January 18 2021

Africa Commences Trading under Africa Continental Free Trade Area Agreement

Source: IBFD Tax Research Platform News

On 1 January 2021, Africa commenced trading under the preferences and rules that were negotiated and agreed upon under the African Continental Free Trade Area Agreement (AfCFTA). The commencement of trade had earlier been postponed due to the COVID-19 pandemic with the priority being given to fighting the pandemic by the Secretariat of the AfCFTA (the Secretariat).

The AfCFTA which entered into force on 30 May 2019 has been signed by 54 countries while 34 countries have deposited their instruments of ratification to date.

The AfCFTA comprises of four legal instruments, which are:

  • the Agreement establishing the AfCFTA;
  • the Protocols on Trade in Goods and Trade in Services;
  • the Protocol on Rules and Procedures for Settlement of Disputes; and
  • the Protocol on E-Commerce. This protocol was included later on in the AfCFTA through a decision of the African Union Heads of State and Government Assembly (Heads of State) in February 2020 to integrate it through a third phase of negotiations.

The principle objective of the Protocol on Trade in Goods is to create a liberalized market for trade in goods between partner states, while the specific objective is to boost intra-African trade in goods through:

  • progressive elimination of tariffs;
  • progressive elimination of non-tariff barriers;
  • enhanced efficiency of customs procedures, trade facilitation and transit;
  • enhanced cooperation in the areas of technical barriers to trade and sanitary and phytosanitary measures;
  • development and promotion of regional and continental value chains; and
  • enhanced socio-economic development, diversification and industrialization across Africa.

Some countries like Ghana, Egypt, South Africa and Rwanda have already started trade through the AfCFTA, however, many other African countries still need to build their administrative capacity and put in place the infrastructure/tools necessary to facilitate trade. The Secretary General of the AfCFTA (the Secretary-General) said that the partner states are to put in place a re-imbursement system where a country that does not yet have the infrastructure necessary to facilitate preferential trade from 1 January 2021 will later refund money paid by traders for non-preferential duties suffered after the commencement of trade.

This development has not come without criticism from various critics with a view that the Secretariat has rushed the launch without ensuring first that all the infrastructure needed to facilitate trade is in place in all partner states. The Secretary-General said, however, that market integration is a process and the Secretariat is committed to ensuring that the positive projections of the AfCFTA are attained.

The official AfCFTA start of trading ceremony was held virtually on 1 January 2021 via Zoom. But prior to the launch, the Heads of State held a meeting on the 5 December 2020 where they adopted the decision of the secretariat to start trading through the AfCFTA.