Currently, forty-four (44) member states are state parties to the AfCFTA Agreement following the ratification of the instruments establishing the AfCFTA while fifty-four (54) member states have signed the Agreement. As at February 2023, forty-six (46) Provisional Schedules of Tariff Concession have since been submitted by member states including four (4) from the Customs Unions.
Following the coming into force the Agreement establishing the AfCFTA in May 2019, efforts have been enhanced to accelerate the implementation and advanced usage of the existing operational tools that to facilitate the realization of commercially meaningful trading under the AfCFTA. These include, among others:
1. The conclusion of the AfCFTA Phase One and two Protocols which provide a legal basis to advance the operationalization of the trading. The finalization of the AfCFTA negotiations ensure that the market access under AfCFTA was not taken advantage of only by the big corporations but for the SMEs, women, and young Africans in trade, to also grow their businesses. The recently concluded Phase Two Protocols cover protocols on Investment, Competition Policy, and Intellectual
Property Rights will greatly contribute to deepening economic integration in Africa.
Under the Phase One Protocol on Trade in Goods, State Parties committed to reduce tariffs on 90% of goods traded among themselves in equal annual installments until they are eliminated within 5 years for non-Least Developed Countries (LCDs) and 10 years for Least Developed Countries. For an additional 7% of ‘Sensitive’ goods, tariffs will be eliminated within 10 years for non-LDCs and 13 years for LDCs. A final 3% of ‘Excluded’ products are to retain their tariffs to allow flexibilities for State Parties with particular sensitivities, but will be subject to review every five years. Under Phase II, the finalization of the Protocol on Women and Youth in Trade and Digital Trade will be concluded in 2023.
2. The development of the AfCFTA Guided Trade Initiative to connect businesses and products for export and import between interested State Parties. The first AfCFTA Certificate of Origin for Rwanda was issued to Igire Coffee for coffee products destined to Ghana. Kenya also exported its first goods, Exide batteries to Ghana. The Initiative requires state parties to issue AfCFTA trading documents, including certificates of origin, importer and exporter declaration forms, and ensure
that their customs laws and systems are aligned to the AfCFTA requirements.
3. The operationalization of the AfCFTA Adjustment Fund aims to support both the member states and private sector to effectively participate in the new trading environment established under the AfCFTA. As with any major trade liberalization regime, the AfCFTA Agreement will introduce near-term disruptions, as tariff revenues by State Parties are reduced, industrial sectors are disordered, businesses and supply chains are reorganized, and employment is dislocated – often in ways that cannot be anticipated. The estimated requirement for uninterrupted implementation of the AfCFTA Agreement and to eliminate the adjustment cost is at $10 billion over the next six to ten years.
The Adjustment fund will for instance, be meaningful for a country experiencing challenges with its textiles and clothing sector to access the fund for retraining of workers or for recapitalization, procuring machinery for goods, or to increase competitiveness The Adjustment Fund consists of a Base Fund, a General Fund and a Credit Fund.
The Base Fund will consist of voluntary contributions from State Parties, grants and technical assistance funds to address tariff revenue losses as tariffs are progressively eliminated. It will also support countries to implement various provisions of the AfCFTA Agreement, its Protocols and Annexes. The General Fund will mobilize concessional funding, while the Credit Fund will mobilize commercial funding to support both the public and private sectors, enabling them to adjust and take advantage of the opportunities created by the AfCFTA.
4. The Pan African Payment System (PAPSS) in place is a centralized Financial Market Infrastructure enabling the efficient and secure flow of money across African borders. PAPSS works in collaboration with central banks in the continent to provide a payment and settlement service to which commercial banks, payment service providers and fintech organizations across the continent can connect as participants. The platform provides a simple, low-cost risk-controlled payment clearing and settlement system.
It also serves as an avenue of expanding financial inclusion to cover the informal sector while monitoring funds transfers, thus reducing money laundering, which costs the continent several billions of dollars annually. As of June 2022, the PAPSS network consists of 8 central banks, 28 commercial banks and six switches. It will expand into the five regions of Africa before the end of 2023. All Central banks are to sign up by the end of 2024 and all commercial banks by the end of 2025. With 42 currencies on the continent, PAPSS will significantly reduce the costs of currency convertibility and save the continent an estimated $5 billion annually.
