanced countries equivalent effect.
(the least-developed countries
or LDCs). It is also important to note that the
2. The remaining 7% of tariff lines, Agreement has built in safeguards
designated as sensitive, will still to make sure tariff liberalization
be reduced and eliminated, but happens in a broad-based manner
over a longer timeframe: the de- through what is called a ‘double
veloping African countries would qualification component’. Through
do this over 10 years, while the this qualification each State Party
LDCs are given 13 years13. In all must ensure that the 90% of tariff
cases, the reductions take place in lines it reduces and eliminates over
equal annual instalments. the implementation period rep-
resents at least 90% of its imports
As an example, a product falling from the rest of Africa. To provide
within the 90% category that, a simple example, if a country’s total
upon importation to a develop- imports from Africa consisted of 10
ing African country, attracted items but the proportion, by value,
a duty of 25 percent in 2020 of those items was heavily skewed
would only be subject to a 20% to just one, comprising, say, 30% of
duty in 2021, 15 % in 2022, and that country’s overall imports from
so on until the tariff becomes within Africa over a previous repre-
zero in 2025. This process sentative period, the double quali-
would take 10 years for LDCs. fication component would bar that
What this means, in practice, is country from including that partic-
that 13 years from the date of ular item in its sensitive or excluded
entry into force of the AfCFTA list. In practice the double qualifica-

13
LDCs have the option to start liberalizing sensitive products 5 years after the start of trading under
the Agreement, i.e. until 1 January 2026. However, the end date for tariff liberalization would remain
the same.

17
AfCFTA State of Play (February 2023)

tion standard ensures that the de- of goods coming into that country
cision to eliminate tariffs on 97% of from the rest of Africa and reduces
tariff lines does not end up impact- the risk of future protective barriers
ing adversely on the small amount being imposed.

Illustration of Tariff Liberalization Schedules


for Developing Countries

First 90% of On the first 90% of tariff


lines, tariffs are to be
Tariff Lines liberalized according to
(General) a normal schedule

On the next 7% of tariff


Next 7% lines countries have
(Sensitive) additional time to
remove tariffs

On the next 3% of
Final 3% tariff lines countries
(Excluded) have the right to
maintain tarrifs

18
The AfCFTA – What You Need to Know: Frequently Asked Questions & Answers

Illustration of Timeline for Tariff Liberalization


for 90% of Tariff Lines in Developing Countries

Initial
Tariff: Year 2:
25% 15%

2020 2022

Year 4:
Year 1: 5%
20%
2024

2021
Year 3:
10%

Year 5:
2023 0%

2025

12) How many State Parties have submitted


tariff offers so far?

As of January 2023, 46 Member ance with the tariff reduction for-


States have submitted their tariff mulae described above, after which
offers (including 4 from Customs they are presented before the
Unions) while 36 have been techni- Council of Ministers for adoption.
cally verified. By technical verifica- Only then can the national sched-
tion we mean the process by which ules of concessions become legally
the draft schedules, prepared and binding instruments and included as
submitted by individual State Par- Annex 1 to the AfCFTA Protocol on
ties, are checked by the Secretariat Trade in Goods for that particular
for technical accuracy and compli- State Party.

19
AfCFTA State of Play (February 2023)

The approach adopted for ser- sectors that have not been chosen
vices-liberalization started with as priorities in the first phase. On
the identification of a minimum of that basis, as of January 2023, all
five priority sectors for negotia- Member States, except three, have
tions – transport, communication, submitted their services liberaliza-
finance, tourism and business ser- tion offers for technical verification
vices. Plans are already in place to by the Secretariat.
bring into negotiations the services

13) Can we say that the Agreement is now in operation?

Yes, the ‘operational phase’ of the trading’ under the AfCFTA Agree-
AfCFTA was launched by an Ex- ment. Therefore, the Agreement
traordinary AU Summit in Niamey, is operational for those Member
Niger, on 7 July 2019 and 1 January States that have ratified it.
2021 was set as the date for ‘start of

14) Has trade under the agreement started?

As noted above, while the opera- including agreed rules of origin and
tional phase of the Agreement was the schedules of concessions and
launched as early as July 2019, commitments, needed to be in place
three years later, in July 2022, the for actual trade to start. The nego-
SG of the AfCFTA Secretariat stat- tiations on these instruments are in
ed that “trading under the AfCFTA their final stages. Indeed, as indicat-
preferences has not taken place”.14 ed above, in October 2022, the Af-
There are several factors behind that, CFTA Council of Ministers launched
the Covid-19 pandemic being one. the AfCFTA Guided Trade Initiative,
Also, several additional instruments, a pilot project involving eight select-

See Statement by the AfCFTA Secretariat Secretary-General to the Ninth (9th) Meeting of the
14

Council of Ministers (CoM) of the African Continental Free Trade Area (AfCFTA), 26 July 2022, Af-
CFTA/COM/9/REPORT/DRAFT, paras. 54 ff.

20
The AfCFTA – What You Need to Know: Frequently Asked Questions & Answers

ed countries – Cameroon, Egypt, trade among State Parties that have


Ghana, Kenya, Mauritius, Rwanda, met the minimum requirements for
Tanzania, and Tunisia – which seeks trading under the Agreement.
to facilitate commercially meaningful

15) Is there a plan to complete outstanding


negotiations soon?

