Only four countries – Rwanda, Kenya, Ghana and Niger have submitted their instruments of ratification….
From TZ Business News Correspondent in Johannesburg.
The Republic of South Africa is hopeful formation of the recently announced Continental Free Trade Area agreement (ACFTA) will create many opportunities for this nation but the agreement is looking more like a pipe dream in the timeline that it is set to go into effect.
December 20 is the target to have at least 30 African countries to have ratified the African Continental Free Trade Area (ACFTA), according to some media reports.
In July 2018, South Africa, along with five other African countries, became party to the African Continental Free Trade Area agreement (ACFTA), joining the 44 existing signatories to the agreement.
ACFTA is a treaty between consenting countries whereby a free trade area will be constituted allowing member countries to conduct trade with each other without tariffs or other hindrances.
Officials in South Africa say through ACFTA, this largest Southern African Development Community (SADC) nation is set to grow and diversify its economy through reduction of inequality and unemployment while also benefiting from an increase in foreign direct investment, a broader range of expertise and the possibility of lower governmental spending.
This is because through ACFTA implementation, there is the possibility of removal of subsidisation on local industry segments due to advantageous outcomes of the agreement.
But ratification of legal instruments in individual African countries to enable ACFTA for into effect by December 2018 is proving rather slow. Of Africa’s 54 countries, the African Union set the ratification threshold at 22, although they targeted 33 countries to ratify the instruments in order to let the agreement go into effect.
So far, just four countries – Rwanda, Kenya, Ghana and Niger submitted their instruments of ratification to Treaty to the African Union Secretariat in Addis, Ethiopia. Depositing the instruments of ratification means that the country has undertaken all required internal legislative and legal measures in readiness to implement the transformational agreement.
South Africa, Namibia, Sierra Leone, Lesotho and Burundi brought the total number of ACFTA signatory nations to 49 of the 54 member states. However, with only four ratifications of the required 22 countries there is still a long way to go for the ACFTA to become a reality.
As early as January 2012, the African Union (AU) decided to adopt a free trade area covering the African continent, which they hoped to have in place by 2017. Fast track to March 2018, where a significant decision was taken towards the fulfilment of the AU’s mandate of a continental free trade area – 44 countries indicated their commitment through signing the agreement in Kigali, Rwanda.
Two further agreements were also presented at the Kigali Summit–namely the Kigali Declaration and the Protocol to the Treaty Establishing the African Economic Community relating to the Free Movement of Persons, the Right to Residence and the Right to Establishment.
Two of Africa’s leading economic powers, Nigeria and South Africa, however, did not sign the agreement in Kigali, although both countries indicated support of the agreement before the Summit; reasons for their reservations took two different routes.
Nigeria was largely considered as a supporter of the free trade area and was expected to play a major role during the negotiations at the Kigali Summit. However, uproar by local businesses within Nigeria led President Buhari to cancel his trip to Kigali in order to respond to complaints that their interests were not being accommodated.
At Kigali, South African President Ramaphosa expressed his country’s support for the agreement and through his signature on the Kigali Protocol, indicated South Africa’s commitment to signing in future. South Africa first had to review and consider the agreement in light of its Constitution, which requires that any international agreement be considered by legal advisors.
When he eventually did sign the agreement, President Ramaphosa said that it would create many opportunities and benefits for South Africa and moreover, would grow and diversify the South African economy through the reduction of inequality and unemployment. He indicated that South Africa’s position as a major supplier of goods and services to the continent would also be strengthened by the agreement.
Through ACFTA, South Africa is also expected to benefit from an increase in foreign direct investment, a broader range of expertise and the possibility of lower governmental spending. This is because, through its implementation, there is the possibility of removal of subsidisation on local industry segments due to advantageous outcomes of the agreement.
It is however noted that two disadvantages arising from the agreement could include increases in the outsourcing of jobs as a result of the significantly reduced tariffs and the possible degradation of natural resources.
ACFTA is expected to provide businesses across Africa with many opportunities and in so doing, it complies with Agenda 2063: The Africa We Want.
Agenda 2063 is an AU goal aimed at socio-economic transformation. In addition, the Economic Commission for Africa (ECA) estimates that intra-African trade should increase by 52.3%, with the elimination of import tariffs. Currently, trading outside Africa is subject to lower tariffs than the 6.1% tariff imposed on trade within Africa.
The scope of the changes ACFTA will affect is relatively wide – businesses, traders and consumers in Africa will no longer be constrained by tariffs and mechanisms will be put in place to assist traders that are burdened by non-tariff barriers.
Further, extractive commodities including oil, minerals and metals, have traditionally been the continent’s leading source of exports, accounting for 76% of exports outside Africa. Due to the volatile nature of these extractive exports, financial assurance is not certain. It is hoped that AfCFTA will encourage a shift away from reliance on extractive exports towards more sustainable trade in Africa.
Moreover, encouraging more labour intensive trade such as manufacturing and agricultural goods will increase employment on the continent.
Currently, the Regional Economic Committees (RECs) are in place to oversee trading between the variety of regions. Implementation of the ACFTA will not result in the disappearance of the RECs; instead they will be considered as the building blocks for the ACFTA.
ACFTA will not only have an impact on the trade of goods and services in Africa, but through implementation of Phase II, it will also see an extension of the disciplines covering investments, competitions and intellectual property. Negotiations for Phase II are expected to commence shortly.
It is without a doubt that the ACFTA introduces a new landscape for trade within South Africa and Africa. It also presents exciting prospects for trade, development and sustainability. It seeks to encompass all 55 member states, which make up a market of more than 1.2 billion people, with a combined GDP of more than US$ 3.4 trillion.
The agreement is set to greatly benefit the continent, improve intra-Africa trade, reduce unemployment, increase infrastructure and create a more competitive yet sustainable environment for trade.
However, a number of steps still need to be completed for the agreement to fully take effect. An additional 16 countries are required to ratify the agreement into law. The agreement will come into force 30 days after the 22nd country has ratified the agreement.