The Agreement establishing the African Continental Free Trade Area (hereinafter, “Agreement”) is an Agreement that was executed by 44 African countries establishing a free trade area across Africa which could mean that upon its successful implementation, AfCTA will achieve the world’s largest free trade area.

What is it and How Has It Impacted Individual States in Africa?

Trade among African nations has always been a huge concern for the continent. Since the induction of the African Union, finding a compromise among the nations and trade agreements has been their primary goal. Where regional cooperation was easier to contend with, uniting the country with a standard of free trade proved difficult. That was until the African Continental Free Trade Area Agreement was founded March of 2018. Here is a little more about the AfCTA and what it means for Africa.

Who is Involved?

Bringing an entire nation together for a proper trade agreement is no simple matter and Africa has been working on this particular goal for almost 60 years, so it is something to be celebrated throughout the country. The AfCTA went into effect on May 30, 2019, and was successfully voted on by 44 out of 55 members of the council held in Kigali, Rwanda.

What Does the AfCTA Entail?

Generally, the African Continental Free Trade Area Agreement is concerned with free trade across all nations within the agreement throughout Africa. The standard of the agreement initially asks participants to remove tariffs from 90% of goods traded within the country. This agreement helps nations throughout Africa provide free access to goods, commodities, and services to bolster a stronger trade infrastructure. The agreement is supposed to bring inter-African trade up 52% by 2022.

AfCTA is composed of three Protocols. These include:

1. Protocol on Trade in Goods

The main objective of this Protocol is to generate a liberalized market for trade in goods as per Article 3 of the Agreement, which outlines the general objectives of AfCTA, briefly included below:

  • Providing a Liberalized Market
  • Facilitate Investment in Trade Among Nations
  • Future Continental Customers Union
  • Offer Sustainable Trade Options Throughout the Country
  • Increase Competitiveness on a Global Scale
  • Diversification of Trade Options
  • Reduce Challenges of the Trade Agreement Among Members
2. Protocol on Trade in Services

This Protocol applies to measures by members of the state affecting trade in services, which is based on the four modes of supply defined under Article 1(p) of this Protocol. These include:

  • From the territory of one State Party into the territory of another State Party;
  • In the territory of one State Party to the service consumer of any other State Party;
  • By a service supplier of one State Party, through commercial presence in the territory of any other State Party; and
  • By a service supplier of one State Party, through the presence of natural personas of a State Party in the territory of any other State Party.
3. Protocol on Rules and Procedures on the Settlement of Disputes

This protocol was created to apply to disputes arising between State Parties concerning their rights and obligations provided for under the Agreement.

There is a Dispute Settlement Body provided for under Article 5 of this Protocol, established under the Agreement, for purposes of administering the provisions of the Protocol on Rules and Procedures on the Settlement of Disputes, except as provided in the Agreement. Of note is that Article 27 of this Protocol, specifically provides for an option to settle disputes through Arbitration subject to the party’s mutual agreement.

In subsequent phases of implementation, additional Protocols will be formulated. These include:

  • The Protocol on Investment;
  • The Protocol on Competition; and
  • The Protocol on Intellectual Property Rights.

Different Phases of the Agreement

Like most new and highly involved government agreements, the African Continental Free Trade Area Agreement has been designed to roll out in phases. Bringing all goals together at once would likely cause a significant shift in the trade infrastructure within Africa making it difficult to include all avenues the agreement covers. Therefore, the AfCTA has been set to run in phases with implementation being made in appropriate intervals to promote gradual change in free trade across the nation.

Phase 1

The operational phase began in July of 2019 and included promoting the use of 5 operational Instruments to govern the AfCTA in nations where the agreement is taking place. An online negotiation forum was enacted to facilitate the removal of tariffs among nations along with an improved digital payout option to make transactions easier. This focused on the liberalization of trade in goods and services and specifically eliminating 90% of product categories and establishing a framework for dispute settlement.

Phase 2

Negotiations for Phase 2 began in February 2019 and cover investment policies, competition, and Intellectual Property Rights protection. These negotiations were set to be resolved in 2020, but due to the rise of the global pandemic, its phase 2 launch was delayed until January 1, 2021. Negotiations are still ongoing for phase 2 completion and launch.

Phase 3

In February 2020, the African Union (AU) Assembly of the Heads of State and Government adopted the resolution to commence Phase III on E-Commerce, immediately after Phase II Negotiations.