Yes. In February 2022 the Assem- June 202215. While these deadlines
bly put forth a directive endorsing have been missed, the political com-
the start of trading under Provision- mitment to get the job done expedi-
al Schedules of Tariff Concessions tiously is unmistakable.
pending the conclusion of all out-
standing issues on tariff schedules. Phase II negotiations are also pro-
This was further emphasized in June gressing. For quite some time, spe-
2022 by the Council of Ministers. cialized Committees on investment,
Additionally, the Assembly directed on intellectual property rights, on
the AfCFTA Secretariat to continue competition, on digital trade, and on
facilitating negotiations. women and youth in trade have been
working hard to complete the Af-
Regarding services, the Assembly CFTA package. The draft protocols
took note of the establishment of five on the first three were adopted by
sub-committees on Specific Commit- an extraordinary meeting of the Af-
ments, Regulatory Frameworks, Pro- CFTA Council of Ministers that was
fessional Qualifications, Services-re- held from 27 to 28 October 2022 in
lated Issues, and Services Rules. It Libreville, Gabon. At its 36th ordinary
initially set a goal to complete nego- session held in Addis Ababa, Ethio-
tiations on the five priority sectors pio, from 18-19 February 2023, the
identified previously (financial, com- AU Assembly adopted these three
munication, transport, professional protocols and opened them for rat-
services, and tourism) by the end of ification by member states.

15
https://au.int/sites/default/files/decisions/41583-Assembly_AU_Dec_813-838_XXXV_E.pdf

21
Why do we need the AfCFTA? How can Africa benefit?

Why do we need the AfCFTA? How can Africa benefit?

16) Why does Africa need the AfCFTA?

There are several reasons why the To present this in quantitative


AfCFTA is good for Africa. The Af- terms, as of 2021, 17 African coun-
CFTA promises to replace over 50 tries had an average GDP of less
small and fragmented markets in Af- than $10 billion17. In addition, Afri-
rica with a single Continental mar- can traders face average tariffs of
ket of over 1.4 billion people repre- 6.9% when they trade across Afri-
senting about one-sixth of the global ca’s 107 unique land borders. Sub-
population16. When consolidated, stantial non-tariff barriers, resulting
the African market is approximately from regulatory differences, such
the same size as India’s. However, as divergent sanitary, phytosani-
unlike India which operates as a sin- tary, and technical standards, raise
gle market, Africa has been divided costs even higher by an estimated
into more than 50 unique markets, 14.3 per cent.18 Intra-African trade
almost all of which are individually is simply too costly. The power of
too small to support investment on the AfCFTA thus lies with its ability
the scale necessary for Africa to in- to integrate and consolidate Africa
dustrialize. into a single USD 2.4 trillion market
and thereby eliminate many of the
barriers to trade present across the
Continent.

16
Data from UNCTAD Stat, Accessed September 2022
17
Ibid.
18
Average tariffs faced by exporters within regions calculated with reference group weighted aver-
age tariffs based on 2013 MAcMap-hs6. For cost estimates of non-tariff barriers see, Cadot, O., A.
Asprilla, J. Gourdon, C. Knebel and R. Peters. 2015. “Deep Regional Integration and Non-tariff Mea-
sures: A Methodology for Data Analysis.” Policy Issues in International Trade and Commodities Study
Series 69, UNCTAD (United Nations Conference on Trade and Development), Geneva.

22
The AfCFTA – What You Need to Know: Frequently Asked Questions & Answers

17) Will the Agreement do anything for African


Industrialization?

Today, Africa’s external exports, as inevitably translates into unpre-


compared to its internal trade, are dictability in foreign currency
overwhelmingly concentrated in revenues and leaves African
raw materials with little to no val- countries incapable of planning
ue addition. For example, in 2021, their long-term development
Africa exported a total of USD 559 with any degree of certainty.
billion worth of goods, of which pri- b) Commodity dependence tends
mary commodities comprised USD to worsen terms of trade over
431.5 billion, or 77% of Africa’s total the long run.
exports. To provide a slightly deep- c) Commodity exports “entail huge
er look, mineral fuels in particular forgone income through lack of
accounted for approximately 34% value addition and the export of
(USD $191.5 billion) of Africa’s glob- jobs to countries that can add
al merchandise exports with a large value”20.
proportion of these exports (USD d) Evidence suggests that no
$180 billion) being in raw petroleum country has been transformed
or natural gas products. In addition, by exporting raw materials. In-
another 12% (USD 69.3 billion) of dustrialization is the tried-and-
Africa’s exports to the world were in tested route for sustainable
raw materials like Rubber, Oil Seeds, transformation.
Pulp and Textile Fibers19. e) Industrialization transfers skills
and technology, creates jobs
Africa’s export composition leaves it and injects hope and dynamism
exposed to several threats: into society, whereas concen-
trating on extractive industries
a) Primary commodities are no- does not.
torious for their price volatility
on international markets, which
19
Data from UNCTADStat, accessed September 2022
20
ERA 2013, pp. 8-9 https://archive.uneca.org/sites/default/files/PublicationFiles/unera_report_
eng_final_web.pdf

23
Why do we need the AfCFTA? How can Africa benefit?

By lowering barriers to trade and about the AfCFTA as transforma-


incentivizing investment across the tional for Africa, we are not wallow-
Continent, the AfCFTA creates a ing in hyperbole; we are describing
conducive environment for African the underlying thinking and the true
industrialization. Thus, when we talk potential of the AfCFTA project.

