By Margaret Soi

The African Continental Free Trade Area (AfCFTA) was signed on 21st March 2018 in Kigali, Rwanda, by 44 out of the 55 African countries, and brokered by the African Union (AU). This agreement was born of the realisation that total trade exports from Africa to the rest of the world are estimated at USD 760 billion; however, this is mostly in the form of raw materials and thus prevents Africa from deriving the true value of such exports. Considering that African exports to the world make up only 3% of the total world trade value, there exists much scope for improvement.

No wonder then, in a 2020 report, the World Bank estimated that by 2035, real income gains from full implementation of the agreement could be 7%, or nearly USD 450 billion, while predicting that the agreement could contribute to lifting an additional 30m people from extreme poverty and 68m people from moderate poverty. Against this backdrop, it is clear that the AfCFTA has the potential to make a significant impact on improving the livelihoods of the African people, by boosting intra-African trade and generating new employment opportunities on an integrated African labour market.

In a follow-up report (https://bit.ly/3wZhqmM) published in June 2022, the World Bank listed other potential benefits of the AfCFTA on labour including higher-paid, better-quality jobs, especially for women; as well as wage rises of 11.2% for women and 9.8% for men by 2035. Policymakers say that the free movement of labour will be a key contributor to the successful functioning of the free trade area and realising the above benefits for workers.

“Let us now dig deeper into why the labour mobility promised under the AfCFTA is important for Africa’s development and how it can be achieved towards bettering local livelihoods and ensuring sustainable wealth creation in Africa” says Margaret Soi, Head of Cross Border Banking at Bank One.

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Why labour mobility stands to benefit Africa – across host and native countries

There is no denying that labour migration is good for trade and economic development, especially in developing countries, with free movement of people benefitting both the host country and the country of origin.

The benefits of free movement of people within Africa can be grouped under the following five distinct categories:

Boosting trade and tourism: Free movement of people can boost both trade and tourism. For instance, Rwanda saw cross-border trade with Kenya and Uganda increase by 50% on the back of easing travel requirements to just identification cards for neighbouring countries in 2013. Also, tourism in the Seychelles increased by a significant 7% per year between 2009 and 2014, when it abolished visas for African nationals.

Bridging skill and labour gaps: There could be situations where certain countries have particular skills in excess while others lack the same skillset. Allowing free movement of labour will enable host countries to find such scarce skills at potentially lower rates than attracting talent from developed countries, while easing demographic pressure in the countries of origin. Further, the productivity enhancements that accrue from such skilled workers will boost economic growth and per-capita income. For instance, while immigrants only make up 10% of Côte d’Ivoire’s population, which hosts the second-highest number of immigrants in Africa, they make up 19% of GDP.

Spurring local employment: While it may appear counterintuitive as migrant workers compete for jobs with nationals, their presence actually stimulates local employment too. For instance, in South Africa, it was seen that recently arrived migrants positively impacted native employment rates and wages, and their presence resulted in lower unemployment. Taking a wider example, the creation of the EU and free movement within has lowered the average unemployment rate in Europe by 6%.

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Boosting government revenues: The employment of migrant workers in the formal economy of host countries can have a significant positive effect on the public finances via taxes. For instance, migrant workers pay on average three times more tax than the citizens of Rwanda. In Ghana, local workers only cover 70-80% of expenditures made in their favour, while migrant workers pay up to 159% of government expenditure on them.

Rise in remittances and knowledge transfer to countries of origin: Finally, labour mobility benefits the native country of the migrant worker through its impact on remittances and knowledge transfer. When migrant workers start working across borders, there is a corresponding rise in remittances to their home countries; to illustrate, African migrant workers sent about USD 85 Billion to their families in 2019. Crucially, intra-African remittances tend to reduce poverty even more, because regional migrants tend to have poorer families than those who leave to work on other continents. Closing the circle, when such migrant workers return home finally, they often use their deepened skills and wealth creation to support their economies and spur employment by establishing startups or investing in enterprises – and engaging in a much-needed transfer of knowledge in the process.

