The African Continental Free Trade Agreement’s Ventures in 2022
In 2022, Kenya shipped car batteries and tea to Ghana, its first deliveries in a pilot program of the African Continental Free Trade Area (AfCFTA) agreement.
The world's largest free-trade pact, which took effect in January 2021, aims to facilitate and increase trade across Africa. Kenya and Ghana are among eight countries taking part in the AfCFTA pact's trial phase.
The battery shipment marked Nairobi-based Associated Battery Manufacturers Ltd.'s entry into the West African market, according to finance manager Nixon Paloma. He said the company, which specializes in automotive and solar batteries, previously had traded only with other East and Southern Africa regional blocs.
"One reason why Africa has not been trading with itself is [due to] logistical problems, tariff problems, non-tariff barriers, as well," Paloma noted to me.
He said getting preferential tariff rates was one of the main benefits of trading under this pilot phase. "For example in Ghana…the duty will be lowered at the rate of 2 percent each year until it goes to zero. So, in 10 years' time, we will be exporting goods to Ghana without any tariffs," Paloma said.
Rwanda also recently shipped its first consignment of coffee from Igire Coffee Ltd. — whose beans are grown, harvested, and processed by women throughout the entire value chain — to Ghana under the AfCFTA agreement.
In an interview, Ghana's high commissioner to Kenya, Damptey Bediako Asare, told me the trial phase that started in July is a significant step toward implementing the AfCFTA.
"Most of the time, we have African countries coming out with a lot of flagship programs and projects, but they remain on the shelves because we are waiting for everyone to get ready before we roll it out," he said. "Some of us believed right from the beginning, 'Why don't we put together countries that are ready to start trading under the AfCFTA so that they form a nucleus family of countries that ... are ready to implement the AfCFTA?' And I think that's exactly what happened."
Asare also highlighted tariff reduction as a direct benefit under the new pan-African deal. He also pointed out that special attention should be directed toward infrastructure.
"We have a lot of African countries that are landlocked," he said. "… How are they going to participate in this exercise of trading among ourselves meaningfully? We need to improve infrastructure."
Kwame Owino, chief executive officer of the Institute of Economic Affairs, a think tank based in Kenya, told me that rather than a free-trade agreement, it is important to note that AfCFTA is more of a guided-trade agreement.
"Because if it was a free-trade agreement, it would be unilateral," Owino said. "Simply say, look, provided you are an African country, a member of the African Union (AU) or having signed this and this treaty, or ratified it, then you should send whatever goods meeting this quality and this classification into a country regardless of any other conditions."
Owino cautioned that broad engagement in AfCFTA will take time, because Africa is a continent of developing nations, with many informal traders. That might lead to disputes involving the pact, he said, predicting that existing regional economic blocs would be stronger for a while.
This first step of allowing AfCFTA countries to trade is a good one, Asare said. He noted that, apart from the economic benefits, nothing comes close to enhancing integration more than when countries start to trade among each other.
A recent World Bank study found that a single African market with streamlined regulations could increase foreign direct investments, which could bring know-how and help firms join regional and global value chains.
The United States has provided technical support for the AfCFTA under both the Trump and Biden administrations, but there appears to be no current comprehensive source of data on funding for U.S. activities specifically in support of AfCFTA's development and implementation, according to the Congressional Research Service (CRS), a public policy research institute for the U.S. Congress.
CRS reports that about a year ago, U.S. Trade Representative Katherine Tai expressed that several U.S. programs were being developed to support the AfCFTA, including workshops for African officials focused on assistance for Intellectual Property Rights (IPR) negotiations.
On the eve of the U.S. Africa Leaders Summit in December, AfCFTA Secretary-General H.E. Wamkele Mene stated at a talk with the Atlantic Council (a non partisan think tank based in Washington) that he was looking forward to providing an update to not only the U.S. government, but also to the U.S. business community and private sector about the opportunities the AfCFTA presents in terms of investment, job creation, and how the AfCFTA can enable further U.S. engagement with the African continent.
Ambassador Tai also told the Council that the United States was eager to partner with the Secretary-General and other counterparts in the African continent to unlock "innovation around how do we make trade policy more inclusive across the board? How do we in many ways democratize the opportunities we are creating?"
The ambassador expressed that the world has evolved through many versions of globalization where there has been a "very unequal and imbalanced relationship between resource-rich countries that are looking for development opportunity and those who are more advanced on the development scale…I think this facilitation in bringing about a new version of globalization, that inclusivity piece also means turning some of these previous dynamics on their heads."
During the Summit, the U.S. government and AfCFTA secretariat signed a memorandum of understanding, committing the parties to expand "two-way trade and investment in Africa," according to a White House summary. Along with promoting "equitable, sustainable, and inclusive trade," the collaboration aims to "boost competitiveness; and attract investment to the continent," the White House also said.
Mariama Diallo is a senior correspondent and web editor at the Voice of America.
Photo Credit: H.E. Wamkele Mene speaks at the Biennial Lecture and Dialogue of the Brown Capital Management Africa Forum by the Wilson Center Africa Program.
The opinions expressed on this blog are solely those of the authors. They do not reflect the views of the Wilson Center or those of Carnegie Corporation of New York. The Wilson Center's Africa Program provides a safe space for various perspectives to be shared and discussed on critical issues of importance to both Africa and the United States.
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