Figure 1: Composition of African Figure 2: Composition of


External Exports, 2016-2021 Intra-African Exports, 2016-2021
100% 100%
7% 7% 9% 9% 8% 8%
14% 12% 10% 11% 16% 11%
90% 90% 8% 8% 6% 6% 10% 11%

80% 15% 13% 12% 12% 15% 12% 80%


19% 19% 22% 23% 17% 20%
70% 70%
11% 12% 12% 12%
15% 20%
60% 60%
20% 20% 18% 19% 22% 22%
50% 26% 24% 23% 23% 50%
25% 23%
40% 40%

30% 30%
34% 39% 43% 41% 29% 34% 46% 45% 46% 43% 44% 39%
20% 20%

10% 10%

0% 0%
2016 2017 2018 2019 2020 2021 2016 2017 2018 2019 2020 2021

Other Ores and metals (SITC 27 + 28 + 68)

All food items (SITC 0 + 1 + 22 + 4) Other

Ores and metals (SITC 27 + 28 + 68) Fuels (SITC 3)

Manufactured goods (SITC 5 to 8 less 667 and 68) All food items (SITC 0 + 1 + 22 + 4)

Fuels (SITC 3) Manufactured goods (SITC 5 to 8 less 667 and 68)

Source: UNCTADStat Database

24
The AfCFTA – What You Need to Know: Frequently Asked Questions & Answers

18) So, can we say that the Agreement will help


diversify Africa’s export markets?

Yes. As shown earlier, Africa is overly ed for only 21.5% of intra-African


reliant on the export of primary com- exports and other crude minerals
modities. Between 2019 and 2021, accounted for only 6%. Combined,
primary commodities accounted for manufactured goods and machinery
approximately 76% of Africa’s glob- and transport equipment comprised
al goods exports, on average. At the 25% of intra-African exports. In-
national level the situation is even tra-African exports were mainly driv-
more stark. For example, primary en by the production of goods higher
commodities accounted for over 80 along value chains like road vehicles
percent of total exports for 37 Af- and transport equipment, for exam-
rican countries individually. In ten ple22. Therefore, the AfCFTA prom-
of these countries this ratio was 97 ises to help Africa pivot away from
percent or higher21. extractives and secure sustainable
and inclusive development, leading
However, the makeup of intra-Afri- to more stable foreign exchange rev-
can trade is more balanced. In 2021, enues and increasing the variety of
for example, mineral fuels account- goods in African markets.

21
Data from UNCTADStat, Accessed September 2022
22
Data from UNCTADStat, Accessed September 2022

25
Why do we need the AfCFTA? How can Africa benefit?

Evolution in the level of Export Diversification Across World Regions


1
0.9
0.8
0.7
0.6
0.5
0.4
0.3
0.2
0.1
0
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021

Africa America Asia Europe European Union

Evolution in the Level of Export Diversification across African Regions


1

0.9

0.8

0.7

0.6

0.5

0.4

0.3

0.2

0.1

0
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021

Northern Africa Eastern Africa Central Africa Southern Africa Western Africa

Note: Scores closer to 1 indicate higher levels of diversification whereby scores closer
to 0 indicate lower levels of diversification
Source: UNCTADStat Database

26
The AfCFTA – What You Need to Know: Frequently Asked Questions & Answers

19) From a broader economic perspective, what can


the AfCFTA do for Africa?

The AfCFTA is expected to be a are expected to be the greatest. As


game-changer for Africa. ECA has discussed, compared to Africa’s
forecast the potential benefits the global exports, which are highly con-
Agreement can bring to Africa in centrated in extractives its internal
2045 versus the situation without the trade is much more balanced, which
agreement. Overall, ECA estimates gives the Continent a platform to
that the Agreement will increase Af- promote the kind of industry that
rican GDP, trade, output and welfare will help build resilience from exter-
while also having positive impacts on nal shocks. ECA further estimates
poverty and inequality. that intra-African trade in agri-food,
services, and industry trade are ex-
While the Agreement is expected pected to increase by 49.1, 37.9, and
to benefit Africa generally, since it 35.7 percent, respectively in 2045
is an Agreement focused mainly on as compared to the situation with-
intra-African trade the impacts here out the Agreement23.

23
United Nations. Economic Commission for Africa; United Nations. Economic Commission for Af-
rica (2021-07). New assessment of the economic impacts of the agreement establishing the African
continental free trade area on Africa: Policy Brief. Addis Ababa :. © UN. ECA,. https://hdl.handle.
net/10855/46750”

27
A game changer for Africa's internal and external
trade relations
Why doprovides
The AfCFTA we need the AfCFTA?TheHow
an unprecedented increasescan Africa
in relative terms forbenefit? Effective implementation of the AfCFTA
opportunity for Africa's transformation, agrifood, industry and services will not would therefore not only boost
competitiveness and development. lead to equal increases in absolute terms, intra-African trade but also help Africa
because intra-African trade is currently industrialize and diversify away from
dominated by industry. energy and mining.

In 2020 In 2045 - Without AfFTCA In 2045 - With AfFTCA

Value of
Intra-African trade ≈ $113 bn + 405% + 577%
(compared to 2020)
(compared to 2020)

Share of
Intra-African trade
≈ 14.2% ≈ 19.4% ≈ 24.6%
37% increase compared to 2020 73% increase compared to 2020

Services 2.6 % 2.9 % 3.0 %


Agri-food 20.0% 15.5 % 17.2 %

Industry 44.8 % 59.1%


59.8%
Energy/Mining 32.6%
22.5% 20.0%
Source: ECA & CEPII/CIREM’s calculations based on MIRAGE-Power (January 2023)

The AfCFTA will also contribute to reduce the current trade dependence of Africa on its external partners
Currently, around 85% of Africa’s formal
20) Is it correct that the AfCFTAIntra-African
benefits
trade is with the rest of the world.
alue-added p
trade
the2045largest
low v rod
TS:
African countries at the expense of the smallest ?
uc
OR