Effects of intracontinental labour mobility on labour standards and wealth creation

“As a natural corollary to the AfCFTA’s beneficial effect on access to scarce skillsets in destination countries, the ease of movement of labour facilitated by the AfCFTA has also seen some host countries losing out on talent if their needs are not met. This is likely to result in a rise in labour standards across the region as countries compete with each other to retain the most skilled workers” explains Margaret Soi.

Significantly, the much-needed labour mobility in an African context has seen the growth of a new class of individuals who have an appetite to grow, maintain and preserve their wealth through sustainable investment solutions both locally and across borders. At a pan-African level, this has spurred an increased demand for cross-border banking through digital channels by these highly skilled professionals who now enjoy the added advantage of mobility to transform their livelihoods. Indeed, such professionals are well poised to join a rising class of mass affluent customers living and working in Africa – a segment that Bank One is ideally placed to serve through the combined footprint of our two shareholders, Mauritian conglomerate CIEL Ltd and Kenya-based I&M Group PLC.

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Margaret adds “Financial institutions like Bank One can support the growth and needs of such skilled professionals by extending to them best-in-class cross-border banking solutions such as the recent award-winning, innovative cross-border banking value proposition under our Offshore Elite Banking Unit. At Bank One, we have a slew of best-in-class banking solutions enabling us to offer services targeted to such mass affluent customers across sub-Saharan Africa, such as: 

Cross-border transactions: Secured offshore transactional capabilities for Foreign Currency banking across multiple currencies and geographies.

Advisory: Trusted advice on structuring investments, managing wealth, and accessing secured financing facilities.

Wealth Management: Dedicated and experienced offshore banking Relationship Managers covering both Francophone and Anglophone clients.

Digital banking: Efficient digital banking services for accounts and investments including an award-winning custody platform and best in class FX services.

Future forward: Committing to labour mobility for a brighter future for all

Soberingly enough despite the plethora of benefits that can be derived from intracontinental labour mobility, not all African countries are committed to the concept. Alongside the signing of the AfCFTA agreement and supporting the Kigali Declaration, while 32 African nations had signed the Protocol on Free Movement of Persons (which seeks to establish a visa-free zone within the AfCFTA countries) by January 2022, only four countries–Rwanda, Niger, Mali and São Tomé and Principe – have ratified it. Most crucially, Nigeria and South Africa, the two largest economies of Africa, have not signed or ratified the agreement.

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Thus, more than one year on since the launch of the AfCFTA, it is becoming increasingly clear that its full potential will not be unlocked if we do not improve the continent’s labour mobility to ensure that the right skills are available at the right place and the right time. Indeed, it is only by ensuring free movement of people and labour across the continent that we can enhance economic growth, allow firms to find much needed skills faster, boost productivity, and enable wealth creation by allowing Africans to trade more with fellow Africans.

Margaret Soi is the Head of Cross Border Banking

Kelechi Deca

Kelechi Deca has over two decades of media experience, he has traveled to over 77 countries reporting on multilateral development institutions, international business, trade, travels, culture, and diplomacy. He is also a petrol head with in-depth knowledge of automobiles and the auto industry

The African Continental Free Trade Area (AfCFTA) has the potential to bring significant economic and social gains to the region, leading to higher incomes, lower poverty, and faster economic growth.

Also if fully implemented to harmonise investment and competition rules, the trade pact could boost regional incomes by as much as 9 per cent, to $571 billion, and create almost 18 million more jobs, many of them higher-paying and better-quality jobs, with women workers seeing the biggest gains, and by 2035, the resulting jobs and income growth could help up to 50 million people exit extreme poverty.

This projection is contained in a new World Bank report, “Making the Most of the African Continental Free Trade Area”, released on Thursday, and done in partnership with the AfCFTA Secretariat.

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According to the report, the implementation of the trade agreement would also lead to larger wage gains for women and skilled workers. “Wages of female workers are expected to be 11.2 per cent higher in 2035 as compared to the wage level without the agreement, outpacing 9.8 per cent growth of male workers’ wages,” the report states.

