Five operational instruments launched

… as AfCFTA to be operational in July 2020

Following the official launch of the Africa Continental Free Trade Area Agreement (AfCFTA) last Sunday in Niger, the African Union (AU) Commission and stakeholders have launched a five operational instrument to govern the working phase of the agreement.

The operational instruments include Rules of Origin, which will determine the eligibility of goods to be traded under AfCFTA as well as modalities such as protection of infant industries and an online negotiating forum to enable member States spearhead the success of the policy.

The remaining are: an online mechanism for monitoring and elimination of non-tariff barriers and AfCFTA mobile application for businesses; digital payments system for goods and services; a Pan-African payment and settlement system; and dashboard of the AU Trade Observatory all of which are expected to accelerate the implementation of the AfCFTA.

Each of these instruments was launched by a different Head of State and Government during the event and these five operational instruments are expected to serve as guiding principles to accelerate the success of the trade policy.

The Commission and stakeholders involved in the implementation of the agreement have been tasked to finalise the remaining negotiations and operational instruments to begin the implementation of the agreement next year.

According to the AU Commission, by July, 2020, a total of 54 African countries will begin trading under the free trade area. This follows the signing of the agreement by Nigeria, leaving Eritrea out as the only African state missing to join the world’s largest trading bloc. This brings the total of countries that have signed and ratified the agreement to 27 while 27 have signed but have not yet ratified it. Only Eritrea has not signed up at all.

To boost the competitiveness of Small and Medium-sized Enterprises (SMEs) in the agreement, the AU Commission has drafted a report to enable them compete with regards to economies of scale and pricing.

Key among the proposals in the report include catering for the interest of small-to-medium cross-border traders by simplifying trade regimes applicable to them which are aimed at boosting their business activities.

Hindrances

The International Monetary Fund (IMF) has noted that the reduction of tariffs alone is not enough. The free trade area agreement is a program that focuses on cutting trade tariffs between member countries and boosting regional trade by 15 to 25 percent in the medium term. This, the IMF noted that could double in the long term if other issues such as poor roads and railway lines, violence-hit areas, strict border controls and rampant corruption, were dealt with.

Background

The AfCFTA is expected to increase intra-African trade by 60 percent by the end of year 2020, remove tariffs on 90 percent of goods, liberalise services and tackle other barriers of inter-African trade, such as long delays at border posts.