}
EXP

ts

2020

No, it is not. Differences in national are more resource dependent like


As intra-African trade would grow more than
economies will portend differences Chad,Africa'sthe Republic
trade with the rest of theof
worldCongo,
between and
in gains from the Agreement. At the 2020 and 2045, and following
Zambia may see fewer gains with- the successful
realization of the AfCFTA market, the share of formal
national level Africa has a high level out intra-African
harnessing trade wouldindustrialization
expand substantially.
24
.
ds
oo

IM l g
of income disparity O R TS: In dand a
ustr every econ- So, while there is heterogeneity be-
P i

omyAfrica’s
is different.
imports from the restDiversified econo-
of the world are mostly industrial goods (whichtween countries, the AfCFTA holds
account for 60% of Africa’s total imports from the rest of the world).
mies such as Ethiopia, Rwanda, and something for every country. ECA
Côte d’Ivoire may see earlier bene- estimates that with full liberaliza-
fits from tariff liberalization. Over tion of tariffs, by 2040, exports to
the longer-term, industrialization Africa will be 23% higher for non-
may benefit countries like South Af- LDCs, and 21% for LDCs, nearly
rica and Kenya more. Others that identical25. The key is for AfCFTA
24
https://www.atlanticcouncil.org/blogs/africasource/who-are-the-winners-and-losers-of-africa-s-
new-free-trade-agreement/
25
https://archive.uneca.org/sites/default/files/PublicationFiles/brief_assessment_of_afcfta_modali-

28
The AfCFTA – What You Need to Know: Frequently Asked Questions & Answers

State Parties to develop implemen- respective comparative advantages


tation strategies that focus on their for sustainable development.

21) At the sectoral level, where are the largest gains


expected?

As mentioned earlier, by sector the and transport equipment, met-


largest gains are expected in the als
agri-food, industry, and services c) In services: Tourism and Trans-
sectors. ECA estimates the follow- port
ing products in these sub-sectors
will see the largest benefits26: These sectoral gains are critical to
securing Africa’s long-term prosper-
a) In agri-food: Cereals and crops, ity. Even without the agreement, the
milk and dairy products, sugar, IMF projects that by 2025 six of the
and processed foods top 10 fastest growing economies
b) In industry: Wood and paper, globally are expected to be in Africa.
chemicals, rubber, plastic, phar- The AfCFTA serves as a platform to
maceutical products, vehicles accelerate Africa’s progress.

ties_eng_nov18.pdf
26
https://uneca.org/sites/default/files/keymessageanddocuments/en_afcfta-infographics-11.pdf

29
the agreed preferential terms.

*Source: Assessment of the economic implications of the AfCFTA’s implementation carried


out by the United Nations Economic Commission for Africa (ECA) and the Centre for
International Research and Economic Modelling (CIREM) of the Centre d’Etudes Prospectives
et d’Information Internationales (CEPII), July 2021.

Why do we need the AfCFTA? How can Africa benefit?


The AfCFTA’s economic benefits are
largely centered on intra-African trade
Global variation Percentage change in intra-African trade, globally
and by main sectors with AfCFTA implemented in
34.2% 2045 as compared to baseline (i.e. without AfCFTA)
The AfCFTA is expected to have positive (equivalent to a gain
of US$ 194.8 billion)
impact on Africa’s global GDP, trade, output Energy/Mining
and welfare with benefits largely 19.4%
Agrifood Services Industry (+US$ 24.8 billion)
concentrated in intra-African trade 35.7%
49.1% 37.9%
(+US$ 6.3 billion) (+US$ 120.4 billion)
(+US$ 43.3 billion)

Intra-African trade creation


would also lead to an
improvement in Africa’s output. At sub-sectoral level, the most notable increases in intra-African
trade, with positive output variations are to be found in:

Refined oil,
mining
Wood and paper, chemicals,
rubber, plastic and
pharmaceutical products, Expected benefits in refined oil
vehicles and transport need to be analyzed carefully, in
Cereals and crops, milk and light of environmental concerns
dairy products, sugar, equipment, metals, textile, associated with C02 emissions
processed food, rice, meat apparel & leather products,
Tourism and transport other manufactured from fossil fuels
products

22) Will the AfCFTA benefit Africa’s young people?

The Agreement Establishing the Af- 1. Reducing costs of trade with


CFTA promotes inclusiveness and reduced tariffs and non-tariff
broad-based socio-economic devel- barriers incentivizing formaliza-
opment. Africa being the youngest tion; and
continent in the world, with 251 mil- 2. Boosting trade, value addition,
lion young people, the AfCFTA aims and economic growth in sectors
to address key barriers that affect where the youth are highly rep-
the youth, such as unemployment, resented, such as in small-scale
overrepresentation in the informal agriculture, and the creative
sectors, age discrimination, and lack- and digital sectors.
ing in access to finance. The AfCFTA
will help mitigate these challenges The inclusion of a dedicated AfCFTA
through, among other means: Protocol on Women and Youth in
Trade is intended to pursue these
objectives and strengthen the posi-
tion of the African youth in intra-Af-
rica trade.

30
The AfCFTA – What You Need to Know: Frequently Asked Questions & Answers

23) Will the AfCFTA benefit Africa’s women?