The report, Making the Most of the African Continental Free Trade Area, extends the work done in 2020 (www.worldbank.org/afcfta2020report), when the World Bank initially assessed the economic potential of AfCFTA.

As part of its first phase, which took effect in January 2021, the AfCFTA will gradually eliminate tariffs on 90 per cent of goods and reduce barriers to trade in services.

The new report, released this week examines the effects of the larger trade market on the continent’s ability to attract investment, both from within Africa and outside, and the resulting economic impact.

Mari Pangestu, Managing Director for Development Policy and Partnerships, World Bank said: “The AfCFTA comes at a critical time when regional cooperation is needed to navigate compounded risks and enhance the resilience of supply chains, to support green, resilient and inclusive growth in Africa.

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“Countries must work together to make the AfCFTA a reality and reap its many benefits – including reducing barriers to trade and investment, enhancing competition, and ensuring markets function fairly and efficiently through clear and predictable rules.”

The report discusses two scenarios to assess the benefits for a market of more than 1.3 billion people with a combined GDP of US$3.4 trillion. 

The key findings indicate that the AfCFTA has the potential to encourage greater foreign direct investment (FDI) required for Africa to diversify into new industries, such as agribusiness, manufacturing, and services, and reduce the region’s vulnerability to commodity boom-bust cycles.

“A deeper integration beyond trade and trade facilitation measures, that harmonizes policies on investment, competition, e-commerce, and intellectual property rights could boost market efficiency and competitiveness, reduce regulatory risks, and attract even more foreign direct investment.

“By 2035, this integration would increase incomes by 9 per cent, or $571 billion, and create 18 million new jobs, with 2.5 per cent of the continent’s workers moving to new industries. This would expand the number of people leaving extreme poverty to 50 million,” the report states.

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The report finds that greater FDI could raise Africa’s exports up to 32 per cent by 2035, with intra-African exports growing by 109 per cent, especially in the manufactured goods sectors. “All countries in Africa will see their intra-African exports increase, that includes Tunisia (165 per cent), Cameroon (144 per cent), Ghana (132 per cent), Tanzania (126 per cent), and South Africa (61 per cent)”, it added.

The World Bank said as barriers to trade and investment are reduced, export sectors likely to grow the most are textiles and apparel; chemical, rubber and plastic products; and processed foods. Deeper integration would lower trade costs and boost capital inflows boosting exports from services sectors such as transport; communications and hospitality.

Wamkele Mene, Secretary-General of the AfCFTA Secretariat said: “Today Africa is one of the least integrated regions globally. African countries trade more with the outside world than with each other. The pact can help countries to simplify and harmonize trade and transit procedures, improve infrastructure, transport and logistics and spur the flows of goods, services, capital, and people that are so vital for development.”

According to the Bank, to unlock these potential gains in trade, investment, and jobs, countries must first successfully conclude the negotiations and the treaty’s most ambitious goals must be carried out by each country.

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The report, Making the Most of the African Continental Free Trade Area, highlights several other areas countries could reform to amplify economic gains from trade.

Kelechi Deca

Kelechi Deca has over two decades of media experience, he has traveled to over 77 countries reporting on multilateral development institutions, international business, trade, travels, culture, and diplomacy. He is also a petrol head with in-depth knowledge of automobiles and the auto industry

The African Continental Free Trade Area (AfCFTA) agreement was launched on January 1, 2021 with the objective to create the largest free trade area in the world measured by the number of countries participating. The pact connects 1.3 billion people across 55 countries with a combined gross domestic product (GDP) valued at $3.4 trillion. It has the potential to lift 30 million people out of extreme poverty but achieving its full potential will depend on putting in place significant policy reforms and trade facilitation measures.

The agreement aims to reduce all trade costs and enable Africa to integrate further into global supply chains – it will eliminate 90 per cent of tariffs, focus on outstanding non-tariff barriers, and create a single market with free movement of goods and services. Cutting red tape and simplifying customs procedures will bring significant income gains. Beyond trade, the pact also addresses the movement of persons and labour, competition, investment, and intellectual property.

