AfCFTA: Two years into Africa’s regional integration
The African Continental Free Trade Area (AfCFTA) marked the beginning of a new era for Africa, reflected in the euphoria with which it was received across the world. However, projections of the economic impact of the trade deal are on the whole positive, despite some scepticism about implementation. Two years down the line, observers believe the next 10 years will make or break the AfCFTA, depending on how successfully the deep-seated threats and challenges are addressed. FEMI ADEKOYA writes.
Positioning Africa as a ‘universal entity’ that operates effectively within the international order by contributing constructively to the international agenda, making its voice heard and ensuring that its priorities are represented in implementation roadmaps and outcomes and in periodic reviews meant to address emerging challenges, remains a key agenda of the AfCFTA.
A point of weakness for Africa, though, has been when strength in numbers and solidarity in priorities have not been applied.
According to Dr Francis Mangeni, an independent consultant and Advisor on African Economic Integration, the ancient wisdom of united we stand or divided we fall still holds, adding that the weakness of diminutive, balkanized economies is still true.
“Unfortunately, it is weak countries that tend to insist more fervently on exclusive sovereignty, while the strong act in concert and multilateralize their interests into global orders”.
For the AfCFTA to proceed and succeed, Africa needs to operate as a single entity, ignoring certain nuances and colonial affiliations.
Following the decision of the Heads of State at a virtual Summit on December 5, 2020, trading under the AfCFTA commenced on January 1, 2021, which was marked by a colourful virtual ceremony jointly organised by the Secretariat and AfroChampions (a continental private sector association).
Over the first half of 2021, though, senior technical officials in their various meetings advised that trading could not yet happen, because there were no tariff schedules. Also, rules of origin were required for each product that was in a tariff schedule, yet not all the rules were in place.
By mid-2021, 88 per cent of the tariff headings had rules of origin. Rules for textiles and clothing, automotive vehicles and certain agricultural products were yet to be concluded. What this vividly and frighteningly showed was that technical officials could hold back implementation of the AfCFTA notwithstanding clear political decisions by the presidents.
This constitutes a major existential threat, if it means that political leaders reached their decisions without technical input or if certain technical officials could indeed delay summit decisions, a fairly huge mismatch between political ambition and technical processes.
This is not uncommon and needs to be addressed, through more inclusive decision-making processes. But as a matter of international accountability, as well as predictability required for medium- to long-term planning, the importance of faith in formal, high-level political decisions and pronouncements would require that technical processes accomplish set targets and goals in a timely fashion.
Though several African nations have started trading a trickle of goods under the African Continental Free Trade Area (AfCFTA) agreement via the pilot phase, tariff and logistics challenges hobble trade, with preference still for trade partners outside the continent.
Under the AfCFTA agreement, cross-border taxes on 90% of goods are supposed to fall at the latest by 2030, although the tariffs on numerous products will be phased out even earlier.
But tariffs are only one of the many barriers to trading across Africa. Logistics is another major hurdle, considering that three-quarters of Africa’s goods are carried on roads, which are often poorly built.
According to the African Development Bank, this increases the cost of logistics on the continent, which can add 75% to the price of African goods.
Several African countries belong to two or more RECs. This overlapping membership raises the issue of coordination and has been a burden to implementation efforts, such as attempts to address tariff and non-tariff barriers and regulatory harmonization. For instance, the rules of origin applied through various trade agreements at the RECs are very heterogeneous.
In some instances, trade officials and businesses have to cope with diverging trade rules and practices being applied to the same product or service. Such processes impose a high compliance cost on businesses and reduce the efficiency of intra-regional trade
Nigeria’s trade in goods with the rest of Africa in about five years stood at N15.85 trillion, data obtained from the National Bureau of Statistics (NBS) have shown.
The figure covers 2018 till September this year. The value translates to 9.3 per cent of the country’s total foreign trade in the period, underscoring the low level of intra-African trade.
In the same period, the value of the country’s trade with members of the Economic Community of West African States (ECOWAS) averaged N1.42 trillion yearly, bringing the sum for the period to N7.09 trillion or 4.2 per cent of the total trade in the period.
Nigeria’s foreign trade was estimated at N170.27 trillion in the timeframe, with exports slightly higher at 52.6 per cent share of the nominal value.
