Entry Into Force of the African Continental Free Trade Area Agreement

Johannesburg 30 May 2019 – The Free Trade Area Agreement with the African continent entered into force on 30 May 2019. In April 2019, The Gambia ratified the agreement, bringing to 22 the number total number of ratifications of the African Union (AU) Member States. threshold for the implementation of AfCFTA. Last month, the AU received the required number of endorsements and the agreement is now in effect.

According to Baker, to Baker McKenzie, partner of Virusha Subban, a specialist in customs and international trade, NAFTA aims to eliminate tariffs on intra-African trade, reduce unemployment, develop infrastructure, and create a more competitive and sustainable environment for cross-border trade.

Subban explains that AfCFTA is a treaty between willing countries under which a free trade area is established, which allows member countries to trade with each other without tariffs or other obstacles. At present, the agreement has 52 signatories, out of 55 Member States, which constitute a market of more than 1.2 billion inhabitants, with a combined GDP of more than 3 400 billion. U.S. dollars.

Itumeleng Mukhovha, partner in charge of corporations and mergers and acquisitions, said: "The expansion of international and regional trade flows has played an important role in the rapid growth of Africa in recent years. The AfCFTA marks a new step in strengthening regional integration and the search for stronger and sustainable growth. In fact, AfCFTA should offer many opportunities to businesses across Africa and, in doing so, comply with Agenda 2063: The Africa we want. The Agenda 2063 is an AU goal aimed at socio-economic transformation. In addition, the Economic Commission for Africa (ECA) estimates that intra-African trade is expected to increase by 52.3% with the elimination of import duties and add $ 70 billion to the GDP of the country. continent by 2040. At present, trade outside Africa is subject to tariffs as the 6.1% duty applied to intra-African trade. The scope of AfCFTA will have widespread changes – businesses, traders and consumers in Africa will no longer be limited by tariffs; and mechanisms will be put in place to badist traders facing non-tariff barriers. "

In January 2012, the AU decided to adopt a free trade zone covering the African continent, which it hoped to put in place by 2017. In brief: March 2018, date to which an important decision has been made towards the fulfillment of AU's mandate as a continent. Free Trade Area – 44 countries have indicated their commitment by signing the agreement in Kigali, Rwanda. Two other agreements were also presented at the Kigali Summit, namely the Kigali Declaration and the Protocol to the Treaty Establishing the African Economic Community on Free Movement of Persons, Right of Residence and Right of Establishment.

"Two of the largest African economies, Nigeria and South Africa, have not yet signed the agreement in Kigali in 2018. Both countries have shown their support for the agreement. before the Summit. However, the reasons for their reservations have taken two different paths, "said Mukhovka. said.

"Nigeria was widely regarded as a supporter of the free trade zone and was to play a major role in the Kigali summit negotiations. However, the turmoil of local businesses, policymakers and lobbyists in Nigeria has prompted President Buhari to cancel his trip to Kigali to respond to complaints that their interests would not be taken into account.

"In July 2018, South Africa, along with five other countries, became party to AfCFTA, joining the 44 signatory countries of the agreement. The African Union Summit, which was held in July 2018, saw South Africa, Namibia, Sierra Leone, Lesotho and Burundi bring the total number of signatories to 49 of the 55 Member States. In February 2019, at the 32nd Summit of Heads of State and Government of the African Union in Addis Ababa, Ethiopia, Botswana, Zambia and Guinea Bissau, the number of countries that signed this Agreement was raised to 52. Nigeria, the largest and most populous economy in Africa, is the most notable non-signatory of the AfCFTA. The Nigerian Minister of Industry, Trade and Investment, Okechukwu Enelamah, recently confirmed that the Nigerian government was worried at the origin of the opening of its borders and the transformation of the country into a receptacle for finished products. an impact badessment report, "says Mukhovha.

When signing the agreement last year, President Ramaphosa said that it would create many opportunities and benefits for South Africa and would develop and diversify the South African economy through the reduction inequalities and unemployment. Ramaphosa said the agreement would also strengthen South Africa's position as the main supplier of goods and services on the continent.

"South Africa should also benefit from increased foreign direct investment, access to a wider range of skills and the possibility of a reduction in public spending through the through AfCFTA. Indeed, thanks to its implementation, subsidies on segments of the local industry could be removed because of the advantageous results of the agreement. However, the deal has two drawbacks, including the potential increase in the outsourcing of jobs resulting from the significant reduction in tariffs and the possible degradation of natural resources, "said Mukhovha.

Mukhovha further explains that extractive commodities, including oil, minerals and metals, have always been the continent's main source of exports, accounting for 76% of exports outside Africa.

"Due to the volatile nature of these exports of mining products, the financial guarantee is not certain. It is hoped that the Agreement on Trade Among Developing Countries will encourage the transition from dependence on exports of extractive products to more sustainable trade in Africa. In addition, encouraging more intensive labor exchanges such as manufactured goods and agricultural products will increase employment on the continent, "she said.

Subban said: "The AfCFTA will not only have an impact on trade in goods and services in Africa, but through the implementation of Phase II, it will also see an extension of disciplines covering investments, competition and intellectual property. According to the AU, the finalization of the support instruments to facilitate the launch of the AfCFTA operational phase will begin in June 2019 at an extraordinary summit of Heads of State and Government .

"Once the 55 AU member states join AfCFTA, it will become the largest free trade area and the largest customs union in the world, along with many other African products and services. now available in other countries of the African Union, "adds Subban.