The scope of AfCFTA is sizable. The agreement will reduce tariffs among member countries and cover policy areas such as trade facilitation and services, as well as regulatory measures such as sanitary standards and technical barriers to trade. It will complement existing subregional economic communities and trade agreements in Africa by offering a continent-wide regulatory framework and by regulating policy areas, such as investment and intellectual property rights protection that so far have not been covered in most sub regional agreements in Africa.

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According to the World Bank AfCFTA can provide a spark for the region. By 2035, it estimates that implementing the agreement would contribute to lifting an additional 30 million people from extreme poverty and 68 million people from moderate poverty. Real income gains from full implementation of the agreement could increase by 7 percent, or nearly US$450 billion. As African economies struggle to manage the consequences of COVID-19, AfCFTA can provide an anchor for long-term reform and integration.  

“The AfCFTA is a critical response to Africa’s development challenges,” His Excellency Wamkele Keabetswe Mene, Secretary General, who is speaking at Africa Oil Week to be held in Dubai between 8th and 11th of November says. “It has the potential to enable Africa to significantly boost intraAfrica trade and to improve economies of scale through an integrated market. It has the potential to be a catalyst for industrial development, placing Africa on a path to exporting value-added products and improving Africa’s competitiveness both in its own markets and globally. It also sends a strong signal to the international investor community that Africa is open for business, based on a single rulebook for trade and investment.

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“The global economy is on the brink of a new industrial revolution, driven by new-generation information technologies such as the Internet of Things, cloud computing, big data and data analytics, robotics and additive manufacturing. All of this presents challenges and opportunities for the AfCFTA.”

One of the industries that can benefit from AfCFTA is the energy sector, both the traditional oil and gas operators as well as the growing number of renewable enterprises. Like the rest of the world Africa is embarking on an energy transition but with oil and gas and mineral resources accounting for more than 75 per cent of the continent’s exports and with the potential for growth in oil and gas high, it will still have a role to play in the short and mid-term. Estimates vary but recent figures put Africa’s proven gas reserves at 487.7 tcf with proven oil reserves in the region of 125 billion bbl. However, trade barriers such as high import tariffs have left many African countries vulnerable to the international market, which resells its resources at higher prices.

The AfCFTA will potentially end this practice as oil and gas producing countries will benefit from global markets as well as the domestic market. Focusing more on growing intracontinental oil and gas trade will give countries autonomy to govern their international trade agreements, which have often left African countries on the losing end. Analysis indicates that the AfCFTA will make room for the generation of GDPs that can positively impact African economies’, create employment, and impact infrastructural development. While this is a necessary benefit that will positively impact Africa, it is already a continent plagued by corruption, which has resulted in the delayed development of essential infrastructure required to facilitate the ease of trade through the AfCFTA.

For African countries, the green energy transition presents both opportunities and challenges. On the one hand, the huge energy deficits in production and access, combined with abundant renewable energy resources, can underpin a relatively rapid and encompassing shift to green energy. On the other hand, challenges related to access to finance, investment risk and the absence of needed technical and human capacities may impede this transition.

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According to the International Energy Agency (IEA), over 600 million people in Africa have no access to electricity and a further 900 million people cannot access clean cooking energy. These figures do not however tell the entire story as there is significant variation across countries. For example, in South Sudan the percentage of the population with access to electricity is as low as one per cent while countries such as Egypt, Algeria, Libya and Tunisia can boast 100 per cent access. The South African Institute of Economic Affairs claims that this disparity is shaped by several factors including state capacity, quality and effectiveness of existing policy and institutional frameworks, and the ability of countries to tap into global knowledge and resources.

In its policy brief ‘Accelerating Green Energy Transition in Africa Through Regional Integration’ the SAIIA states that individually, most African countries lack financial, technical, and human capacities needed to fully implement a green energy transition. This indicates an important role for some collaboration, both between African countries and with external partners, to enable Africa to address its energy deficit. While many modalities for financing African green energy transition have been highlighted in the policy discourse, two recent trends seem promising in fast tracking the transition process. First is the AfCFTA, which promises to build a regional market for goods and services, with free movement of persons and investment. By consolidating small, poor, and fragmented African countries into one strong market, the agreement can change the dynamics in terms of access to funding, human capital, and technology for the green energy sector. The second important trend is the evolving Europe-Africa relationship.  

