The number of countries that ratified the African Continental Free Trade Area (AfCFTA) agreement has increased to 40 with the recent ratification of Zambia, Malawi, Algeria and Burundi, a top official told reporters on Friday, July 9.
Secretary-General Wamkele Mene was addressing his second quarterly press briefing. He noted that the DR Congo, Seychelles and Burundi ratified but are yet to deposit their instruments of ratification, quickly adding: “But it’s a very positive signal, the fact that 40 countries have ratified.”
“This is a very important development,” Mene noted, adding that he recently visited Tanzania and had fruitful discussions with its leaders.
End last month, the Secretary-General visited the country and met with President Samia Suluhu Hassan.
“Its President told me that Tanzania will ratify by September and that means that one of the biggest economies in Africa is also going to ratify,” he said.
“With Tanzania (ratifying) it means that EAC, the entire Customs Union, will now be part of the implementation of the AfCFTA.”
Burundi ratified the AfCFTA on June 17, becoming the fourth East African Community (EAC) country to ratify following in the footsteps of Rwanda, the most committed country to the Agreement, Kenya and Uganda.
The agreement initialed in Kigali, on March 21, 2018, aims to create the largest free-trade area in the world and the EAC business community wants things fast-tracked.
The Continental Free Trade Area aims to reduce all trade costs – eliminate 90% of tariffs – and enable Africa to integrate further into global supply chains.
But, Mene acknowledged, “if we don’t have commercially meaningful trade the ratifications will be meaningless” and as such, care is being taken to ensure things eventually go well.
Earlier on Thursday, he attended a Council of Ministers session where it was indicated that 86 per cent of the negotiations on the rules of origin were concluded.
The official target of at least 90 per cent of these negotiations must be wrapped up and, Mene noted, “We are pushing to conclude negotiations in the next two weeks.”
Pan-African payments system to save $5 billion
To facilitate intra-African trade, the Pan-African Payments and Settlement System (PAPSS) is being developed in collaboration with the African Export-Import Bank, also referred to as Afreximbank. It is a pan-African multilateral trade finance institution created in 1993 under the auspices of the African Development Bank.
The PAPSS, “a very important pillar for the implementation of the AfCFTA,” is a centralised payment and settlement market infrastructure for processing, clearing, and settling intra-African trade and commerce payments.
The pilot phase was rolled out in Nigeria, Gambia, Ghana, Guinea, Liberia and Sierra Leone and it is hoped that by year end, it will be ready for a full rollout.
It is being developed to facilitate payments and formalize the huge informal cross-border trading activities on the continent.
This is a very important development because, Mene explained, there are 42 currencies in Africa and an annual loss of $5 billion is incurred as the cost of converting currencies on the continent for the purpose of trading.
“This is a big amount that can be seen as revenue foregone,” he noted.
Experts say the cost of currency convertibility is a real constraint to intra-Africa trade.
Once the PAPSS is up and running, for example, a trader in Kigali will ably transact business with somebody in Kinshasa, DR Congo, in Rwandan francs while the other receives Congolese francs, with Afreximbank being the correspondent facility.
Afreximbank is the operator and the main settlement agent for the system.
Meanwhile, Mene did not say exactly when, but he noted that negotiations for phase two of the Agreement will “commence in a short while.”
The AfCFTA negotiations are scheduled in phases. Phase one covers trade in goods and trade in services. Phase two will cover investment, intellectual property rights, digital trade, women and youth in trade, and competition policy.
The Heads of State, he said, have given his office a “clear directive” to conclude this in the shortest period of time.
Trade data in a year’s time
The AfCFTA has been in operation since January 1.
Asked about trade statistics, Mene urged for patience because, he explained, “trade data is incredibly difficult to generate” since different Customs Authorities use differing models to track trade flows.
He said: “This is something provided by Customs Authorities. All of us are waiting to see what will be the trade volumes triggered by the AfCFTA.
“We will have to be patient as we work with them to make sure that in a year’s time we can release data to show trade flows.”