After a hesitant and slow start, will 2024 mark the turning point in the establishment of the Continental African Free Trade Area (CAFTA)? After the pilot phase initiated by seven of the continent's countries, the expansion of the Guided Trade Initiative (GTI) to a further 24 countries should mark a turning point for what is destined to become the world's largest free trade zone. Currently, 96 products can be traded freely with tariff preferences under this initiative. The next African Union summit, scheduled for next February, should also further encourage the operationalization of the Zlecaf, whose pilot operation has been generally conclusive. However, more needs to be done if Africa is to become a genuine common market.
With 53 countries having signed the treaty establishing the Continental African Free Trade Area (CAFTA), 47 of which have ratified it, the African common market, destined to become the world's largest free trade zone, is well underway.
In the opinion of many experts, the process will be slow to get off the ground, but everything points to the inevitability of this African common market.
And the Guided Trade Initiative (GTI) launched on October 7, 2022 by 7 countries - Cameroon, Egypt, Ghana, Kenya, Mauritius, Rwanda and Tanzania - has served as a pilot phase. This "aims to enable meaningful trade and to test the operational, institutional, legal and trade policy environment within the Zlecaf framework", according to Wamkele Mene, Zlecaf Secretary General.
The 96 products traded under this initiative (pharmaceuticals, rubber, steel, pasta, ceramic tiles, tea, coffee, sugar, dried fruit, etc.), for which rules of origin exist, served as a trigger for trade under Zlecaf preferential conditions.
Although the operation involved only a small number of countries and products, the results were deemed conclusive overall. "The lessons we have learned are that, in reality, the private sector across the continent is ready to take advantage of Zlecaf, and that governments need to act much more quickly to meet their needs," stressed Wamkele Mene, the group's secretary general, adding that "this year (2024), our intention is to accelerate the implementation of Zlecaf".
With this in mind, a further 24 African countries will join the Guided Trade Initiative this year, bringing to 31 the number of countries required to trade a certain number of products under Zlecaf rules.
From this year onwards, a total of 31 countries will be trading a number of products under Zlecaf's preferential conditions. These are countries that have deployed the Zlecaf electronic tariff book and rules of origin manual, and have officially published their tariff rates. The year 2024 will therefore see the launch of Zlecaf, with more than half of all African states committed.
Aware that tariff and non-tariff barriers are major obstacles to the development of trade on the continent, Zlecaf has emphasized their gradual elimination as a means of boosting intra-African trade.
While the agreement includes a number of protocols covering several areas, including trade in goods, trade in services, intellectual property rights and competition policy, the most important aspect remains trade and the progressive elimination of tariff barriers, which constitute major obstacles to trade.
To this end, a progressive dismantling of customs tariffs has been adopted on the basis of three national lists of concessions (A, B and C). List A" comprises 90% of each country's tariff lines, representing the equivalent of 90% of its imports from the rest of the Zlecaf member countries.
Liberalization of the products on this list, considered as non-sensitive products, will take place gradually, over a period of 5 years for developing countries (2021-2025) and 10 years for least developed countries (LDCs).
List B" comprises 7% of the tariff lines of each member country. Overall, these are products considered sensitive, and which therefore benefit from protection spread over a longer period of time, i.e. 10 years for developing countries (2021-2030) and 13 years for LDCs.
In addition, there is the "List C", made up of 3% of the tariff lines of each of the Zlecaf countries, which are excluded from liberalization because of their economic or social specificities for the country.
The tariff dismantling began on January 1, 2021. Each dismantling tranche is applied on January 1 of each year. It should be noted that trade within the Zlecaf framework is governed by the principle of reciprocity, which implies that benefits granted by one country to another must be reciprocal.
By progressively eliminating tariff barriers, African countries should remove one of the major obstacles to intra-African trade in goods. According to the World Bank, "this measure alone would boost trade and real income by 7% by 2035".
As regards non-tariff barriers (sanitary and phytosanitary measures, rules of origin, etc.), these are integrated by Zlecaf within the framework of the protocol on goods, which defines the practical arrangements for their operationalization, in particular the institutions to be set up.
As a result, to further stimulate trade and cope with the costs generated by the use of hard currencies and Swift, some believe that payments in local currencies should also be considered.
Kenyan President William Ruto is in favor of paying for commercial transactions in local currencies, believing that "this will reduce the cost of convertibility of African currencies, which is $5 billion a year, and the cost of Swift transactions, which amounted to $19.5 billion in 2019".
Moreover, stimulating trade also requires a sufficient supply of products. Yet few products are processed on the continent. Hence the urgent need to encourage the processing of local products and promote the industrialization of the continent, leading to trade in higher value-added products.
According to the World Bank, Zlecaf should boost African exports by $560 billion, mainly in the manufacturing sector. However, to reach this level, the common market would need to encourage more countries to engage in the processing of their raw and agricultural materials.
Zlecaf is therefore on the right track. This agreement, which brings together 53 countries with a market of over 1.3 billion consumers and a gross domestic product (GDP) of over 3,500 billion dollars, could help transform African economies.
Once fully operational, Zlecaf will boost intra-African trade, which is still very low. Indeed, according to recent UNCTAD data, intra-African trade accounts for around 14.4% of the foreign trade of African countries, compared with 63% for intra-European trade and 58% for intra-Asian trade (2021).
However, to significantly increase this ratio of intra-African trade, African countries will have to revolutionize their economies by focusing more on the processing of their products.