The African Union and the AfCFTA Agreement

The African Union was created in 2002 to replace the Organisation of African Unity (OAU), an organisation founded by 32 African states in Addis Ababa, Ethiopia, on May 1963 with the aim of promoting African integration and to represent the African continent as a united bloc on the international stage.

The ideal at the heart of the African Union’s (AU) integration process lies in Pan-Africanism, i.e. the unification of the various African communities scattered across the continent into one large community whose reciprocal ties of solidarity, cooperation and support will facilitate Africa’s re-emergence on the global stage as a strong and sovereign entity capable of autonomously achieving a full economic and political integration and of playing a greater role in world affairs.

Although there is not a uniform definition of Pan-Africanism, this current of thought emerged at the end of the 19th century as a cultural and political movement that believed that the achievement of a full political unity among African peoples was a necessary foundation for the emancipation of the continent from of colonialism, apartheid, racism, and Western dependence and economic exploitation. 

The transformation of the OAU into the AU, which now includes all 55 African nations (with Morocco being the last country to have joined, in 2017), was fuelled by this desire of African populations to achieve progress and economic and social development with their own means. 

Through initiatives such as Agenda 2063, a 50-year strategy adopted on the occasion of the OAU’s 50th anniversary celebration, the AU has committed to work towards building the Africa that Africans want through inclusive and sustainable development of the continent based on the economic, political and social integration of all African countries. To this end, Agenda 2063 identifies seven key objectives (referred to as ‘aspirations’) that represent the main lines of action on which the AU will focus its activity: 1) a prosperous Africa based on inclusive growth and sustainable development; 2) an integrated, politically united continent based on the ideals of Pan-Africanism and the vision of Africa’s renaissance; 3) an Africa of good governance, democracy, respect for human rights, justice and the rule of law; 4) an Africa that is peaceful and secure, free from the conflicts and ethnic divisions that still exist in some parts of its territory; 5) an Africa with a strong cultural identity and with common heritage, values and ethics; 6) an Africa whose development is people-driven, which is able to leverage the potential of the African people, especially women and youth; 7) an Africa as a strong, united, resilient and an influential global actor and partner.

As an intergovernmental organisation, the AU derives its mandate and powers from the member states, which are also responsible for the implementation of its plans and policies. Instead, with regard to financial resources, its institutional activities are mainly financed by two sources: member states and donors. Member States’ contributions, however, cover roughly 30% of the Union’s total financial needs and come mainly from a handful of countries such as Algeria, Egypt, Libya, Nigeria and South Africa, being commensurate with the level of contribution of the various African countries to the continent’s GDP. More precisely, member states are classified into three categories, each grouping large, medium or small economies. More substantial, therefore, is the funding that the AU receives from its external partners (including the European Union), on which it is still heavily dependent.

In addition to the African Union, the continent is home to multiple Regional Economic Communities (RECs), some of which are established as free trade areas, others as customs unions and others again as economic integration agreements (Article V of the General Agreement on Trade in Service – GATS defines the latter as agreements aimed at liberalising trade in services). Each REC groups different African states, each of them participating to more than one of these organisations, a situation that that many describe as ‘spaghetti bowl’ (see figure 1), which leads to frequent overlapping regional political agendas and sometimes, conflicting interests by their member States. The African Union, which considers these Communities as ‘building blocks’ in the process of continental economic integration, officially recognises eight of them: 

  1. Arab Maghreb Union (UMA)
  2. Common Market for Eastern and Southern Africa (COMESA)
  3. Community of Sahel–Saharan States (CEN–SAD)
  4. East African Community (EAC)
  5. Economic Community of Central African States (ECCAS)
  6. Economic Community of West African States (ECOWAS)
  7. Intergovernmental Authority on Development (IGAD)
  8. Southern African Development Community (SADC)

Figure 1: The Spaghetti bowl of multiple memberships of African RECs.

