A total of 39 out of 55 countries have deposited their instruments of ratification for the historic agreement, which establishes the biggest single trade area globally, comprising 1.3 billion people and a cumulative GDP of $3.4trn.
South Africa’s neighbours, Botswana and Mozambique, as well as Morocco and Sudan, are among the 16 states whose instruments of ratification remain outstanding.
President Ramaphosa made the appeal during the official launch of the seven-day Intra-African Trade Fair (IATF) 2021 at the Durban Convention Centre in KwaZulu-Natal.
The South African coastal city took over hosting duties from Kigali, Rwanda, after the latter’s government failed to complete an exhibition centre because of constraints resulting from the outbreak of Covid-19.
The original agreement that helped found the AfCFTA was signed in Kigali. Trading under the AfCFTA started on 1 January 2021.
As countries, let us work with speed to resolve any outstanding issues around the AfCFTA. Let those countries that have not already ratified it do so. Let us take the necessary steps towards domestication.
The opening ceremony of the IATF 2021 was graced by Presidents Muhammadu Buhari (Nigeria), Lazarus Chakwera (Malawian), Hakainde Hichilema (Zambia), Hussein Mwinyi (Zanzibar) and Emmerson Mnangagwa (Zimbabwe), as well as Prime Minister Édouard Ngirente (Rwanda).
Wamkele Mene (AfCFTA Secretariat general secretary); Professor Benedict Oramah (Afreximbank president and chairperson); Albert Muchanga (African Union Commissioner for trade); Ebrahim Patel (South Africa’s trade, industry, and competition minister); Olusegun Obasanjo (chair of the IATF Advisory Council); and Sihle Zikalala (premier of KwaZulu-Natal) were among the dignitaries in attendance.
“As countries, let us work with speed to resolve any outstanding issues around the AfCFTA. Let those countries that have not already ratified it do so. Let us take the necessary steps towards domestication,” says Ramaphosa.
Road to ‘Made in Africa’
According to the South African president, the AfCFTA aspires to connect all of Africa’s regions, deepen economic integration, and boost intra-continental trade and investment.
“The AfCFTA will provide new export opportunities for ‘Made in Africa’ products and enable member countries to trade with each other without tariffs or other hindrances,” he says.
A crucial aspect of realising that ambition is ensuring that the AfCFTA is underpinned by strong rules of origin, which place a premium on value-add from the continent, says Ramaphosa. He also urges that the region guard against “the temptation to become transhipment centres, adding only limited industrial value in Africa.”
One of the advantages of the AfCFTA is its potential to attract investors from across the world to set up production facilities on the continent.
“We are encouraged by the sentiment expressed by the African Development Bank that the implementation of the AfCFTA will be a key component of the bank’s lending programme and that, working with the AfCFTA Secretariat, the bank hopes to amass a number of AfCFTA-aligned investments,” Ramaphosa says.
He has declared that South Africa is ready to work closely with “all African countries to forge more balanced, equitable, and fair trade relations among African nations.”
IATF, a place for big deals
The IATF is viewed as an enabler of the AfCFTA because it acts as a bridge among governments, regulators, financiers, investors, and business. In 2018, Cairo, Egypt, hosted the inaugural IATF. During that event, $30bn worth of transactions were concluded.
Wamkele Mene says he hopes IATF 2021 will surpass that target.
Based on first-day figures, that does not look far off. Initial estimates placed visitor numbers to the IATF 2021 at 10,000. However, more than 11,000 people were captured by the event’s registration system on the first day. In addition, more than 1,000 exhibitors have set up stalls around the convention centre in Durban to showcase their wares.
“Africa is now open for business based on a single rule book for trade and investment, with a functional dispute settlement mechanism. We are demonstrating to the world that we are committed to a rules-based trading system,” says Mene.
The AfCFTA offers a response to investors’ reluctance to invest in small, fragmented, and uncompetitive national markets. Moreover, the AfCFTA has the potential to unlock value chains for investors in sectors such as pharmaceuticals, automobiles, agro-processing, and financial technology, explains Mene.
“In pharmaceuticals, in 2019 alone, Africa imported $15bn worth of pharmaceutical products. This is an opportunity for us to leverage the AfCFTA, particularly IPRs [intellectual property rights], to assert Africa’s productive capacity and to serve Africa’s public health imperatives,” Mene says.
Funding and financing the African trade dream
Afreximbank has thrown financial muscle behind the AfCFTA by committing to disburse $40bn to support intra-continental trade over the next five years.
Afreximbank will build on the $20bn disbursed in the past five years.
“We are also providing Letters of Credit Confirmation lines to African commercial banks to support cross-border trade,” says Prof Oramah. “It is our aim to onboard 500 banks with aggregate lines of over $8bn. The bank has so far onboarded nearly 480 and is [currently] the bank with the widest messaging links with African banks.”
The way Prof Oramah sees it, trade agreements have worked in more mature markets because institutional mechanisms exist to support implementation.
“Africa is beginning to build its own institutions. Afreximbank is one of them. That is why the bank is unrelenting in its support for the AfCFTA,” he says.
In collaboration with the AU and the AfCFTA Secretariat, Afreximbank has created a Pan-African payment and settlement system to facilitate cross-border payments in national currencies. The system is being piloted in the West African Monetary Zone.
Prof Oramah says the system will strengthen national currencies, integrate Africa’s payment infrastructure, and save the continent about $5bn in transfer charges.
“Above all, it will return to Africa large volumes of trade diverted away from the continent due to currency issues. Afreximbank is supporting the pilot in an amount of $500m and expects to expand this to $3bn when fully adopted across Africa.”
Furthermore, Afreximbank is piloting an African Collaborative Transit Guarantee Scheme that will facilitate an uninterrupted flow of goods across borders with a single transit bond, operating on a risk-sharing platform with country specific issuers.
“Afreximbank is committing $1bn to the scheme. We envisage that this scheme will save the continent over $300m in transit cost annually,” says Prof Oramah.
The event continues today (16 November).
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