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A regional approach to addressing the African energy deficit is not new, as regional power pools already exist, through which African countries manage power generation and distribution. The AfCFTA directly and indirectly addresses these challenges, which will both improve the prospect of regional power pools succeeding, as well as greater acceleration towards green energy. First, the AfCFTA intends to scale investment in regional infrastructural projects and given that renewable energy is a significant component of regional power pools, this can accelerate the transition to green energy. The second phase of negotiations is centred on protocols for cooperation on investment, intellectual property rights and competition policy. This protocol provides for national and continental investment as well as support for existing investment promotion agencies like the Programme for Infrastructure Development in Africa (PIDA).

Kelechi Deca

Kelechi Deca has over two decades of media experience, he has traveled to over 77 countries reporting on multilateral development institutions, international business, trade, travels, culture, and diplomacy. He is also a petrol head with in-depth knowledge of automobiles and the auto industry

Exploring strategies to deepen private sector participation in the implementation African Continental Free Trade Area (AfCFTA) was the highlight of a panel session during the 2021 WTO Aid-for-Trade Stocktaking meeting. The African Development Bank the United Nations Industrial Development Organization (UNIDO) and International Trade Centre (ITC) organized the session held on Wednesday 24 March.

“The success of the AfCFTA hinges on the ability of African firms to understand and capitalize on the trade related opportunities offered by the AfCFTA,” said Pamela Coke-Hamilton, International Trade Centre (ITC) Executive Director.

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The Aid-for-Trade initiative – which promotes the role of trade in development and supports building productive capacities– should focus on three priorities to boost the private sector’s role in AfCFTA: empowering businesses with skills and know-how; fostering multi-stakeholder partnerships to attract investment for greater value addition and enhancing market connections using e-commerce and digital platforms, Coke-Hamilton said. 

Also participating were: Mr. Alan Kyerematen, Ghana Minister of Trade and Industry; Mr. Li Yong, Director-General of UNIDO; Mr. Solomon Quaynor, African Development Bank Vice President, Industry, Infrastructure, Private Sector and Trade; Ms. Tania Rödiger-Vorwerk, Director, Private Sector, Trade, Employment and Digital Technologies in Germany’s Ministry for Economic Cooperation and Development; Ms. Glwadys Tawema, CEO of Benin firm, Karethic; Mr. Emmanouil Davradakis, Senior Economist, European Investment Bank; Mr. Paul Walters, Director for Trade & Development, UK Foreign, Commonwealth and Development Office and Mr. Michael Kottoh, Head of Strategy & Research, AfroChampions.

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“This is a trade area of the people, so we need to understand and engage the people to go forward and believe in this dream of an African free trade area,” said Ambassador Usha Dwarka-Canabady, Permanent Representative of Mauritius at the United Nations Office at Geneva and coordinator of the African Group at the World Trade Organization, who moderated.

Discussion focused on boosting  private sector involvement in policy dialogues on trade, investment and infrastructure, strategies to increase participation by micro, small and medium enterprises, and the need for greater partnerships to attract investment in promising industries.

Kyerematen proposed that bridging information gaps between governments and the private sector would help build confidence around the free trade agreement and noted that fiscal incentives, including subsidies, might be needed in some instances.

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Li emphasized the private sector’s role in speeding up industrial development and economic diversification, particularly in the context of the ongoing pandemic and other development challenges.   “The private sector accounts for 80% of total production, two thirds of investment, three-quarters of credit and employs 90% of the working age population.” He also noted “several determining factors, including an enabling business environment, affordable connectivity, accelerated digitalization and opportunities to forge strong public-private partnerships” as crucial to ensuring businesses’ commitment to trade and invest in the AfCFTA.