Although all these Communities pursue broadly similar objectives, they sometimes overlap, as mentioned above, in uncoordinated or even conflicting regional policies, implemented through different programmes which end up creating significant regulatory divergences and implementation asymmetries between the different regional blocks. Examples are product quality and safety standards or axle weight limits for commercial vehicles on regional road infrastructure, which, despite more or less harmonised within a single REC, differ considerably among Communities. Moreover, multiple REC membership often push African States to engage in “regulation shopping”, a practice where a State decide to apply a regional regulation instead than another, because more convenient to its interests. A practical example is offered by Kenya, that is both member of the the East African Community (EAC) and the Common Market for Eastern and Southern Africa (COMESA). Kenya has many times used the COMESA safeguard measures against Uganda to protect its sugar market, although the two countries are both members of the EAC customs union, where the East African Community Customs Union (Safeguard Measures) Regulations allow Partner States to use such measures only with regard to third countries (that are not part of the EAC), and not among themselves.

Similarly to the AU, a similar proportion characterises the funding of the African RECs’ activities. COMESA’s sources of funding, for instance, come for 1/3 from the Member States and 2/3 from other external donors. The same happens for the East African Community. Which means that both the AU and the African RECs are not financially independent to develop and implement their policies and programmes autonomously.

In terms of institutional architecture, the African Union consists of three main bodies:

  1. The Assembly is its highest political and decision-making body, composed of all African Heads of State and Government, which meets at least once a year. The AU Assembly agrees on the organisation’s policies and priorities and is responsible for monitoring the implementation of its policies and decisions. 
  2. The Executive Council comprises Ministers (usually from foreign affairs, but in some cases also from other Ministries) from all member States and meets at least twice a year in ordinary session, chaired by the same member State that leads the Assembly, on an annual rotating basis. The Council is responsible for preparing the agendas and drafting the decisions to be submitted to the Assembly. It also promotes cooperation and coordination with the eight RECs officially recognised by the AU, other African institutions and external donor partners.
  3. The Commission, is a body with executive functions and plays a central role in the day-to-day management of the African Union, including tasks delegated by the Assembly and the Executive Council. Its role is of paramount importance in assisting member states to implement AU programmes and policies. Its Commissioners are elected every four years and their position is renewable for one time only. 

Continental integration is embodied by the African Continental Free Trade Area (AfCFTA), established by an Agreement signed in Kigali, Rwanda, on 21 March 2018 which came into operation on 1th January 2021. The AfCFTA is the culmination of an ambitious project announced in the Lagos Plan of Action for the Economic Development of Africa, 1980–2000, a plan developed by the OAU to increase Africa’s self-sufficiency, economic self-reliance and reduce its dependence on trade and aid from overseas. These objectives were subsequently further articulated by the OAU in the Abuja Treaty (1991) which describes a 6 steps strategy to progressively create an African Economic Community within a time-horizon of 34 years. The AfCFTA represents the 3rd stage of such strategy, that includes the establishment of a free trade area and its subsequent transformation in a Customs Union with a Common External Tariff (art. 6). The final stage of this process foresees the evolution of the Customs Union into an Economic and Monetary Union, i.e. an area where goods, services, persons and capitals can move freely (Common Market) with the adoption of a single African currency administered by an African Central Bank. In order to reach such final objective, however, there are some challenges which will need to be addressed, not least the threats of economic nationalism, i.e. the tendency to prioritize national interests by advocating protectionist policies to protect local industries from external competition (on this topic, read our post).

The AfCFTA Agreement is complemented by 3 Protocols (on Trade in Goods; Trade in Services and on Rules and Procedures on the Settlement of Disputes, while 3 additional Protocols on Competition Policy; Investments; and Intellectual Property Rights are still under negotiations). The Protocol on Trade in Good, the main one, is made-up of 9 Annexes. All together, the AfCFTA Agreement, its Protocols and the relevant annexes and appendices to Protocols constitute a single undertaking (i.e., according to the WTO terminology, they form part of a whole and indivisible package whose single components cannot be agreed separately). On August 2020, a Secretariat was officially inaugurated in Accra, Ghana, which is responsible for coordinating the implementation of the AfCFTA agreement.