Yes, it will. To mention just two ex- reducing tariffs and other barriers
amples, women are estimated to to cross-border trade, the AfCFTA
account for around 70 per cent of reduces the perceived incentives
informal cross-border traders in of informality, thereby encouraging
Africa. Women also represent 58 informal traders to operate through
per cent of all Micro, Small, and Me- formal channels that offer more pro-
dium Enterprises (MSMEs) in Afri- tection. Overall, the contribution of
ca. When engaged in such activity, the AfCFTA to gender equality and
women are particularly vulnerable women economic empowerment
to harassment, violence, confisca- is expected to be significant. Once
tion of goods and even imprison- again the decision to negotiate a
ment. Additionally, research has standalone AfCFTA Protocol on
shown that many women-led firms, Women and Youth in Trade, a first in
especially MSMEs are less profit- history, is indicative of the determi-
able than those owned by men. By nation to achieve this goal.

24) What will the AfCFTA do for Africa’s global voice?

The world sees Africa as scores of AU Agenda 2063, Africa can achieve
small and fragmented units with lit- more only if it can “speak with one
tle to no voice and engages with it voice and act collectively to promote
as such. This fragmentation limits our common interests and positions
Africa’s ability to play a meaningful in the international arena”. Indeed,
role in making the rules that govern only in this manner can Africa ensure
global economic relations. Only by the unity and solidarity necessary to
forging a common position on im- withstand the continued external in-
portant matters of common interest terference in its affairs. With a sin-
can Africa become strong enough gle voice, Africa can negotiate better
at the negotiating table to write its trade deals than what each of the 55
interests into the global rules of en- AU member States have been able
gagement. Using the language of the to achieve individually.

31
Why do we need the AfCFTA? How can Africa benefit?

By serving as a tool to integrate Af- indicated their desire to strength-


rica’s small and fragmented econo- en trade relations with Africa. The
mies into a large single market, the negotiations that are likely to fol-
AfCFTA will provide the platform low these engagements must be
for Africa to negotiate trading ar- handled from a position of strength.
rangements with external partners Speaking with one voice will help
on terms that are more favorable to make the African voice louder, bold-
it than has been the case hitherto. er, and stronger on the global stage.
Recently, the United States, the Eu- The AfCFTA provides the platform
ropean Union, Japan, China, India, for this to happen.
and several other economies have

25) What does the AfCFTA mean for climate change


and the environment?

The International Panel on Climate but suffers the most from it. While
Change (IPCC) put it well when it increased trade under the AfCFTA
said: is expected to support the Conti-
nent’s industrialization and broad-
“Africa has contributed among based development, more trade
the least to greenhouse gas may also raise concerns about its
emissions, yet key development impact on the climate. For example,
sectors have already experi- increased economic activity often
enced widespread loss and dam- translates into increased demand
age attributable to anthropo- for transportation of goods, which in
genic climate change, including turn requires additional investment
biodiversity loss, water short- in trucking and transport infrastruc-
ages, reduced food production, ture, like roads and bridges. This
loss of lives and reduced eco- would also mean increased move-
nomic growth” (IPCC, 2022) ment of people across borders. It is
thus natural that questions about
In other words, Africa contributed the impact of the AfCFTA on climate
the least to causing climate change change are being raised.

32
The AfCFTA – What You Need to Know: Frequently Asked Questions & Answers

The fact that Africa has hardly con- same time, neither should Africa’s
tributed to climate change does efforts to bring about development
not mean Africa should ignore this through the AfCFTA be undermined
existential challenge. In this con- by climate change considerations.
text, the AfCFTA can be a tool for Climate justice demands that the
reducing emissions as it can poten- principle of common but differenti-
tially increase the availability and af- ated responsibilities is operational-
fordability of environmental goods, ized to the letter and spirit.
services, and technologies. At the

The AfCFTA and African Businesses

26) How does the AfCFTA benefit the African


private sector?

The AfCFTA is essentially about eliminate tariffs on 97 percent of


creating a conducive working en- goods traded between State Parties
vironment for the African private to the Agreement over a period of
sector by reducing barriers to trade, 13 years. When that happens, the
harmonizing national policies and African business sector will reap
regulations across the Continent, the benefits in the form of not only
and by reducing transaction costs a larger market to export to but also
more generally. For example, as cost savings and associated compet-
indicated earlier, the AfCFTA will itive advantages in that market.

33
The AfCFTA and African Businesses

27) What about Non-Tariff Barriers (NTBs)? Will the


AfCFTA address these?

NTBs, i.e. all barriers to trade that es NTBs is through the Continen-
take a form other than tariffs or cus- tal Non-Tariff Barrier Mechanism
toms duties, pose a major challenge (the NTB Mechanism), available at
to cross-border trade on the Con- https://tradebarriers.africa/home.
tinent. Some examples of NTBs are The NTB Mechanism enables busi-
discretionary import licensing pro- nesses and traders to submit their
cedures, technical and health-re- NTB-related complaints, which
lated standards, and quantitative will then be forwarded to nomi-
restrictions which can include out- nated focal points in the countries
right bans against the importation against which the complaints are
of products from particular coun- lodged for follow up and necessary
tries. Tackling these pervasive and intervention. The tool is currently
damaging instruments is therefore operational, but widespread use of
paramount to a successful trading the tool has yet to materialize since
arrangement. And the principle meaningful trade under the AfCFTA
in the AfCFTA Agreement is very is only just starting. As of January
clear: they are prohibited. 2023, only a handful of claims, six
to be exact, have been registered.
But, in practice, we need to do a lot It is expected that as preferential
more than make a blanket state- trade flows under the terms of the
ment such as this. The principal tool AfCFTA increase, so will usage of
with which the AfCFTA address- the tool.

34
The AfCFTA – What You Need to Know: Frequently Asked Questions & Answers

28) What else does the agreement do for Africa’s cross-


border traders?