The African Development Bank, UNIDO and the ITC have each engaged with the private sector at the continental, regional and sub-national level to facilitate the African business community’s access to the new single market, said Vice-President Quaynor.

The African Development Bank is actively supporting or looking to support initiatives to boost trade and improve livelihoods for Africans, Quaynor said, citing the Ethiopian Commodity Exchange as a model to  be replicated across Africa, referring to the commodities exchange established in 2008 that is transforming the country’s agricultural trade.

“African farmers receive only 20-25% of the final price of their market produce, compared to the 70-85% that Asian farmers receive.”

Quaynor also named AfroChampions, a public-private partnership designed to accelerate economic integration and support the emergence of African multi-nationals, as an initiative that is making an impact.

The meeting comes in the wake of the entry into force of the AfCFTA on 1 January 2021. The free trade area  brings together 1.3 billion Africans in a $3.4 trillion economic bloc. The bloc is the largest free trade area since the establishment of the World Trade Organization, and economists project that its benefits and impacts could lift tens of millions out of poverty over the next 15 years.

Kelechi Deca

Kelechi Deca has over two decades of media experience, he has traveled to over 77 countries reporting on multilateral development institutions, international business, trade, travels, culture, and diplomacy. He is also a petrol head with in-depth knowledge of automobiles and the auto industry

The operational phase of African Continental Free Trade Agreement (AfCFTA) which will enter into force on the 1st of January, 2021, will cover a market of 1.2 billion people and a combined gross domestic product of $2.5 trillion — making Africa the world’s largest free trade area since the formation of the World Trade Organization seven decades ago.

The AFCFTA is a free trade agreement among African countries, who are signatories to the Agreement. The CFTA is consistent with the World Trade Organisation rules relating to Free Trade Agreements. A free-trade agreement is an agreement among a group of two or more countries whereby the duties and other restrictive regulations of commerce are eliminated on substantially all the trade between the countries in products originating from the countries.

The Key Targets Of The Agreement

• The Agreement wants to create a single market for goods and services in Africa and to permit more people to move around any country in Africa with minimum visa requirements.
• It also seeks to create a market that is less free from custom duty and tariffs.
• It seeks to make movement of money and capital across African countries freer.
• The Agreement also hopes that, if it ever becomes successful, there would be established a Continental Customs Union that would be make issues of customs duty and levy less demanding in Africa.
• The Agreement seeks better ways of bringing more industries to Africa as well as opening up its agricultural and food sectors.

What The Agreement Intends To Disrupt for African Businesses

Free Up Trade

The Agreement, when it comes it force in January, 2021, would finally put an end to tariffs charged on goods imported from African countries that have signed the Agreement. Therefore, countries that have signed the Agreement are required to set out the products or goods that they are willing to forfeit tariffs on. They are also expected to list out the import duties to be charged on products or goods that they are not ready to fully forfeit tariffs or import duties on.

The Agreement, in other words, would allow the signatory countries to offer preferential treatment to goods imported from other African countries that are also signatories to the Agreement. However, the Agreement has listed some steps to be followed in making sure that this preferential treatment fully benefits any signatory country. In any case, this preferential treatment would not be applied where the goods or products in question are meant to remedy any defect in trade.

The Agreement Makes It Impossible for Signatory Countries to Give Limit to the Number of Goods or Products That Would be Subjected to Free Tariffs

That is, you cannot say only 30% of imported goods from signatory countries would benefit from free tariffs, while the rest of 70% would not be subject to tariff. Hence, the Agreement enjoins State Parties not to impose quota restrictions on imported goods, except where relevant World Trade Organisation agreements as well as the provisions of the AfCFTA can be invoked. However, signatory countries can impose export duties on goods that are exported out of their countries provided that they notify the AfCFTA Secretariat.

Rules of Origin

Under the Rules of Origin, businesses know the benefits that they may obtain under any preferential trade agreements. The intention of the Agreement is to make it possible for businesses in signatory countries to know how much they can benefit from the Agreement. The aim is to ensure that companies that are not within the signatory countries do not ship their products or goods to countries that are signatories to the Agreement in order to benefit from the Agreement.