The regional trade in the period reviewed was dominated by Nigeria, which aligned with the historical trend. Of the N15.85 trillion regional trade, exports totaled N12.76 trillion or 80.5 per cent while the country imported a paltry N3.09 trillion value of goods.
Also, goods brought into the country from other ECOWAS countries through official routes in the period accounted for 7.5 per cent of the trade value. The value was N528.6 billion whereas the country’s exports to the neighbouring countries were over 12-fold (N6.36 trillion).
The low intra-regional trade, as underpinned by the NBS figures is low, its growth is also anaemic at best and mostly retrogressive.
For instance, in 2019, the figure grew by almost 80 per cent to N5.03 trillion only to slump by 44.7 per cent the following year. Last year saw the value of trade between the biggest regional economy and other African countries improved slightly (6.6 per cent).
As at September, the value was N2.28 trillion, putting the annualised estimate at N3.04 trillion, which will be about 2.5 per cent higher than last year’s performance.
The African Regional Integration Index does not reflect efforts to push the single market and free-movement agenda in past decades, with foreigners said to be able to move more freely in the region than Africans themselves.
Averaging 0.383, trade integration on the African continent tends towards the lower rungs of the score ladder, the index said. It adds that Africa has the highest average import duties and the highest average non-tariff barriers in the world.
Nigeria has yet to finalise its tariff schedule as well as unveil guidelines and implementation strategy for the trade deal, raising concerns for the organised private sector.
The Secretary, National Action Committee on African Continental Free Trade Agreement (AfCFTA), Francis Anatogu, had announced that all was set for Nigeria to begin trading activities under the AfCFTA.
Anatogu said Nigeria must pay attention to trade facilitation, policies, infrastructure, trade information, free movement of people and goods, finance and institutional coordination between the federal government and private sector.
“What we are focusing on in 2022 is understanding where the opportunities are and we have already identified areas that are priorities for AfCFTA in terms of products and services. We have also been able to dimension them into arrowheads to help us focus on the short term and frontiers that we can focus on the medium to long term”, he said.
He, however, stated the need to grow the volume of transactions within the country, while also supporting and encouraging businesses to take advantage of the African markets. He also pointed out the need to attract global investment in the country’s bid to take advantage of the AfCFTA.
In his words: “At the National Action Committee (NAC), our mission and vision for the AfCFTA is to take 10 per cent of Africa’s import from the world to provide the products and services from Nigeria that are currently being supplied by other countries outside Africa, but we know that for us to achieve that, we need to focus on developing value chain in products and services.”
He said according to the Nigerian Export Promotion Council (NEPC), export has grown in the past one year, advising that the next step for Nigeria is to boost its manufacturing presence on the continent.
He noted that so far, seven countries have started piloting the AfCFTA trade, saying Nigeria is on the verge of joining, adding that one of the key elements the country is trying to put in place is the preferential trade process to be able to trade under AfCFTA.
“The Nigerian Customs Service (NCS) has developed this procedure and is being reviewed with the stakeholders with a view to adopting it and publishing it for businesses to start to use,” he added.
After signing a Memorandum of Understanding on Cooperation for Trade and Investment between the US and the African Continental Free Trade Area (AfCFTA) with the Secretary General of the AfCFTA Secretariat, Wamkele Mene, during the US-Africa Business Forum in December, US Trade Representative, Ambassador Katherine Tai, said: “The future is Africa – for the United States and global economy. Africa’s significance is undeniable… The Biden-Harris administration recognizes that it is impossible to meet today’s challenges on trade without African contributions and leadership, and our support of the AfCFTA is part and parcel of this…
“But our work together will be an inclusive undertaking, requiring active participation from African Union member states, Regional Economic Communities, diaspora, SMEs, women-owned businesses, young entrepreneurs, workers and civil society groups.
“I think that where Africa and African nations can really benefit from this whole move towards globalization is by getting into value and supply chains, where they have strength to do that. I think that’s one of the things when we talk about the AfCFTA, when we talk about AGOA, when we talk to countries about improving their investment climate so that investors aren’t just interested in taking out raw materials, they’re interested in joint ventures or putting up manufacturing facilities… I do think that there is, especially with AGOA, that allows countries from other partners to produce manufactured goods. I think that there’s a way forward on that. One of the issues we’ll be looking at is how to bring African countries more into value and supply chain.”