The African Continental Free Trade Area (AfCFTA) has long been celebrated for its potential to create the world’s most populated economic bloc.

The agreement encompasses 55 African countries with a total of 1.3 billion people. It came into force in January 2021 with the main goal of stimulating intra-African trade and investment, which have typically stood at about 20% and 4% of total African foreign trade and investment, respectively.

Secretary-general Wamkele Mene believes the recent disruption in global value chains has once again pushed Africa to “the back of the queue”, strengthening the case for the development of more intertwined and resilient African value chains.

Q: The African Union called 2023 “the year of the acceleration for the implementation of the AfCFTA”. How are you trying to accelerate the implementation agreement? 

A: First we are intensifying trading and the number of countries that are trading under the AfCFTA. We have 47 out of 55 countries that have ratified the agreement, but only nine of those have introduced the domestic legislation that will allow trading to happen.

So they have to take the next step and enable commercially meaningful trade to happen. That is what makes a difference between a trade agreement that exists as law – which the AfCFTA does because it has been ratified by 47 of the 55 signatories countries – and a trade agreement that is commercially meaningful, where you can have companies trading, choosing to trade under the rules of that free trade agreement.

That’s the goal: to get more countries to ‘domesticate’ the AfCFTA by introducing a legal instrument that will compel the head of customs to introduce the AfCFTA as one of the tariff books they must handle. That’s the next acceleration that we’re talking about

Q: How are you lobbying local governments to do so? 

A: I’m meeting with individual governments, with the heads of states, ministers of trade, ministers of finance and the heads of customs authorities. They really are the key to ensuring that we see commercially meaningful trade taking place because you can’t have a trade agreement without customs authorities being on board. They are at the heart of the trading.

Q: In February you struck an agreement on rules of origins allowing for the free trade of goods produced within an African special economic zone (SEZ). Can you elaborate further on this? 

A: Before the agreement in February, there were no rules that enabled goods produced in SEZs in Africa to be traded in the general market. So, in other words, the products that were produced had to be exported outside the continent unless producers paid their duties in full.

The new regulation will enable goods produced in an African SEZ to be admitted in any general market in one of the 47 countries that ratified the agreement provided those goods meet its rules of origin thresholds. That is a significant step forward because it means that we are now integrating SEZs into the common AfCFTA market that ultimately we want to build.

We want our SEZs to be competitive and have a big market that they can leverage. For a long time, many countries in Africa would freely admit goods from SEZs outside the continent, but they were not accepting duty-free goods from African SEZs. Now we have corrected that anomaly.

Of course, it’s going to take time for the implementation. But it means that we are now giving our SEZs a chance to compete in the African market, and to be competitive vis-a-vis goods or services produced in SEZs in a third country outside the continent.

We believe that we should be moving faster in integrating SEZs. And we believe that there is a very, very compelling case for the role of SEZs in boosting intra-African trade.

Q: How is the AfCFTA going to boost intra-African FDI?

A: The protocol on investment protection and investment promotion has just been adopted by the heads of states. And it really sets a minimum standard for the protection of investment between the AfCFTA members.

Intra-African investment is very low at about 4% of total FDI, if not a little lower, because of the very high barriers that exist. The treatment of a foreign investor is now set out in law. How each member should treat a foreign investor is covered by the treaty; trading goods, financial services, intellectual property rights – all of these things that are covered by the treaty – are protected by that investment protection agreement. And it provides a framework for the resolution of investment disputes.

Before the AfCFTA, if there was a dispute, companies would have to settle that dispute in accordance with either the International Court of Arbitration rules, or the New York convention, and so on. So now we’re providing a forum for resolution of these disputes in accordance with the AfCFTA dispute settlement mechanism. I hope the factor that will encourage countries to comply is the investors’ perception that they uphold the trade and stick to the rules. 

Q: How does the AfCFTA fit the global push for nearshoring? 

A: The events that unfolded from the Covid-19 pandemic are good examples of the urgency facing the AfCFTA. During the pandemic, global supply chains were disrupted. Individual countries imposed export restrictions on the critical tools that were required to fight the pandemic, at least in the first six to nine months. That pushed Africa to the back of the queue for things like vaccines, antiseptics and masks, because we are so reliant on these global supply chains and Africa’s productive capacities are very low.

Then the war in Ukraine happened. Last year, I visited an African company that manufactures car seats, and they told me they had to suspend production for months because they couldn’t get the wiring harness produced in Ukraine that they required. But that wiring harness is produced with copper that comes from Zambia, and then gets sent back to Lesotho for the production of the cast. These are clear examples that when global supply chains are disrupted, Africa suffers. People lost jobs in Lesotho because for three to four months there was no production.

What this reinforces is that SEZs are absolutely essential for Africa to be able to establish an alternative and more resilient supply chain without disengaging completely from global supply chains. Otherwise, we will be forever at the mercy of global supply chains. And when there’s disruption, we will forever be at the back of the queue.

We have to develop self-sufficiency and the productive capacity in priority areas. SEZs are an essential part of creating that local productive capacity. 

Q: The plans by biotech firms Moderna and BioNTech to locate production facilities in Rwanda and Kenya seems to point in this direction.

A: Absolutely. Pharmaceuticals’ value chains are the most important priority given the public health imperative. What we learned from the first two years of the pandemic was tragic.

Around the end of 2021, vaccination rates among African people were at around three to four percent. At that time in Europe and the US, people had already been vaccinated twice. That’s why this agreement is important: the trade rules will enable the establishment of those continental value chains.

We are establishing the rules that enable BioNTech and Moderna to set up because it’s not just for the domestic markets in Rwanda or Kenya any longer. Now they can access a market of 1.3 billion people.

This article first appeared in the June/July 2023 print edition of fDi Intelligence