Thus, for the goods or products of these companies to benefit from the Agreement, they must be completely produced in any of the signatory countries or sufficiently processed in any of the signatory countries. So, if you you merely wash, paint, peel vegetables etc, you may not benefit from the Agreement. The only exceptions to this rule are that, if the goods or products involve your personal effects or belongings which are below a certain amount; or the goods are imported only for display at Fairs or Exhibitions and under the control of the Customs Authority; or the goods are shipped through another signatory country’s territory — that is, the goods are still in transit not having arrived their final destinations.

A Major Emphasis of The AfCFTA Is On National Treatment

Under this, all signatory countries to the AfCFTA must treat products imported from other signatory countries in the same way as they treat products produced domestically. What this means is that none of the signatory countries should discriminate against imported products in the domestic market simply because they are imported. In simple terms, if the goods are imported from Ghana into Kenya (the two countries being part of the Agreement), the imported goods in Kenya would be seen as Kenyan goods, nothing less.

Using Trade Remedies To Create A Balance

What trade remedies do is that they enable the signatory countries to prevent much of the effect of over-importation of foreign goods which may damage the country’s local market. Hence, trade remedies are invoked to address serious disruptions to domestic industries arising from predatory pricing by companies in partner countries, or illegal subsidies in those countries, or generalized surges in imports. Where any of these fears happen, the Agreement mandates the appropriate authority to investigate the claims by signatory countries in order to find out the level of injury to domestic producers.

Accordingly, the Agreement sets out the circumstances in which such measures can be taken and the processes that govern their application. The Agreement still relies on the provisions of the World Trade Organisation’s agreements governing trade remedies. This is a sort of a big relief to import-competing companies, who may feel a measure of relief is available to them regarding ‘unfair competition’. However, much still depends on how the agreements are interpreted and applied, and the efficiencies thereof.

What The Agreement Intends To Do In The Long Run

• Non-discrimination:

The Agreement also looks (in conjunction with other AU agreements and protocols) at allowing free entry to signatory countries’ citizens. However, the right to move freely or stay is permitted for a maximum of 90 days from the date of entry, although individual signatory countries may grant a further period.

Again, there are no provisions on intention to abolish visa requirements. Instead, signatory countries are enjoined to issue valid travel documents to their nationals to facilitate free movement. In addition, signatory countries are to adopt a travel document called an ‘African Passport’ .

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• Work Permit: Signatory parties are also required to issue residence permits, work permits or other appropriate permits and passes as required by the host state. Again, nationals of a signatory country shall have the right to seek and accept employment without discrimination in any other signatory country. Such nationals may be accompanied by their spouse and dependants.
• Right of Residence and Right of Establishment: By this, nationals of a signatory country shall have the right of residence and the right of establishment in accordance with the laws and policies of the host country. The right of establishment shall include the right to set up a business, trade, profession, vocation or an economic activity as a self-employed person.
• Mutual Recognition of Qualifications:

Again, in the long run, and if the Abuja Protocol is fully complied with, signatory countries shall, individually or through bilateral, multilateral or regional arrangements, mutually recognize academic, professional and technical qualifications of their nationals’, and ‘establish a continental qualifications framework’.

AfCFTA 2021 AfCFTA 2021 AfCFTA 2021 AfCFTA 2021 AfCFTA 2021 AfCFTA 2021 AfCFTA 2021

Signatory Countries:

Algeria; Angola; Central African Republic; Chad ; Comoros; Djibouti Equatorial Guinea; Eswatini; Gabon; Gambia; Ghana; Ivory Coast; Kenya; Mauritania; Morocco; Mozambique; Niger; Republic of the Congo; Rwanda; Sahrawi Arab Democratic Republic; Senegal; Seychelles; Sudan; Zimbabwe, etc.

Analysis And Future Projections From The Agreement.