The negotiated subjects from the divergent phases of the Agreement shall be constituted into legal instruments referred to as Protocols; which shall form an integral part of the AfCTA Agreement upon adoption as per Article 8 of the AfCTA Agreement. Phase 1 negotiations put together the AfCTA Agreement, Protocol on Trade in Goods, Protocol on Trade in Services, and Protocol on Rules and Procedures on the Settlement of Disputes and their annexes and appendices. Trade in Goods under the AfCTA commenced on 1st January 2021 based on legally implementable and agreed tariff schedules and concessions, rules of origin, and customs declaration.

The outcomes of the negotiations of Phase 2 and Phase 3 issues shall be constituted into Protocols on Intellectual Property Rights, Investment, Competition Policy, and E-Commerce and shall form part of the single undertaking upon subject to entry into force under Article 8 of the AfCTA Agreement. The Protocols will require adoption by the AU Assembly and subsequent ratification, according to the constitutional rules and procedures of member states. The Protocols will enter into force 30 days after the deposit of the 22nd instrument of ratification (Art. 23.2 of the AfCTA Agreement). For the member states that endorse these Protocols, the Protocols shall enter into force on the date of the deposit of the instrument of accession.

The AU Assembly did determine 31st December 2021 as the time limit for the conclusion of Phase 2 and Phase 3 negotiations.

Have Any Nations Ratified the Agreement?

The only country within Africa that has yet to sign the African Continental Free Trade Area Agreement is Eritrea. However, ratification of the agreement is in full swing currently with 38 out of 54 signers ratifying various parts of the agreement. The countries that have offered instruments of ratification of the AfCTA are Kenya, Ghana, Rwanda, Chad, Niger, Guinea, Eswatini, Mali, Cote d’Ivoire, South Africa, Namibia, Congo Rep, Djibouti, Uganda, Mauritania, Senegal, Egypt, Togo, Gambia, Sierra Leone, Sahrawi Arab Democratic Republic, Burkina Faso, Zimbabwe, Sao Tome and Principe, Gabon, Equatorial Guinea, Central African Republic, Mauritius, Angola, Tunisia, Lesotho, Cameroon, Malawi, Algeria, Burundi, Zambia, and Nigeria.

Benefits of the AfCTA

The AfCTA has been given both praise and criticism over the years and Eritrea has still resisted the notion of joining the agreement due to ongoing disputes with neighboring countries, but the AfCTA is said to have several benefits that will positively impact Africa as a whole. Here are some of the many benefits proposed by the African Continental Free Trade Area Agreement.

Better Quality Jobs

The younger generation of workers in Africa has traditionally held a higher unemployment rating than older individuals, but the AfCTA is set to change that and allow more younger citizens to find quality paying jobs.

Increased Productivity

The competition will increase among nations, but in a healthier way with cheaper output costs and increased productivity for individual businesses.

Cheaper Goods Prices

Pricing on goods and services throughout Africa has been unstable, but by providing stable pricing, goods, and services will be able to be provided to the people of Africa cheaper than ever before.

These are just a few of the many benefits the AfCTA is set to offer African nations.

Challenges of the AfCTA

Although 44 out of 45 African countries have signed the Agreement and 36 AU member states have deposited their instrument of ratification, only three countries being – Egypt, South Africa, and Ghana have met the custom requirements on infrastructure for trading. This means only these three countries can trade effectively under the AfCTA.

Additionally, the countries involved have sovereignty which by itself goes to mean that they can impose laws in their countries at their will, which could hinder the enforcement of the Agreement. Case in point, in October 2019, the Nigerian government ordered a full closure of all land borders contravening the AfCTA which Nigeria is a signatory. This closure halted trade with Nigeria’s neighboring countries. The Nigerian government believed however that AfCTA undercut the country’s food import substitution policy on local production and consumption. Yet, these are just but a few of the challenges.

Conclusion

Even though negotiations have been delayed, the AfCTA is now a part of Africa and working to make the continent’s trade stronger and empower its people.

The general footprint of the AfCTA, therefore, depends on a broad spectrum of institutional and structural factors surrounding the role of regional economic communities. This will demand political, financial, and technical support as well as the reevaluation of the contradictory interactions between EU trade arrangements with African countries and the AfCTA procedures.

Please note that this legal article is for information purposes only and should not be relied upon without legal consultation. Should you have any questions, please feel free to contact us.