Overall, the AfCFTA should be rec- all Africans collectively. It contains


ognized as a bundle of binding and multiple commitments on customs
reciprocal commitments exchanged cooperation and mutual adminis-
amongst State Parties whose pri- trative assistance, trade facilitation,
mary objective is to reduce tariffs, technical barriers to trade, sanitary
harmonize regulatory standards, and phytosanitary standards, tran-
and create a conducive regulatory sit trade, and so on. Working ‘behind
environment for cross-border trade the scenes’, these commitments will
in Africa. The AfCFTA is, first and reduce, if not eliminate, unneces-
foremost, a critical instrument for sary barriers to trade. In this sense,
businesses because it aims to facil- the AfCFTA is a powerful tool for
itate production and trade within Africa’s private sector. That is why
Africa. The Agreement is about the private sector must invest itself
making Africa an attractive place in the AfCFTA, understand it, own it,
for businesspeople to invest in and champion it, and hold governments
creating an environment that is con- accountable to its promises and
ducive both to themselves and to commitments.

29) Much of the Agreement seems to be focused on


trade in goods. What about services?

Services are becoming an increas- services become more important


ingly important part of the African in Africa’s economy so do oppor-
economy. As of 2020, services ac- tunities to trade in them. Trade in
counted for approximately 53% of services covers a wide range of eco-
Africa’s GDP27 and, in 2021, 63.6% nomic activities. Services trade can
of Africa’s GDP growth was at- happen without many of us noticing
tributed to the services sector28. As it, such as when we make interna-
27
Data from UNCTADStat, Accessed September 2022
28
https://www.afdb.org/en/documents/african-economic-outlook-2022

35
The AfCFTA and African Businesses

tional telephone calls or transfer tors for trade purposes: business


money to a bank account in anoth- and professional services, commu-
er country. Trade in services also nication, construction and related
includes things like medical treat- services, distribution, education,
ment one receives abroad or study- energy, environmental, financial,
ing or teaching in another country. health and social, tourism, transport,
Although they can initially sound and those not included elsewhere29.
abstract, the sweeping scope of ser- For now, AfCFTA State Parties have
vices trade makes it apparent that identified five services sectors for
they are impossible to ignore even if immediate liberalization: business
we may not be always aware that we or professional services, communi-
are engaging in them. cation services, financial services,
tourism & travel services, and trans-
Just as the AfCFTA attempts to fa- port services. On each of these sec-
cilitate cross-border trade in goods, tors, AfCFTA State Parties are now
it also aims to facilitate trade in ser- finalizing their schedules of specific
vices amongst African countries. commitments, potentially launching
The Agreement has a protocol ded- a services version of the equivalent
icated entirely to services. Services of the AfCFTA-Guided Trade Initia-
are formally classified into 12 sec- tive in the near future.

29
https://www.wto.org/english/tratop_e/serv_e/serv_sectors_e.htm

36
The AfCFTA – What You Need to Know: Frequently Asked Questions & Answers

Business &
Professional
Other Communication

Construction &
Transport Related

12 Service Sectors
Tourism Distribution

Health and
Education
Social

Financial Energy
Environmental

37
The AfCFTA and African Businesses

30) The AfCFTA is about intra-African trade; is there


space for international investors?

Yes. While the trade case for the Af- lation across the continent without
CFTA is compelling, the case for in- impediments.
vestment is equally so. The AfCFTA
promises to integrate over 50 small When the AfCFTA is in full force
and fragmented markets into one Africa’s historical experiences with
single market of 1.4 billion people under-investment must change. To-
and a combined GDP of USD 2.4 day, despite being home to almost
trillion30. The AfCFTA then provides 17 percent of the global population,
any investor, African or otherwise, Africa accounts for just 3.9 percent
with the economies of scale neces- of world investment stock (2020)31.
sary to justify investments of any The AfCFTA makes Africa ripe for
size. It does this by giving investors international and intra-African in-
the certainty that once a product vestment and provides an opening
is produced in Africa, it will meet for investors to engage with it in
the AfCFTA rules of origin require- ways never before possible.
ments and benefit from free circu-

31) What about digitalization? Does the AfCFTA


help bring Africa forward into the fourth industrial
revolution?

Yes. In February 2020 an offi- tocol was subsequently moved into


cial decision was made to include the current Phase II negotiations32.
e-commerce in a third phase of Negotiations towards this protocol
negotiations, to be known as the are widely expected to be conclud-
Protocol on Digital Trade. This pro- ed in 2023.

30
Data from World Bank Databank, Accessed September 2022
31
UNSD 2019, available at unstats.un.org/, and UNCTADStat, available at unctadstat.unctad.org
32
https://centurionlg.com/2022/01/26/the-e-commerce-protocol-of-the-afcfta-possible-consider-
ations/

38
The AfCFTA – What You Need to Know: Frequently Asked Questions & Answers

E-commerce is seen as a valuable of which are owned by Women,


platform that can help Africa take during the Covid pandemic. In fact,
advantage of the fourth industrial ECA research revealed that during
revolution, which is bringing a fun- the pandemic nearly 65% of African
damental change in the way we live, businesses took at least one step
work, and relate to one another. The toward advancing their digital activ-
Fourth Industrial Revolution is en- ities. To adapt to the pandemic firms
abled by extraordinary technological cited acquiring new digital technolo-
advances commensurate with the gies and tools, training staff on digital
first, second and third industrial rev- platforms, advertising digitally, and
olutions.33 Digitalization also proved developing new products more appli-
to be a key lifeline for many business- cable for online sales. ECA also found
es, including Mirco, Small, and Me- African firms were able to reach new
dium Enterprises (MSMEs), many customers and stay connected with

