South Africa, Nigeria and the AfCFTA: 6 key questions answered
n March 2018, 44 African countries signed the umbrella agreement creating the African Continental Free Trade Area (AfCFTA) in Kigali, Rwanda. The AfCFTA represents a continental vision for a single market for the trade of goods and services and the free movement of persons and capital, which will ultimately contribute towards improved infrastructure and higher, sustainable levels of socio-economic development in Africa. However, it is not without its challenges, and finding political commitment and consensus amongst 55 countries is no easy task.
Nigeria and South Africa chose not to sign the framework agreement, although South Africa signed the Kigali Declaration, signalling its intention to continue working on the AfCFTA process. Nigeria, however, pulled back at the last minute in a surprise move that marked a clear departure from its previous championing of the AfCFTA. This has raised concern about the level of political support among influential African countries given that both are economic powerhouses in their respective regions.
This article unpacks the way forward for the AfCFTA and outlines some of the concerns of Africa’s major economies and their least developed peers.
1. What’s next in the AfCFTA process?
The AfCFTA negotiations are divided into Phase 1 and Phase 2. Not all issues from Phase 1 were finalised prior to the signatory process in March; signing of the agreement proceeded on the basis that these outstanding issues would be negotiated in the months to come. While Phase 1 focused on trade in goods and services and the dispute settlement mechanism, important topics remain outstanding. These include the modalities governing the trade in goods, determining the rules of origin and also deciding which sectors within trade in services will be included in the negotiations.
Despite the uncertainty about these remaining Phase 1 issues, Phase 2 negotiations will reportedly commence later this year and will focus on competition, investment and intellectual property matters. Discussions around ‘21st century issues’ such as e-commerce could potentially be included in negotiations on trade in services but is unlikely to form part of the official negotiations within the AfCFTA, as many African Union (AU) members lack the technical expertise to negotiate e-commerce issues and are reluctant to make commitments in this area.
2. What is the vision of the AfCFTA?
The AfCFTA is part of the AU’s overarching plan for enhanced development, deeper regional integration and higher levels of intra-African trade. It complements the AU’s overarching development programme, Agenda 2063, and the creation of an African Economic Community (AEC).
The other major AU programme engaged with enhancing continental development is the Action Plan on Boosting Intra-African Trade (BIAT), a framework for regional development focusing on increasing intra-African trade and deepening regional integration. The BIAT is also complementary to the AfCFTA’s end goals: the former focuses on supply side constraints to intra-African trade, while the AfCFTA is concerned with addressing the market access demand side constraints. The ultimate goal is the creation of a common African market and customs union, an African monetary union and a Pan-African Parliament.
3. Why have some countries adopted a cautious approach to it?
In total, 44 of 55 AU member states signed the AfCFTA framework agreement. There are three main reasons why some African countries did not:
• Constitutional/parliamentary processes that require ratification of the international agreement domestically by parliament and other stakeholders first.
• Some African countries were not represented at the appropriate level at the Summit and hence those delegates attending did not have the mandate to sign the AfCFTA.
• Some countries lodged a request that they needed additional time to conclude their national consultations.
Their reluctance to sign up to the AfCFTA is also due to the fact that African countries have vastly different levels of economic development. Many are least developing countries (LDCs) that are heavily reliant on income generated from tariffs to supplement their domestic fiscus. They are concerned about the impact that increasing trade liberalisation could have on their national income. Inadequate infrastructure, an over-reliance on commodities, the rise of non-tariff barriers and a poor manufacturing basis is also a cause for concern for most African countries inhibiting their ability to participate in international trade.
On the one hand, signing the framework agreement signals political commitment to move towards deeper levels of integration and connectivity across the continent through a common agreement towards greater tariff liberalisation. On the other hand, countries who did not sign are most likely cautious of what future negotiation rounds would bring and what concessions would be required. Importantly, they would be bound to these concessions prior to the actual negotiations taking place if they signed the umbrella agreement. So while some countries are in favour of full liberalisation, others are concerned about how it might affect their domestic industrialisation plans. This loss of policy space is arguably a significant concern for the region’s larger economies, such as Nigeria and South Africa.
