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Teething problems slow AfCFTA take-off

By Geoff Iyatse (Assistant Business Editor) and Femi Adekoya
01 February 2021   |   4:30 am
While some top African economies have already freighted their first cargoes under the African Continental Free Trade Area (AfCFTA), Nigeria continues to await the release of the list of liberalised goods by the National Action Committee, one month after implementation commenced.

Secretary-General, AfCFTA, Wamkele Mene

• Higher tariffs, levies may deter intra-African trade
• While Ghana has freighted first cargo
• Pending issues will be concluded before end of Q1, says Nigeria’s rep

While some top African economies have already freighted their first cargoes under the African Continental Free Trade Area (AfCFTA), Nigeria continues to await the release of the list of liberalised goods by the National Action Committee, one month after implementation commenced.

On January 4, Ghana organised an event to commemorate its first export under the framework, setting a tall order for other countries. Ghana is reportedly one of three countries, including Egypt and South Africa that have fit for purpose border and custom facilities, aligning with AfCFTA’s trade terms.

Nigeria, the regional bloc’s most populous country and biggest economy is yet to secure the required infrastructure to leverage the agreement.
Speaking during a virtual press conference, recently, Secretary-General of the African Continental Free Trade Area Secretariat, Wamkele Mene, said: “The most important point that I want to emphasize is that Africa is now trading under new rules, new preferences, because we want to build a single integrated market on the African continent. It may take some time before each of us sees the direct benefit. We are not going to be deterred by our critics who say they don’t see evidence that trading has actually started,” Mene said.

Stakeholders are however worried that the processes are not taking shape fast enough.

According to the agreement establishing the AfCFTA, its implementation route is anchored on four institutional frameworks – the Assembly, the Council of Ministers, the Committee of Senior Trade Officials and the Secretariat.

While the first three requisite institutions are existing structures within the African Union Commission (AUC) and member states, the Secretariat, which is expected to provide administrative support for the implementation of the agreement, was officially handed over to Ghana while the pioneer Secretary-General was also appointed in 2019.

Until his appointment, Mene, who served as head of mission to the World Trade Organisation (WTO) for South Africa, was his country’s lead negotiator in AfCFTA.

A source who is versed in Africa’s trade and AfCFTA conceptualization, told The Guardian a few days ago that a lot more should be happening at the Secretariat since Ghana won the bid over a year ago, lamenting that not much is happening.

“We are almost entering February, yet there should be a tracker on what has been achieved month-by-month and quarter-by-quarter. It is typical of Africa. When there is a job to do, it is like a talk show. People come to make presentations and return home without following up with the discussion,” the source lamented.

Also missing from the trade and regional financial organisations is the political will to actualise the agreement, and move to the next critical. But the Secretary of the National Action Committee for the Implementation of the AfCFTA, Francis Anatogu, told The Guardian that implementation was on course and that pending hitches would be resolved before the end of this quarter.

Anatogu, who spoke in a telephone interview, said: “For trade to state, we need to execute the tariff order, that is, the list trades to be liberalised. Members of the Economic Community of West African States (ECOWAS) have the same list. The list has been finalised at the sub-regional level and submitted to the African Union (AU) for technical verification. When the technical verification is concluded at AU, it will be published and become public documentation.”

He said trading under the guise of AfCFTA is yet to commence in any part of Africa. According to him, the tariff orders would be transmitted to customs for yet another treatment and documentation before it is published as a binding agreement.

Anatogu’s position contradicts the claim by Ghana that it had shipped its first consignment as of January 4, leveraging AfCFTA window.

Responding to the yet-to-be-staffed secretariat, he noted, “that it is part of the initial challenges faced by these sorts of the initiative.” The staffing, he said, would be undertaken simultaneously with other paperwork, adding that it is important to acknowledge the impact of COVID-19 on processes.

A Nigerian financial and trade expert, Dr. Biodun Adedipe, said minimal basic logistics, including a functional secretariat, is needed for AfCFTA’s commencement. He added that AU wasted much resources and time on ratification at the expense of efficient takeoff of the scheme.