5. The AfCFTA Private Sector Strategy aims at delivering impact and economic recovery in the post-pandemic world by engaging with stakeholders from across the private and public sector, and from across all corners of the continent to ensure an inclusive approach to implementing the AfCFTA.
For the continent to reduce its vulnerability to external shocks and improve trade and economic performance, the AfCFTA, regional value chains are being developed, under the AfCFTA Private Sector Engagement Strategy, to offer African countries an opportunity to use regional advantages to boost competitiveness, diversify product supply, and export products with higher value-addition. The strategy focuses on four initial priority sectors or value chains, namely geoprocessing, automotive, pharmaceuticals, and transportation and logistics, based on the potential for import substitution and existing production capabilities on the continent.
6. Launching of the AfCFTA e-Tariff Book in November 2022 further allowed for a digitalized trade facilitation that ensures tariff concession schedules are easily accessible to Trade and Customs Authorities. The Tariff book includes rules of origin and the customs procedures that apply to products which allows users to benefit from enhances knowledge and capacities in the use of tariffs, commodity classification and organisation of tariff-related work within Customs administrations and other relevant stakeholders. These tariff concessions have been offered by the customs unions and once agreed they will then be nationalized and traders will be able to trade fully.
7. Conducting the AfCFTA Regulatory Audits on Trade in Services that identify restrictions on market access and national treatment affecting the supply of services into the country as defined in the AfCFTA Trade in Services Protocol. The report details descriptions that document each trade restriction and its legal reference. For example, one of the areas where this data is particularly useful is in the tourism sector. By understanding the restrictions on market access and national treatment impacting tourism services, countries can work to remove those barriers and create a more open and welcoming environment for tourists. This, in turn, can help to boost the economy through increased tourism revenue.
8. Establishing the Automotive Fund for any investment that seeks to pursue local content development in the automotive value chain. The funding will also be used for ensuring access to consumer finance as part of the creation of demand and associated insurance products. A comprehensive strategy has since been developed for automotive manufacturing in Africa. The strategy points to an immediate need to finalize the Rules of Origin (ROO) and the establishment of the Task Force that could fast-track the development of a major advanced automotive value chain in Africa.
The finalization of the ROO for the auto sector is essential, as it would facilitate strategies in developing regional and continental value chains. It would assist in developing national programmes and allow for greater cooperation and trade between those members who have adopted national programmes and wish to develop trade in vehicles and components under them AfCFTA.
9. The AfCFTA Dispute settlement mechanism, a key pillar in the successful implementation of the Agreement is active with the operationalization of the Dispute Settlement Body (DSB) in April 2021. The Appellate Body comprises 10 Board Members. The operationalization of the DSB signals the readiness of the AfCFTA dispute settlement infrastructure to take up any disputes that may arise in the course of trading among the State Parties.
10.The AfCFTA SME Financing Facility which will catalyze access to finance for SME business activities. This is to ensure that the market access is not taken advantage of only by the big corporations, but that the SMEs, women and young Africans in trade, can also have the opportunity to grow their businesses in support
of trading under the AfCFTA.
1.The AfCFTA Trade and Industrial Development Advisory Council inaugurated as a 13- member Council to advise the AfCFTA Secretariat on trade integration and transformative industrialization as part of the implementation of the AfCFTA. The role of the Advisory Council is to focus on the AfCFTA implementation processes, negotiations and implementation; trade facilitation and connectivity; industrial development and regional value chains; and inclusivity issues.
12.The elimination of Non-Tariff Barriers Mechanism (NTBs). The elimination of NTBs is critical to boosting intra-Africa trade and achieving the objectives of the AfCFTA. It will reduce the costs of trading across borders and ease cross-border movement of goods. The bulk of the AfCFTA benefits will be realised if State Parties efficiently manage and eliminate NTBs. The Protocol on Trade in Goods establishes a reporting, monitoring, and elimination mechanism where traders can file a complaint on a specific trade obstacle they have encountered during the process of moving goods and services across borders.
Source: Information and Communication Directorate, African Union Commission I E-mail: DIC@africa-union.org
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