With a secretariat based in Accra, the Ghanaian capital, the African Continental Free Trade Area (AfCFTA) is the world’s biggest free trade area measured by the number of countries participating. The pact connects 1.3 billion people across 54 countries with a total gross domestic product of $3.4tn, according to the World Bank. The AfCFTA came into being on January 1, and secretary Wamkele Mene tells Jason Mitchell that doubling intra-African trade by 2035 “is perfectly within reach”.
Q: Does AfCFTA have the potential to transform the continent?
A: Yes, absolutely. If the agreement is implemented effectively, we have the potential to lift 100 million Africans out of poverty – including 30 million out of extreme poverty – by the year 2035, according to the World Bank. We have to work very, very hard to make sure that this very encouraging positive projection becomes a reality. But we know that it is possible because we have seen how transformative trade can be in other parts of the world.
Q: How many African countries have fully ratified the pact and are in the process of implementing it?
A: There are 54 countries that have signed the agreement out of 55 on the continent. There are 36 nations that have ratified it and undertaken the legal obligations for market opening, reducing barriers to trade and so on. On 1 January, 2021, out of those 36 countries, a handful of them – including South Africa, Egypt, and Ghana – had the necessary customs infrastructure in place to trade according to the preferences of the agreement. The other countries among that group of 36 are in the process of establishing that customs infrastructure.
Because we know that not all countries are ready with the customs procedures and infrastructure – in particular because for 10 months they were fighting Covid-19 and got delayed – we agreed that traders would start to trade from 1 January, and if the country you are exporting to is not ready in terms of customs procedures and infrastructure, you are entitled as a trader to get a credit.
Q: That seems a very bureaucratic process.
A: It is a legal process; we are dealing with a legally binding agreement. There is no other way to devise a legally sound method. The heads of state decided that by the end of June 2021 all countries must have ratified the agreement, all countries must have the requisite customs infrastructure in place.
Let me just say this: I have never seen a trade agreement where everybody implements at the same time on day one. I have been negotiating trade agreements all my life and I have never seen it. Even if you go back as far as 1951 when the European Coal and Steel Community was agreed to, it took a long time before [countries implemented it fully]. While it is perfectly understandable that there are legitimate questions about whether we are trading or not, I think we also have to bear in mind that a trade agreement does not happen overnight. Projections for benefits are between 15 and 20 years.
Q: Let’s take an example. If, at the end of June, we have two countries, let’s say Malawi and Zambia, and Malawi is not allowing exports to enter fully from Zambia and is trying to levy the same tariffs as before, what is the mechanism by which the trade agreement can be enforced?
A: There is a non-tariff barrier (NTB) reporting mechanism to respond to NTBs in real time at www.tradebarriers.africa. In addition, there is a dispute settlements protocol. It is very clear and sets out the steps and procedures for resolving any dispute that arises. And so, for example, party A would be well within its rights under the agreement to say to party B: “You have allowed these goods to transit into your border but you are not living up to your obligations, I have a right to enter your market under the agreement’s conditions.”
The dispute settlements process would then kick in at that point. There is a panel that is established by the parties, a panel of international experts, which will adjudicate on the merits of the dispute and it will issue a ruling. Each party to the dispute gets to decide who will be its adjudicator. We have learned from the World Trade Organisation and improved on its dispute settlement understanding.
The real question – which I think is the most pertinent – is when will people start to see results [from the pact], when will traders be able to exports their goods or services into the next-door market, and I want to be clear here, that we should not expect these things to happen overnight. Some countries – maybe because of balance of payments problems – five or six years down the line, may say: “We have a liquidity crisis, we cannot do this for one year,” and the agreement makes provision for that.
Q: In five years time, will there be a lot more free trade in Africa?
A: There will be, yes. But I don’t think we should hold Africa to a different standard; it took Europe a long time to implement its agreement. The experience of Europe demonstrates the difficulties of market integration.
In each Africa sub-region, all the important elements are there. There is a challenge because some members of customs unions – for example, Tanzania and Burundi, members of the East African Community [EAC] – have not yet ratified the agreement. EAC must work together to find a way to implement the agreement even though two EAC partner states have not yet ratified it. I know for a fact that Tanzania and Burundi are working towards ratification because I have spoken to senior officials.
By the end of the year, we will be at around 45 countries that have deposited their instruments of ratification. Ratification is important but the more important step is having the customs procedures and customs infrastructure in place, which is a complicated technical exercise.
Q: Are highways that connect west and east Africa needed? How can they be constructed without damaging the natural world too much? What are the opportunities for foreign investors?
A: Well, I am not an expert on environmental issues in the context of infrastructure. All I can say is that environmental concerns are important to bear in mind.
However, what is required on a huge scale is infrastructure investment that will support trade. We know this, for example, from southern Africa, the Maputo corridor: we know the impact that creating these trade corridors can have in enhancing commerce in a particular region. Egypt is building a corridor that will connect north Africa to west Africa, and another that will connect north Africa to east Africa. President Abdel Fattah Al-Sisi has a very noble ambition for a road corridor that will connect the country all the way down to southern Africa.
If we do not significantly improve our infrastructure we will not be able to reach the results and the full potential of this trade agreement. There is more than a $100bn deficit in cross-regional infrastructure. The infrastructure we require that will have a significant impact on intra-African trade are the road links that connect west and east Africa and the road links that connect central and southern Africa. There is a need for greater railway integration, too.
Q: What is your overall ambition as secretary of the AfCFTA?
A: We want this agreement to put Africa in a positive light in terms of investor sentiment, investor confidence. Earlier we were talking about the dispute settlement mechanism. That did not exist before. Now we have one for the resolution of commercial, trade and investment disputes.
This pact must have the effect of improving the ease of doing business on the African continent. I think the practical effect of the harmonisation of rules will be improving Africa’s investment climate. Non-African investors have been saying to me: “We are taking a wait and see approach, we want to see Africans implementing this agreement before we come in and invest in infrastructure because we want a legally sound environment to invest in.”
A lamentable 18% of all Africa’s commerce at the moment is intra-African trade, while the equivalent figure is in east Asia is around 35% to 40%. We trade more with the rest of the world than we do among ourselves. I want us to double intra-African trade by 2035. That is perfectly within reach.
Wamkele Mene is the secretary general of the AfCFTA.
This article first appeared in the April/May print edition of fDi Intelligence. View a digital edition of the magazine here.