Finally, there are unresolved questions remaining related to tariff liberalisation, discussions on rules of origin and special and differential support to LDCs.
4. Why did Nigeria and South Africa not sign the framework agreement?
Paradoxically, Nigeria was instrumental in garnering support to finalise the AfCFTA in the build-up to March 2018, but pulled out at the last minute for reasons linked to the need to consult with its domestic stakeholders. Instead, President Muhammadu Buhari requested a committee to review the AfCFTA’s text, saying “continental aspirations must complement Nigeria’s national interests”, which includes not positioning the country as "a dumping ground for finished goods".
Reports suggest that Buhari was under pressure from local labour unions not to sign the agreement for fear that it might harm its economy. This follows on Nigeria’s refusal to sign the Economic Community of West African States (ECOWAS)-EU Economic Partnership Agreement, highlighting Nigeria’s general distrust of free trade agreements. It also points to Nigeria's desire to consolidate its economic power in West Africa: the country opposed Morocco’s application to join ECOWAS at the end of 2017.
South Africa, in comparison, has cited the need to comply with domestic legislative procedures – specifically section 231 of the South African Constitution – before inking the AfCFTA umbrella agreement. International agreements like the AfCFTA must go through a stipulated parliamentary process before it can be ratified. Unlike Nigeria, South Africa signed the Kigali Declaration, a supplementary declaration created by South Africa, signalling its commitment to continue to work towards a free trade area. Moreover, President Cyril Ramaphosa has publicly voiced South Africa’s support for the CFTA pending the completion of these domestic procedures.
Following South Africa’s example, the other members of the Southern Africa Customs Union (SACU), with the exception of Swaziland, abstained from signing the AfCFTA, citing similar reasons for their decision. Their position also reflects a general consensus amongst SACU countries to preserve the integrity of the customs union when negotiating new trade agreements.
Alternatively, the realpolitik version suggests that they are simply abiding a long-standing practice to follow South Africa’s lead and decision making in third-party negotiations. That being said, Zambia, Namibia, Lesotho and Botswana have all signed the Kigali Declaration, which at least signals their commitment to the AfCFTA’s long-term goals and their pledge to continue working towards a deeper level of continental integration.
5. Will their absence affect the success of the AfCFTA?
The AfCFTA is likely to move forward with or without Nigeria and South Africa. Ratifications from only 22 AU members are needed to bring the agreement into force, which means that even if larger economies do not sign up, it is likely that the AfCFTA will be enforced eventually. Whether South Africa ratifies the AfCFTA remains to be seen, although thus far there are no warning signs that it will not come on board and bring the SACU countries with it.
Political championing and regional leadership is essential for driving the momentum behind a large-scale initiative such as the AfCFTA – roles that should arguably be filled by South Africa and Nigeria. If Africa’s larger economies do not show sufficient interest spearheading the AfCFTA processes, they could potentially open the door to alternative African leadership beyond Nigeria, Egypt, South Africa and Kenya. Rwanda, for example, is the first country to ratify the AfCFTA. Its president and AU Chairperson Paul Kagame has been at the helm of steering the AfCFTA process and has long pushed for greater institutional and financial independence of the AU.
6. When will the AfCFTA be implemented?
It is essential that political will among AU members is sustained to help carry through the momentum from 21 March towards implementation of the agreement. AU leaders have indicated their willingness to commence the Phase 2 negotiations by the end of 2018/January 2019, with the aim to complete the entire process by the end of 2020. Given this ambitious target, it is imperative that all African countries come on board. While the AfCFTA is not a panacea to Africa’s woes, it does represent an opportunity for countries to work together for mutual benefit and growth.
(Main image: Flickr/Paul Kagame)