AFCFTA : African Nations Establish Continental Free Trade Area, Largest Since WTO

by Ike Obudulu Last updated on April 12th, 2018,

Kigali, Rwanda: African countries, Wednesday, in Kigali, Rwanda, signed the African Continental Free Trade Area (AfCFTA) agreement establishing a continental free trade area, that will allow Africans to trade and move freely on the Continent. This is the biggest free trade agreement since the establishment of the World Trade Organization (WTO).

44 countries signed the historic AfCFTA 2018 deal, 43 endorsed the Kigali Declaration that spells out renewed commitment and timelines toward a prosperous continent, while 27 signed the protocol on free movement of persons. The countries that did not sign the protocol on free movement of persons said they would ratify AfCTA partially by allowing for free trade but not movement and residency of people from other countries.

African heads of government agreed to establish a continental free trade area at the 18th Ordinary Session of the Assembly of Heads of State and Government of the African Union in January 2012 with an original tentative launch date of 2017. Negotiations however did not start until 2015.

The Summit also endorsed the Action Plan on Boosting Intra-Africa Trade (BIAT) which identifies seven clusters: trade policy, trade facilitation, productive capacity, trade related infrastructure, trade finance, trade information, and factor market integration.

The AfCFTA agreement brings together 1.2 billion people with a combined gross domestic product (GDP) of more than $2.6 trillion. This represents a critical mass that will enhance the African investment proposition.

The draft agreement commits countries to removing tariffs on 90 percent of goods, with 10 percent of “sensitive items” to be phased in later. The agreement will also liberalise services and aims to tackle so-called “non-tariff barriers” which hamper trade between African countries, such as long delays at the border.

Eventually, free movement of people and even a single currency could become part of the free trade area.

The AfCFTA text contains the legal framework for the free trade area, which will then need to be ratified by the individual countries through their respective domestic processes level within six months, that is, by September this year. AfCFTA will come into force after it has been ratified by either 15 or 22 countries – a number that has yet to be agreed on. A second phase of negotiations will be held later to cover investment, competition policy and intellectual property.

Those that did not sign can also do so within the six month period. The holdouts so far include Nigeria, South Africa, Uganda, Burundi, Guinea Bissau and Eritrea.

There are other details that still need to be ironed out. Countries will need to submit which products they consider “sensitive”, thus exempting them from the tariff cut for now, for example. And the African Union Commission will need to establish a secretariat to preside over the agreement.

The trade pact is expected to spur economic growth, industrialisation, improved infrastructure development and business diversification.

The trade agreement also deals with non-tariff barriers, technical obstacles to trade and customs procedures. The agreement also creates a framework to deal with transit issues between countries.

Africa presently trades far less with itself than it does with the rest of the world. UNCTAD, the main UN body dealing with trade, said it made up only 10.2 percent of the continent’s total trade in 2010.

Ahead of the signing, the chairperson of the African Union Commission, Moussa Faki Mahamat, urged African countries to ratify and implement the African Continental Free Trade Area (AfCFTA) agreement, saying it will fast-track the continent’s much-desired economic growth.

Mahamat made the call during the opening of the 18th Extraordinary Session of the Council of Ministers of the African Union in Kigali .

“The Agreement will be a historic pact, which has been nearly 40 years in the making and represents a major advance for African integration and unity. The African Continental Free Trade Area will also strengthen Africa’s position in global trade,” he said.

Mahamat further urged African countries to overcome fears and self-interests as these continue to be barriers to regional trade and growth. Member countries and other continental trade bodies ought to look at the collective benefits as they outweigh the concerns, the AU official said.

The UN Economic Commission for Africa (UNECA) has estimated the agreement’s implementation could increase intra-African trade by 52 percent by 2022, compared with trade levels in 2010.

Vera Songwe, the Executive Secretary of the United Nations Economic Commission, for Africa observed that the agreement comes at a time when there are instances of anti-globalisation and protectionism.

For instance, she observed, the American government last month announced increased tariffs for steel and aluminum imports. African steel and aluminum exports are valued at about $800 million.

“We are currently witnessing some new and quite extraordinary developments in the global economy. In the developed world there is a rising tide of protectionism and anti-globalization. Although we are not the focus, Africa will not remain untouched,” Songwe said.

ECA @ECA_OFFICIAL: “By integrating, we are putting an end to the era of fragmented markets that has caracterized Africa since 1885” says Niger President and Afrochampion @IssoufouMhm #AfCFTA2018

Presidency | Rwanda Verified account @UrugwiroVillage: President Kagame concludes: This is not just a signing ceremony. Today’s deliberations are critically important as we chart the next steps on our journey toward the Africa we want. Once again Excellencies, I welcome you and wish us all a productive Summit #AfCFTA2018

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Ike Obudulu

Ike Obudulu

Versatile Certified Fraud Examiner, Chartered Accountant, Certified Internal Auditor with an MBA in Finance And Investments who has both worked for and consulted with some of the world's largest companies on main street and wall street in over 20 countries, Ike brings his extensive reporting and investigations experience to bear on his role as Chief Editor.
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