INTER-AFRICA

Pan- African trade deal takes flight

This trade agreement will make Africa the largest free-trade area in the world

In Summary

• Kenya was among the first countries to ratify the trade treaty after the Parliament gave it a nod in April last year.

• Opening up markets is subject to some transition periods ranging from five to 13 years.

Presidents Uhuru Kenyatta and John Magufuli (Tanzania) in Uganda where they and other leaders attended the East African Community Summit, February 23, 2018. /
Presidents Uhuru Kenyatta and John Magufuli (Tanzania) in Uganda where they and other leaders attended the East African Community Summit, February 23, 2018. /
Image: PSCU

The African Continental Free Trade Area (AfCFTA) — which is expected to create a single African market with an estimated value o $3 trillion (Sh300 trillion) — came into effect yesterday.

This trade agreement, which will make Africa the largest free-trade area in the world, was approved by the African Union (AU) on April 29 after 22 countries ratified its adoption.

Kenya was among the first countries to ratify the trade treaty after the Parliament gave it a nod in April last year followed by the presentation of instruments to AU by President Uhuru Kenyatta the following month.

Although the trade agreement is now in play, work however still needs to be done on the operationalisation of the agreement and the supporting instruments that need to be finalised.

“The usual infrastructure challenges remain, and low industrialisation. However there is high political momentum to address challenges and achieve more ratifications,” Director of trade and customs at Comesa secretariat Francis Mangeni said.

According to the AU, these instruments will involve complex negotiations as they cover rules of origin; schedules of tariff concessions on trade in goods; online non-tariff barriers monitoring and elimination mechanism; digital payments and settlement platform; and an African Trade Observatory Portal.

Mangeni said although there are heavy political undertones that still need to be addressed, a lot of the NTBs can still be sorted through the current Comesa-EAC-SADC tripartite agreement as well as the AfCFTA system.

The major beneficiaries of the AfCFTA will be those economies in Africa that have the capacity to expand their exports of goods and services into the rest of the continent.

These include companies mainly from SA, Nigeria, Kenya, and Egypt.

However, there are concerns that some countries, particularly the smaller and more vulnerable economies, may experience the negative impacts of premature liberalisation and fiscal revenue losses.

According to Mangeni, commencing implementation of AfCFTA should be a message to the world that Africa is open for business.

“AfCFTA is already attracting investment into Africa like Volkswagen and Toyota have discussed with the AU commissioner for trade and industry ambassador Albert Muchanga on their imminent investment into the automobile sector in Africa,” he said.

Trade facilitation programmes can also finally commence which will significantly lower the cost of trade across signatory states.

“However opening up markets is subject to some transition periods ranging from five to 13 years,” he said.