The AfCFTA constitutes the largest Free Trade Area (FTA) on the planet, involving all African countries with the only exception of Eritrea, which is currently the only one who has not signed it yet, while the number of ratifications of the Agreement is currently close to forty (a monitoring tool on the status of ratifications has been developed on the TRALAC website). Establishing a FTA is not an end in itself. In fact, the AfCFTA Agreement lays the foundation for the establishment of a future continental Customs Union, with a common external tariff. However, reaching such an objective will take time as the AU member States have to progressively deepen their cooperation and economic integration.

The AfCFTA aims at liberalising 90% of tariff lines on goods exchanged between African countries, progressively bringing them down to 0% within a time frame of 10 years for countries classified by the United Nations as “Less Developed Countries” (LCDs), and 5 years for middle-income or more developed countries. A limited number of countries called “G-6” (Ethiopia, Madagascar, Malawi, Sudan, Zambia and Zimbabwe) have been allowed to complete tariff liberalisation in a longer time frame of 15 years.

The remaining 10% of the tariff lines are divided into two categories: 7% are classified as sensitive products, for which liberalisation can take place over a longer period of 13 years for LDCs and 10 years for non-LDCs, while 3% have been completely excluded from the process. Sensitive and excluded products must be designated by member States according to a series of criteria set forth by a Decision adopted at the 32nd Ordinary Session of the Assembly of the African Union on January 2019. These criteria specify that the designation of sensitive and excluded products can be based on 5 criteria: 1) food security, 2) national security, 3) fiscal revenue, 4) livelihood and 5) industrialization. Both LDCs and non-LDCs can exclude 3% of their tariff lines provided that the excluded products do not represent more than 10% of their total foreign trade volume. At the moment, the various African countries and Customs Unions are transmitting to the AU Commission their tariff offers, i.e. their plans to phase out tariffs in trade with other African countries, and are in the process of incorporating the tariff reductions into their respective domestic tariffs. Obviously, a prerequisite for any African country to benefit from these reductions (and in the future, from complete tariff exemption), will be that the goods must be accompanied by a certificate of origin, in accordance with the Rules of Origin (RoO) contained in Annex 2 of the AfCFTA Agreement (RoO are a set of provisions establishing the criteria that goods must satisfy in order to be considered as “originating” from a certain country and they constitute an essential part of preferential trade arrangements, including FTAs). Currently, countries that have ratified the AfCFTA have agreed on rules of origin on more than 81% of tariff lines, which means that they are already able to start trading with preferential duties on more than 81% of products. Negotiations on the remaining 19% are still ongoing and expected to be concluded by July 2021.

In order for the AfCFTA Agreement to be operationalised and deliver its expected outcomes, the Conference of African Ministers of Finance, Planning and Economic Development, during their meeting in Addis Ababa in May 2018, highlighted the need for each AU member State to develop specific national strategies to identify opportunities, constraints and actions needed for implementing the AfCFTA, including key objectives for increasing trade performance, particularly intra-African trade in goods and services. Key issues include capacities, regional context, country priority sectors, AfCFTA-related risks and opportunities under the AfCFTA for regional and global value chain integration. Indicators are to be developed under each strategic objective for baselines, targets and achievements.

The need to develop national strategies for AfCFTA implementation was subsequently incorporated in a decision adopted by the Assembly of Heads of States and Government of the African Union at its thirty-first ordinary session, held in July 2018 in Nouakchott (Assembly/AU/Dec. 692/(XXXI)), which also established the development in each member State of national implementation Committees made up of both public and private stakeholders to monitor the implementation of the strategy.

As a consequence, Guidelines for guiding the AU member States in the development of national strategies for the implementation of the AfCTA were prepared by the African Union Commission in collaboration with the UN Economic Commission for Africa, which were validated during an expert group meeting organized in Libreville in March 2019. An example of an AfCFTA National Implementation Strategy is the one developed by Zimbabwe.

Recently, the AU has developed an app that aggregates all information on the process of the creation of the AfCFTA. The app, which also include a blog (accessible on registration), can be downloaded here or on the Google Store or the Apple Store.

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