According to the United Nations Conference on Trade and Development (UNCTAD), the Agreement is economically significant to Africa for the following reasons:

• Trade between African countries remain low, at around 10 per cent of total trade of Africa in 2010. Such trade is limited by a relatively high applied tariff protection rate, at about 8.7 per cent, with heterogeneous tariff structures that range much higher in many cases. UNCTAD’s recent data shows intra-African trade share rising from about 9 per cent in 2000–2005 to 14 per cent in 2010 and reaching 18 per cent in 2015. This data is significant and gives hope that with the changes to be introduced the CFTA, the volume of trade would further increase.
• The CFTA would add US$ 17.6 billion (2.8 per cent) to Africa’s overall trade with the world (compared to a 2022 baseline scenario without it), stimulating Africa’s exports by US$ 25.3 billion (or 4 per cent), according to the UNCTAD. The sectors that would benefit the most would be agriculture and food, with a projected growth of 9.4 per cent over the 2022 baseline scenario. Industrial exports would see a boost of US$ 21.1 billion, a very respectable 4.7 per cent higher than the 2022 baseline.
• Again, trade between African countries is expected to rise by US$ 34.6 billion (52.3 per cent above the 2022 baseline), if agriculture/food, industrial goods and services are included, with the highest impact being in industrial goods (at US$ 27.9 billion, or 52.3 per cent above the baseline), when this CFTA comes in force.
• Intra-African trade in agricultural and food products would increase by US$ 5.7 billion (53.3 per cent over the baseline), with services rising by US$ 1 billion (31.9 per cent over the baseline). Overall, intra-African trade would rise from 10.2 per cent of total trade in 2010 to 15.5 per cent by 2022. Although a positive overall outlook, it still short of the stated goal of doubling the trade within 10 years.
• Market diversification, both for exports and imports, is very limited, due to a relatively small number of export items (mostly primary products). However, for those economies on the continent that have a more diversified production base, the “local” (African) market for manufactured products is more important in their overall trade.
• If improvement in commerce is realized within the CFTA, a further US$ 85 billion would be added to intra-African trade. This would represent a significant 128.4 per cent increase over the 2022 baseline. That would certainly achieve a more-than-doubling of intra-African trade in 10 years, rising to 21.9 per cent of Africa’s global trade by 2022.
• Given the current level of intra-African trade share at about 18 per cent of total African goods exports, the expected doubling of intraAfrican trade could raise it even up to or beyond 30 per cent.
• The significance of the findings is that tariff liberalization in goods will lead to only partial expansion in intra-African trade. Realizing a larger impact on boosting intra-African trade requires tariff liberalization of goods trade to be accompanied by the removal of non-tariff barriers, reform of services sector and improvement of trade facilitation measures. With a holistic reform of market access and entry conditions among African countries through the CFTA, the continent can expect to see the share of intra-African trade in total trade of Africa to rise significantly, doubling within 10 years.
• Customs clearance procedures and SPS and TBT requirements more than triple the number of days goods stay at customs (both as exports and imports), compared to the OECD average of 10.6 days. The CFTA may finally help to resolve this.

Why Some Countries Have Refused to Sign The Agreement.

Some of the fears of the Agreement are that:

• A CFTA implementation would negatively impact customs revenue resources of most countries since there may be reduction in tarriffs on goods from signatory African countries. However, according to the UNCTDA, this would augment real income for Africa by US$ 296.7 million (or 0.2 per cent) as a result of stimulated exports. Once this happens, the real wages for African workers would rise too over the 2022 baseline, with unskilled agricultural workers seeing the largest rise since the focus is largely on Agriculture.
• Dumping of goods
• Threat to local economies.

Charles Rapulu Udoh

Charles Rapulu Udoh is a Lagos-based lawyer who has advised startups across Africa on issues such as startup funding (Venture Capital, Debt financing, private equity, angel investing etc), taxation, strategies, etc. He also has special focus on the protection of business or brands’ intellectual property rights ( such as trademark, patent or design) across Africa and other foreign jurisdictions.
He is well versed on issues of ESG (sustainability), media and entertainment law, corporate finance and governance.
He is also an award-winning writer