He continued: “The AfCFTA Secretariat is a regional administrative office that should have an implementation roadmap that detailed timelines on critical issues of infrastructure and pioneer staffing. The events for its proper takeoff were not sequenced while commitment was secured from the member states.

“For instance, I imagine the host country of the Secretariat will provide the basic infrastructure for takeoff, while the Secretary-General should hit the ground with minimum key staff to ensure smooth operations. Such staff will be sufficiently senior to draw up the operation manuals and especially drive engagement with stakeholders. It would seem more attention went into member states signing the protocols and having the legal ratification than its timely and effective takeoff.”

But Prof Ken Ife, a consultant with ECOWAS, said funding could be part of the major challenge of the administrative efficiency of the protocol implementation, adding that it is a common problem with multilateral institutions.

He said Ghanaian Government, which scrambled for and won the Secretariat, should live up to the challenge of providing “the running cost for at least the first one year” while the institution fine-tunes the financing arrangement.

Stakeholders in the manufacturing sector still view the agreement with caution. The Lagos Chamber of Commerce and Industry (LCCI), in its 2021 outlook, said AfCFTA could make the local business even less competitive as the rising cost of operation continues to weigh heavily on them. Other experts fear the trade deal could turn Nigeria into a dumping ground for other African countries.

Anatogu said Nigeria, being import-dependent, would need to “work actively with other African countries to grow specific sectors” to benefit from the agreement.

He was confident Nigerian companies would benefit in terms of cheaper inputs as the deal takes root. Besides, he said, not all items would be liberalised.

“It is about importing from Africa instead of China and other parts of the world. Production will also become increasingly cheaper as Nigerian companies will be able to import inputs from African countries rather than Asia and Europe,” he said, adding that the protocol will unleash Nigerians’ innovation.

Another worry for stakeholders is the slow nature of government business in the country.Under the deal, each state or regional trade blocs make their plans and that information is eventually hosted on the Africa Trade Observatory (ATO) website. Nigeria is yet to upload data as searches run on the site provide nil outcomes.

Similarly, stakeholders are asking for the deployment of the AU Passport to aid the movement of people, thereby fostering trade among members. Specifically, tariffs on 90% of goods will be phased out within 10 years and more for the remaining 10%. This is being done in stages and could take up to 2035, according to the AfCFTA secretariat.

This means that for Nigeria that depends mostly on imported raw materials for production, taxes on any good being exported to neighbouring countries could make the final products too expensive to sell elsewhere on the continent. This is expected to further affect the country’s competitiveness.

The logic of the AfCFTA is that if African countries did more business with one another, they would all benefit, creating more jobs and so raising living standards across the continent.

The Nigerian Customs said it was ready to play its role as a trade facilitator in the AfCFTA but said it was still waiting for the National Action Committee.

The spokesperson of the Customs, Joseph Attah, said the service was awaiting “the list of the 90 per cent liberalised national trade offers; the list of 70 per cent non-liberalised exclusive goods at the regional level, and the list of 3 per cent non-liberalised sensitive goods.”

On his part, MAN President, Mansur Ahmed, expressed worry about dumping in the course of AfCFTA implementation. He said: “Dumping is frankly a matter of political will. Do our governments and political leaders have the political will to agree on these issues that we have to do? To make sure that we don’t permit dumping to happen, there may be need to ensure that all nations function primarily based on the rule of origin that has been agreed.

“However, the distinction is that whereas some nations will be sure that these rules are complied with, others sadly won’t achieve this. This requires an efficient monitoring mechanism to be put in place to make sure that all nations comply,” he added.

President of the Lagos Chamber of Commerce and Industry (LCCI), Mrs Toki Mabogunje noted that while the take-off of AfCFTA should be lauded, much work remains undone as critical parts of the agreement are yet to be finalized.

According to her, several key issues including schedules of tariff concessions, schedules of service commitment, rules of origin, investment, competition policy and intellectual property rights have not been concluded.

“There is still a lack of clarity on the type of value addition that must occur within an AfCFTA State party for a product to benefit from tariff reduction. We call on the AfCFTA Secretariat and the African Union to expeditiously finalize pending negotiations for effective AfCFTA implementation. There is still a great deal of sensitisation and enlightenment that need to be done on the implementation modalities,” she added.