The African Continental Free Trade Area Agreement (AfCFTA) is set to contribute to lifting 30 million people from extreme poverty and 68 million people from moderate poverty by 2030 and increase real income gains by as much as 8% if properly implemented.
The objectives of the AfCFTA include the elimination of tariffs and non-tariff barriers to the exchange of goods; progressive liberalisation of trade in services; cooperation on investment measures harmonisation of intellectual property rights and competition policies; cooperation on customs matters and implementation of trade facilitation measures; establishment and promotion of cooperation in all trade-related areas; and maintaining an institutional framework for the implementation and administration of the Continental Free Trade Area.
These objectives are feasible with proper implementation of the agreement, but there are significant issues that may pose a challenge in the implementation of the agreement. Proper implementation of the Agreement will require, first, the political will and capacity of the governments in each state party to implement the AfCFTA, and second, the cooperation and capacity building of private actors to embrace the ideals of trading within Africa as envisaged under the Agreement.
In this article, we will analyse some of the most critical challenges experienced so far in the quest for proper implementation of the Agreement with a view to identifying workable solutions.
In the first part of this article, we explored the challenges of the actualisation of AfCFTA and the role of existing regional communities. In this final part, we will take a look at the digital trade and the opportunities inherent in AfCFTA.
Digital Trade and Digitalization in the AfCFTA
It is generally agreed that proper implementation of the AfCFTA in all sectors across finance, agriculture and education requires digitization, particularly in the area of electronic records. Therefore, state parties must ensure that they take preemptive steps to promote e-commerce, digital trade and technological innovations as measures to facilitate the implementation of the AfCFTA.
As Africa is currently experiencing significant growth in the tech, digital, e-commerce industries and, other inter-related fields, the AfCFTA will need to provide the framework for tackling the rising challenges associated with digitization like data breaches which usually involve compromising or abusing digitally acquired data, digital scams and increased rate of fraud. Bridging the digital divide and democratising access to technology are pertinent challenges to the implementation of the AfCFTA.
Digitalisation for Africa is the clearest possible route to trade that is cheaper, faster, simpler and more sustainable. Digitalisation, in the long run, will reduce costs and promote efficiency amongst state parties which will, in turn, boost economic development and growth.
However, available technology, access to digital products and solutions, poverty, illiteracy and archaic processes pose a significant challenge to leveraging digitalisation for trade in Africa. The biggest challenge to achieving this is the lack of a suitable legal framework. The framework applicable to trade records currently is archaic and in need of revamping. A possible solution is to adopt a similar framework to the UNCITRAL Model Law on Electronic Transferable Records (MLETR), which has been used successfully by a few jurisdictions.
Another challenge that must be addressed in the implementation of the AfCFTA is what has come across as a lack of imagination and innovation in developing Africa-first solutions from our attempts to implement the Agreement so far. For example, frontier technology like cryptocurrency and blockchain are missing in current conversations to innovate AfCFTA-specific solutions to challenges such as cross-border payment issues, ridiculous transaction costs in the traditional banking system, complexity and slow pace of paper trade, etc.
Other areas that would benefit from innovation include intellectual property rights protection, competition and rules of origin.
Implementation of the AfCFTA requires individual state parties to align their domestic legislation with their obligations under the Agreement. This would require extensive review towards, repealing, amending or supplementing existing legislation, enacting new legislation or negotiating industry-specific concessions. The whole process is technical and requires a coordinated effort from the government, sector regulators and the organized private sector. There is, therefore, a need for capacity-building to upskill all the relevant stakeholders to play their respective roles effectively. Many DFIs have recognized this skill gap and are currently funding capacity-building projects to enhance the implementation of the AfCFTA, thus creating opportunities for professionals.
Increased intra-Africa trade will significantly increase the demand for different means of transportation which will in turn attract investment in building supporting infrastructure. The maritime industry will be the biggest beneficiary with many opportunities becoming available.
The AfCFTA is an ambitious project and already bears the distinction of being one of the fastest free trade agreements to be concluded within a short timeframe. The teething challenges highlighted above are opportunities for research and experiential learning in developing best practices in the negotiation and implementation of Free Trade Agreements.
Many of the RECs in Africa have been underwhelming in achieving the level of regional integration and economic development that underpin their existence. The negotiations phase of implementing the AfCFTA therefore represents a renewed opportunity for the RECs to act on their regional integration goals and actually implement liberalization policies.
The AfCFTA has the potential to build Africa’s economy through trade liberalization and economic integration and could create the largest and most efficient trade area in the world. Some objectives of the agreement such as creating a common currency and visa may be complex issues to achieve, but with the size of the continent and the horizon for trade, there is no gainsaying that the gains could be very significant.
However, there are daunting challenges that must be surmounted before any of these gains come to fruition and many state parties to the AfCFTA do not have the reputational track to suggest that the AfCFTA will be implemented properly and beneficially as designed. It is pertinent to note that a lot has been achieved already with the right number of signatories, an impressive secretariat, and a highly skilled secretary-general in place to ensure the objectives of the agreement are met, but poor implementation will undo all of this progress if we do not look ahead and legislate for any obstacles that might impede optimal implementation of the AfCFTA.
The obstacles highlighted in this article are a good place to start to ensure that the AfCFTA does not become another principle existing only on paper but can be an agreement with effects that are felt all over Africa.