MAKING PROGRESS IN IMPLEMENTATION OF AFCFTA

MBABANE - African countries, including Eswatini, continued to make progress toward the implementation of the AfCFTA despite the challenges that shaped the review period.

According to Afreximbank’s African Trade Report 2024, following the official start of trading under the African Continental Free Trade Area (AfCFTA) in January 2021, progress has been made, with six countries ratifying it. This brought the number of countries having ratified the AfCFTA to 47 by the end of 2023. Eswatini is among those countries that have deposited their instruments of AfCFTA ratification.Other key milestones in the implementation of the AfCFTA were also achieved during the review period. The negotiations for the protocol on trade in goods and services made significant progress in 2023, with 48 tariff concessions, representing 87 per cent of the African Union membership, having been submitted, 46 of which have been approved by the Council of Ministers.

Regarding negotiations on rules of origin (RoO), progress has also been encouraging, with negotiations with relevant partners having led to an agreement on the RoO for over 92.3 per cent of the traded goods, as of the end of 2023. While an agreement is yet to be reached regarding negotiations on the RoO for the automotive and textile and clothing sectors, steps are being taken to expedite the process. For instance, the AfCFTA Council of Ministers created an Automotive Task Force and adopted an automotive strategy to reach a consensus between the negotiating parties. Afreximbank continues to provide support to the AfCFTA through products and initiatives to facilitate implementation. In November 2023, Afreximbank, in collaboration with the African Union Commission and the AfCFTA Secretariat, held the third edition of the Intra-African Trade Fair (IATF) in Cairo, hosted by the government of Egypt.

Growth

This edition, which saw significant growth in the number of exhibitors, visitors and speakers, facilitated trade and investment deals of around US$43 billion. In addition, IATF 2023 dedicated special sessions, including the Creative Industries, Trade and Investment Forum, and an Automotive Show, as part of Afreximbank’s efforts to promote African economic integration and intra-African trade, in support of the implementation of the AfCFTA. Other products and initiatives developed by the bank to support the implementation of the AfCFTA include the adjustment facility fund established by the AfCFTA Secretariat and Afreximbank to support African countries and the private sector to effectively participate in the new trading environment established under the AfCFTA. The fund has three components.

The base fund consists of contributions from State parties, grants and technical assistance funds to address tariff revenue losses as tariffs are progressively eliminated. The general fund aims to mobilise concessional funding, while the credit fund mobilises commercial funding to support both the public and private sectors, enabling them to adjust and take advantage of opportunities created by the AfCFTA. The Pan-African Payment and Settlement System (PAPSS), the bank’s flagship initiative, developed in collaboration with the African Union, had also achieved important milestones as of the end of 2023, with a total of 13 central banks, 114 commercial banks  and 10 switching service providers across the continent having become members of the initiative.

The bank has also established strategic partnerships with several commercial banks and other financial institutions to accelerate the implementation of PAPSS and boost intra-African trade in line with the objectives of the AfCFTA. Specifically, PAPSS will enable intra-African trade and commerce payments to be made in African currencies. This will reduce the challenges posed by liquidity constraints, a major barrier in the promotion of African trade and economic growth. PAPSS will also reduce transaction costs in intraregional trade and formalise a significant portion of informal cross -border trade. The bank is also implementing the Africa Collaborative Transit Guarantee Scheme, which facilitates the movement of goods across borders under the AfCFTA using a single technology-enabled transit bond. The bank’s signing of the Instrument of Accession to the Inter-Surety Agreement for the Implementation of the COMESA Regional Customs Transit Guarantee/Bond Agreement paves the way for the implementation of the US$1 billion Continental Transit Guarantee Scheme, about US$200 million, of which is earmarked for the COMESA region.

Milestones

As a result of the AfCFTA, Africa’s GDP is expected to increase by 0.91 per cent, or US$34.76 billion. In terms of trade, the implementation of the AfCFTA is expected to increase total exports and imports of African countries. Intra-African trade jumps 33.04 per cent, while imports and exports with the rest of the world are expected to decline slightly by 0.04 per cent and 0.03 per cent respectively. Production on the continent is also shown to have increased under the AfCFTA by 1.19 per cent. Since the model shows a reduction in total consumption, it can be concluded that the increase in production is driven by the increase in trade.  All African countries show an increase in gross domestic product (GDP) with the implementation of the AfCFTA. The countries showing the highest increases, in absolute terms, are Côte d’Ivoire and South Africa, where GDP increases by US$7.01 billion and US$4.42 billion, respectively. These countries also have the largest increases in trade, along with South Central Africa and Morocco.

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