Textile factory in Africa, Botswana.
Policy Analysis

Breathing Life Into the AfCFTA: Why the details matter

While many African leaders view the African Continental Free Trade Area as a tool for transformative growth in Africa, effective implementation has been elusive. Jamie MacLeod and David Luke from the London School of Economics discuss the barriers that need to be overcome to transform trade across the continent.

By Jamie MacLeod, David Luke on March 2, 2022

“When a state finds itself in crisis, it does not see beyond its nose,” Nigerian economist Adebayo Adedeji lamented the lost opportunities of Africa under the plague of economic crises it faced in the 1980s. One of the lost opportunities at that time was economic integration: the 1980 Lagos Plan of Action—a systematic political program for integration—collapsed as policy-making attention refocused on commodity prices and debt stability crises.

Staying the Course Through COVID-19

COVID-19 likewise diverted the attention of leaders to health and economic shocks, including commodity price swings, supply chain disruptions, access to essential medical equipment, tax revenue, and unemployment. Policy attention consumed itself with new budgeting and funding priorities and crisis management, rather than implementing an economic project such as the African Continental Free Trade Area (AfCFTA) that involves a longer-term vision.

In the marketplace of ideas, attention is currency. Knowing this, stakeholders have fought for recognition of the AfCFTA as a tool for the transformative growth of the African continent. Much effort was made to articulate the AfCFTA as a part of the COVID-19 “recovery package” for Africa:

“[F]or Africa, the stimulus package is the actual AfCFTA, the implementation of this agreement. Increased intra-African trade is what will drive economic development post-COVID-19.” H.E. Wamkele Mene, Secretary-General, AfCFTA Secretariat (African Renewal, 2020)

“Africa does not need a Marshall Plan to ride out the ongoing coronavirus crisis. It has a more powerful tool in the AfCFTA to use in accelerating regional and economic integration and prepare for uncertain times.” Vera Songwe, Executive Secretary of the Economic Commission for Africa and Under-Secretary-General for the United Nations (Tralac, 2020)

“While the operationalization of the Secretariat was postponed due to the COVID-19 pandemic, the same pandemic has also magnified the urgent need for speed to accelerate economic integration on the continent.” (African Union [AU], 2020) H.E. Moussa Faki Mahamat, Chairman of the AU Commission

As of February 2022, with 44 AU member states having ratified the AfCFTA agreement, it appears that Africa’s leaders agree about the significant role of the trade accord in Africa’s development.

The challenges of COVID-19 reveal a story of the perseverance of African leadership and commitment to transformative economic policies.

Though it is likely that more progress on the AfCFTA may have been made without the pandemic-related distractions to policy-making attention, that such a crisis failed to upend the momentum of the AfCFTA is to be commended. The history of failed African economic integration under the economic crises of the 1980s fortunately appears to have been averted. The challenges of COVID-19 in Africa in 2020 and 2021 reveal a story of the perseverance of African leadership and commitment to transformative economic policies.

Burdens of Brinkmanship

Despite the efforts of African leaders, the AfCFTA is stuck somewhere between its “negotiation” and “implementation” phases. At several points, AU summits have celebrated the near-completion of the AfCFTA, yet effective implementation has been elusive.

In March 2018, leaders from 44 countries signed the Agreement Establishing the African Continental Free Trade Area and declared the launch of the AfCFTA at the 10th Extraordinary Session of the AU Summit. In May 2019, the threshold of 22 AfCFTA ratifications was reached, allowing the agreement to enter into force, followed by a 12th Extraordinary Session of the AU Summit that kicked off the operational phase of the AfCFTA in July 2019. A 13th Extraordinary Session held virtually in Johannesburg in December 2020 announced that the “commencement of trading” under the AfCFTA would start in January 2021.

The AfCFTA is stuck somewhere between its “negotiation” and “implementation” phases.

Despite a small number of publicity consignments aligned with the formal start of trading, substantive and commercially meaningful trade under the AfCFTA had still yet to take off as of February 2022. Negotiators have repeatedly failed to keep pace with, and live up to, the timelines set by their leaders. The culprit blocking progress and the effective start of trading under the AfCFTA, is the long-delayed conclusion of a small number of vital technical components of the agreement.

The main blockage is the rules of origin. However, the AfCFTA Council of Ministers decided in January 2022 to proceed with rules of origin for 87.7% of product lines that have been agreed. But this also means that some key products have been left out of trading under the agreement. It is known that the Secretariat has received 29 tariff offers that comply fully with the modalities for tariff liberalization, along with 44 initial offers encompassing specific commitments for liberalizing trade in services in the five sectors prioritized for the first round of opening services trade. The relatively low number of tariff offers implies that many countries are hesitant to commit fully in the absence of clarity on what the rules of origin would entail for the remaining products.

The culprit blocking progress and the effective start of trading under the AfCFTA, is the long-delayed conclusion of a small number of vital technical components of the agreement.

From the Taiwan Strait to the fields of Ukraine, leaders know how to wield brinkmanship to squeeze out negotiating objectives. But they must also know its risks. Negotiators must be cautious as they hold out on the remaining technical issues of the AfCFTA. The risk of further delays in the agreement is the erosion of the attention needed to see the AfCFTA through. It is also a delay in impact; with 10 million to 12 million youth entering Africa’s workforce each year, the continent needs to be transformed now, not in half a decade.

Call for Regional Leadership

In their regional economic communities, economic powers such as Kenya and South Africa offered to liberalize more rapidly or fully than their neighbours, emphasizing their leadership roles and responsibilities. Kenya immediately allowed duty-free imports into its market from its neighbours when the East African Community trade regime was established in 2005. However, Kenya agreed that—as the most economically developed country in the region—it would permit its exports it be progressively liberalized over a longer 5-year period.

If Africa’s regional powers could again show greater leadership in realizing the start of trade under the AfCFTA, they could help to generate the momentum needed to get trade flowing across and transforming the continent. The time is now for brinkmanship to give way to concessions and collaboration in the rules of origin to unlock the AfCFTA.

When starting an automobile in cold weather, the ignition sometimes requires a few attempts before the engine roars to life. That needn’t necessitate throwing away a good car. When the AfCFTA gets going—which it will—it will contribute to transforming trade on the African continent and driving long-overdue African industrialization. The wait will be worth it.

The time is now for brinkmanship to give way to concessions and collaboration in the rules of origin to unlock the AfCFTA.

In the meantime, Africa’s regional economic powers have a leadership role to play in getting the AfCFTA moving without further delay. The economies in each of Africa’s five regions account for more than half of the continent’s GDP. If they can show the leadership required to make compromises and get trade flowing, the AfCFTA will have the impetus it needs to truly take off.

Jamie MacLeod is a trade policy consultant and research assistant at the London School of Economics.

David Luke is a professor in practice and strategic director at the Firoz Lalji Institute for Africa at London School of Economics.

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