Figure 3.6: Digitalzation Efforts by African Firms Since Covid-19, %

0.8
69%
0.7

0.6
54%
0.5

0.4
33%
0.3
22%
0.2
14%
0.1

0
Acqui red Adequate Trained existing Conducted Advertising Developed new line Hired new employees
Technologies or tool s employees/staff Campaign of online products for Digitalization

Source: ECA & IEC (2021). Reactions and Outlook to COVID-19 in Southern Africa. IEC: Mauritius & ECA: Addis Ababa. April 2021

33
https://www.weforum.org/focus/fourth-industrial-revolution

39
Challenges with implementing the AfCFTA

existing ones when in-person inter- lization in the 21st century and is
action was limited34. in line with other continental initia-
tives such as the AU digital Trans-
Ongoing negotiations strive to de- formation Strategy for Africa which
sign a protocol that takes into con- seeks to build a Digital Single Mar-
sideration the importance of digita- ket in Africa by 203035.

Challenges with implementing the AfCFTA

32) What are the challenges that African governments,


businesses, and consumers need to be aware of and
prepare themselves for?

The greatest threat to the AfCFTA on its developmental promises only


is incomplete or inadequate imple- if and to the extent it is implemented.
mentation. Like every initiative and
inter-governmental agreement, the The burden of implementation lies
AfCFTA will make a difference in primarily with the governments of
the lives of African citizens only to the State Parties, but African cit-
the extent its promises and com- izens and businesses also have a
mitments are implemented. Gov- significant role to play. Both need
ernments have shown leadership by to support their governments and,
conceiving and initiating the AfCFTA from time to time, hold them ac-
process and by bringing it to its cur- countable for the promises they
rent stage, which should be recog- solemnly made in the Continental
nized and applauded. But this is not treaties they signed and the nation-
enough; implementation is critical. al legislations they adopted. Good
The AfCFTA is a development in- pressure is good politics, and good
strument for Africa, but it can deliver politics is good economics.

34
https://www.uneca.org/sites/default/files/uploaded-documents/ATPC/reactions-and-outlook-to-
covid-19/COVID-19_Africa-Impact-Survey_March2021_Final_English_Release_22042021.pdf
35
https://au.int/sites/default/files/documents/38507-doc-dts-english.pdf

40
The AfCFTA – What You Need to Know: Frequently Asked Questions & Answers

Equally serious threats to the Af- as the economic partnership agree-


CFTA may also come from outside ments (EPAs) with the European
Africa. Agreements governing trade Union (EU) – have the potential to
relations between individual African make AfCFTA implementation un-
countries and/or subregions with duly political and costly.
non-African trading partners – such

33) What are the internal roadblocks, if any, that stand


in the way of fully implementing the Agreement?

As reiterated, implementation is capacity, which translates into


critical; nothing happens without it. investment in industrialization,
But, even with the best of efforts to in education, in research and
implement the Agreement, there development, and associated
are still other hurdles that will face endeavors. That is why the AU
any government, business or person has come up with an Action Plan
in this field: for the accelerated industrial de-
velopment of Africa (AIDA) and
a) Supply Capacity: Before talking another on an Agribusiness and
about trade, Africa needs to Agro-business Development Ini-
have the products and services tiative (3ADI).
to trade. That means production
capacity. That further means ca- b) Hard Infrastructure: Both pro-
pacity to produce agricultural duction and trade across bor-
and industrial products of the ders, physically or electronically,
right quality and quantity at require the right type and qual-
competitive prices. It also means ity of infrastructure and logis-
having the capacity to produce tics, hard and soft. Economic
and provide the range and quali- development is an infrastruc-
ty of services consumers need at ture-heavy business. Without
competitive prices. Trade there- roads and trucks, railway lines
fore presupposes investment and rolling stock, seaports and
in building Africa’s productive seafaring vessels, airports and

41
Challenges with implementing the AfCFTA

aircrafts, no product can move sessment device. There are also


from one country to another several initiatives and institutions
in meaningful quantities. Like- that form part of the African Gov-
wise, without digital connectiv- ernance Architecture (AGA) that
ity networks in place, none of complement the APRM.
the enormous promise of digital
trade can be realized. That is d) Trade finance: Many good and
why the AU’s Boosting Intra-Af- potentially viable business ideas
rica Trade (BIAT) initiative of and startups remain unrealized
2012 recognized that, for trade for lack of finance. Cross-border
liberalization to work, it needed trade is inherently more risky
to be supported by a dedicated than domestic trade. In cross-bor-
Programme for Infrastructural der trade, the parties reside in
Development in Africa (PIDA) different jurisdictions, are sub-
that had been launched in 2010 ject to different laws, transact
with a view to bringing together in different currencies, speak
various regional and continental different languages, practice dif-
infrastructures under the lead- ferent cultural traditions, etc.,
ership of the African Develop- all of which translate into added
ment Bank. risks and transaction costs. Trade
finance instruments come in to
c) Governance and soft infrastruc- manage such risks and, in doing
ture: Equally important, none of so, to expedite business across
these initiatives would exist or borders. Trade finance is at its in-
function in the absence of insti- fancy in Africa and governments
tutions in the sense of organiza- would do well to prioritize the de-
tions guided by a set of rules and velopment of such facilities. We
norms of good governance, rule need more of it at continental, re-
of law, accountability, and access gional, national, and local levels.
to fair, speedy, and impartial jus- The commitment contained in
tice. That is why, back in 2003, the the BIAT initiative to “accelerate
AU created the African Peer Re- the establishment of the African
view Mechanism (APRM) as the Investment Bank” was a step in
Continent’s governance self-as- the right direction, but it has yet

