What's Stalling the Full Implementation of AfCFTA?
The African Continental Free Trade Area stands as one of Africa's 13 key initiatives within the Agenda 2063 developmental plan, established by the African Union back in 2012. This program aims at boosting internal African commerce and enhancing the continent’s standing in international trade.
The main goals of the African Continental Free Trade Area (AfCFTA) encompass establishing a unified market for products and services via the free movement of people, thereby intensifying economic integration across Africa. This initiative seeks to create an open marketplace for goods and services by conducting multiple negotiation phases. Additionally, it targets improving the circulation of capital and natural assets within the continent and fostering investment activities. Moreover, AfCFTA strives to set up conditions conducive to forming a Comprehensive Customs Union down the line, encourage balanced and inclusive social and economic progress, support gender parity, and facilitate transformative changes in participating nations. The agreement further emphasizes boosting industrial expansion through diversification, building regional supply chains, advancing agriculture, and increasing food security, along with several other key focuses.
The AfCFTA initiative was crafted with several key protocols encompassing trade in goods and services, dispute resolution mechanisms, investments, intellectual property rights, and competition policies. It operates through specific tools referred to as "AfCFTA instruments," such as rules of origin, tariff reductions, an online platform for tracking and eliminating non-tariff obstacles, the Pan-African Payments and Settlements System, and the African Trade Observatory—these elements facilitate trading across Africa. Since being established, AfCFTA has achieved significant milestones towards meeting its goals, underscoring its importance for the continent.
On January 1, 2021, trading commenced under the AfCFTA, signifying an important achievement for Africa. With a collective GDP of around $3.4 trillion, this unified marketplace has the potential to boost intra-African commerce by more than $18.65 billion through reduced tariff barriers. By implementing extensive regulations encompassing nearly all African nations, the agreement offers a platform for developing novel regional supply networks, enhancing value-added trades, and fostering job creation. Additionally, the AfCFTA exposes businesses to a vast consumer market comprising 1.3 billion individuals, thereby encouraging significant investments throughout the continent.
At present, 54 member states of the African Union have endorsed the AfCFTA agreement, out of which 42 have completed the full ratification process, and 39 have filed their instruments of ratification. This indicates a robust dedication to integrating markets across Africa. The participating countries committed to eliminating tariffs on 97 percent of goods within specified periods. To date, 43 nations (which make up 78 percent of all AU members), along with four customs unions—the SACU, CEMAC, EAC, and ECOWAS, as well as Mauritania—have presented their tariff proposals.
Seventy-eight percent of tariff lines in rule-of-origin discussions have been concluded across various instruments. Regarding trade services, progress has been made with 42 preliminary submissions addressing five key sectors. Essential next steps involve setting up a committee for Phase II protocols focusing on investments, competition policies, intellectual property rights, electronic commerce, and promoting engagement from women and young people in trade. Additionally, the Dispute Settlement Mechanism will be activated soon. To boost bilateral commercial exchanges and foreign direct investment, the Business Investment Forum was initiated as well.
The CEO of the African Continental Free Trade Area, H.E. Wamkele Mene, stated that trade has surged considerably under the AfCFTA, leading to an increase of intra-African commerce by 3.2% to reach $192.2 billion. Through the Guided Trade Initiative, engagement in trade rose dramatically from just seven nations to thirty-nine. Additionally, the acceptance of the protocol focused on women and youth in trade was a pivotal step towards fostering greater economic inclusion and their integration within Africa’s integrated market system.
Even with considerable advancements made, the African Continental Free Trade Area (AfCFTA) continues to encounter substantial obstacles that impede complete execution. Various elements like inadequate infrastructure (including roads, railways, and ports), non-tariff impediments, difficulties related to aligning policies and regulations, political and organizational hurdles, ongoing security concerns and governmental volatility, insufficient understanding and engagement from the private sector, restricted funding and technical assistance, along with gaps in digitization and technology all play roles in limiting how thoroughly this accord can be implemented.
Despite being included as part of Agenda 2063’s key initiatives, the development of cross-regional infrastructure for roads, railways, and ports remains unfulfilled. Consequently, deficient transportation systems persist in obstructing the smooth movement of commodities and services between countries, thereby impeding the comprehensive execution of the African Continental Free Trade Area (AfCFTA). Additionally, insufficient power supplies throughout much of the continent significantly limit progress in manufacturing and industrialization efforts.
Challenges like differences in product standards, licensing needs, and intricate technical rules, along with complicated customs processes, corruption, and overly bureaucratic systems, have hindered the complete enforcement of the AfCFTA.
Despite the AfCFTA accord, policy discrepancies persist among the 54 member nations regarding trade policies, taxation systems, and legal structures. Consequently, standardizing these elements across all participating countries could be challenging and might impede the comprehensive establishment of an integrated trading framework.
Political and systemic hurdles persist across many African nations, exemplified by recurrent military coups in several countries including Niger, Sudan, Guinea, and Mali during the period spanning 2020 to 2024. These abrupt shifts in governance could hinder progress toward enacting the Africa Continental Free Trade Area (AfCFTA). Additionally, even within those member states experiencing more consistent political climates, administrations might hesitate to completely adopt this accord out of apprehension regarding potential decreases in income resulting from lowered tariffs.
Conflict and insecurity have emerged as significant concerns across Africa. With ongoing security issues, countries are increasingly closing their borders, which disrupts commerce and complicates cross-border business activities. This situation impedes the complete execution of the African Continental Free Trade Area (AfCFTA) agreement and poses challenges to its intended goals.
The African Continental Free Trade Area represents a groundbreaking effort aimed at reshaping Africa’s economic landscape through increased internal trade, promoting industrial development, and spurring overall growth. Nonetheless, achieving comprehensive implementation continues to be challenging, necessitating robust governance and execution strategies. Despite being a pan-African endeavor, the AfCFTA's effectiveness ultimately depends on how well individual countries put it into practice.
Considering the varied obstacles faced by different member nations, it is crucial for strategies to be tailored to their specific contexts to guarantee successful integration. Setting up local AfCFTA offices within each country will help facilitate smoother implementation and act as central administrative points, ensuring prompt action. Thoroughly adopting AfCFTA is vital because of its extensive influence on policies; this could bolster Africa’s ability to withstand potential future health crises, promote sustainable development, improve consistency in digital policies, and move towards achieving the 'Africa beyond aid' objective.
- Orji, an experienced researcher focusing on areas such as trade, education, food security, and energy, serves as a Free Trade Fellow at the Ominira Initiative.