42
The AfCFTA – What You Need to Know: Frequently Asked Questions & Answers

to be implemented. Afreximbank instrument, Annex 4, dedicated


is undertaking a lot of promising to Trade Facilitation.
initiatives in this area; it must
be supported. Afreximbank has f) Trade information: The busi-
several programs like structured ness community in Africa lacks
trade finance, a note purchase adequate information on trade
program, and asset-backed lend- and market opportunities in fel-
ing that can provide a critical low African countries and mar-
support function for countries kets. Market surveys are rarely
engaging in trade. Increasing en- conducted; information about
gagement with these institutions customs regulations and pro-
can help build confidence and de- cedures are often inaccessible,
risk cross-border African trade. and the cost of doing business
between African countries is dis-
e) Trade facilitation: Whatever proportionately high as a result.
the commitments undertaken Africa must address this critical
at Continental level to liberal- gap. The intra-Africa trade fair
ize and expedite cross-border that is being organized on a bian-
trade, the practice on the ground nual basis is a good initiative, but
in many countries remains chal- it is far from enough.
lenging and at odds with those
commitments. Yet again, that g) Currency convertibility: Nearly
was why the BIAT initiative ded- each of the small and fragment-
icated a section to trade facilita- ed markets in Africa today is
tion urging AU member states served by its own national cur-
to take measures at the “highest rency, making up a total of some
levels of Government … in order 42 different currencies on the
to facilitate the removal of illegal Continent. To transact business
roadblocks, check points and il- between two countries that have
legal fees and other rent seeking different currencies, the use of
practices along trade and transit a third country’s legal tender,
corridors and border crossings.” often the Euro or the USD, be-
Likewise, that is also why the Af- comes necessary. The moment
CFTA Agreement has a separate transactions between two trad-

43
Challenges with implementing the AfCFTA

ers sitting on either side of an Settlement System (PAPSS), “a


African border are subjected to cross-border, financial market
a third currency as an interme- infrastructure enabling payment
diary, transaction cost shoots up. transactions across Africa”. Uti-
Africa is estimated to lose up to lizing cutting-edge technolo-
USD 5 billion every year on cur- gy connecting African banks,
rency conversion alone. The final payment service providers and
solution for this can come only other financial market interme-
from a monetary union, which diaries, PAPSS enables instant
is further down the road on the and secure payments between
African integration journey. In African countries while trading
the interim, Africa has launched under the AfCFTA. 36
the Pan-African Payment and

34) What does the AfCFTA bring to the ordinary African


citizen

The AfCFTA brings significant ben- CFTA implementation, the number


efits to the African citizen in several of people living under extreme pov-
ways. erty (less than USD 1.9/day/person)
will be reduced by over 19% in Cote
To begin with, the AfCFTA is expect- d’Ivoire, 11.5% in Tanzania and 3.2%
ed to reduce poverty across Africa. in Ethiopia as compared to the si-
While the magnitude of poverty tu-ation without the AfCFTA.
reductions depends on each coun-
try’s existing socio-economic situa- But, in addition to the benefits of the
tion, modelling work carried out by Agreement at a high level, there are
ECA predicts that all countries will several specific pathways through
see improvements to welfare and which African citizens can benefit
living standards. For example, ECA from the AfCFTA.
estimates that, by 2045, with full Af-

https://papss.com
36

44
The AfCFTA – What You Need to Know: Frequently Asked Questions & Answers

First, African citizens benefit in ter paying jobs than those that are
their role as businesspersons. As more closed off.
discussed earlier in response to
Question #26 on the role of the Finally, African citizens benefit
AfCFTA for the African private sec- from the AfCFTA in their role as
tor, the AfCFTA is essentially about consum-ers since, in the end, every
progressively creating a large single one of us is a consumer. When the
market in which African businesses AfCFTA forces national markets
can produce and trade freely. To the to open themselves to competition
extent the AfCFTA benefits African from other countries, more products
businesses, the African citizen bene- and services will compete for con-
fits in his or her capacity as the own- sum-ers. Competition is always good
er or operator of these busi-nesses. for consumers because it creates
more choice, brings better prod-
Second, in their role as workers ucts and services to the market, and
Af-rican citizens will also benefit tends to make these products and
from the AfCFTA. Research shows services available at lower prices.
that a business environment that
sup-ports entrepreneurship cre- In summary, the AfCFTA is good for
ates more jobs, especially through business, but it is also good for the
the ability of businesses to bring ordinary citizen in her capacity as a
innovation and investment , while consumer, worker, and entrepreneur.
more open economies create bet-

45
Timeline & Milestones of the AfCFTA

Feb. Agreement & Adoption of Feb.-July


2016 12 Negotiating Guiding 2017
Negotiations
Principles
Begin

First AfCFTA Negotiating Negotiations &


June Forum held May
Agreement on 90% Tariff
2015 2016 Liberalization

Feb. March
2020 2018
Trading formally AfCFTA Enters
begins into Force

Decision taken to add Phase I Negotiations


Jan.
Protocol on Women and May
Concludes
2021 Youth in Trade & Protocol 2019
on Digital Trade

AU Assembly adopts
Oct. three protocols:
2022 Competition, Intellectual
AfCFTA Guided Trade
Initiative Announced Property and Investment

AfCFTA Guided Trade


July Initiative Officially Feb.
2022 Launched 2023

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