I warmly greet Your Excellences, Business Leaders and friends of Africa. And thank you for the invitation. There are three of us from the African Union Commission.
I am truly happy to be here in Chicago, this historical city, which is billed to have been founded by Jean Baptiste Point du Sable, a Free Black Man and trader of African descent, who came from Haiti in the late 1770s.
Let me at the outset congratulate Mrs. Toyin Umesiri, NAZARU Founder for initiating the Trade With Africa Business Summit. I commend you for this impressive and progressive initiative. We are all proud of you Toyin.
Deservedly, Toyin is also Ambassador of the Intra-African Trade Fair. Colleagues, This Summit represents an opportunity to discuss and reflect on ways and means to strengthening trade and investment ties between Africa and the United States of America.
In this year’s edition of the Trade With Africa Business Summit, I have been specifically requested to speak on the issue of the African Continental Free Trade Area (AfCFTA).
I will cover three main points in my statement. The first one is on the AfCFTA and the opportunities it brings to investors and traders. The second point is on the current status of implementation of the AfCFTA Agreement. The last but not the least is the point on what lies beyond the launch of the operational phase of AfCFTA that was held in Niamey, Niger on 7th July, 2019.
The audience will have an opportunity to raise questions after my statement. I invite you all to be frank. And let me at this stage state that I also deeply appreciate the presence of participants. You are the blood giving life to this Business Summit.
AfCFTA and the opportunities it brings to investors and traders
Let me straight away start with the first point and I ask the question: What is the African Continental Free Trade Area? The most straight forward answer is that it is a newly established and integrating African market supported by a comprehensive legal framework and offering attractive investment and trade opportunities. Let me give substance to this answer.
I will begin by stating that the vision of the AfCFTA is to create a single integrated African Market. This means that all the fifty five Member States of the African Union must sign and ratify the Agreement establishing the African Continental Free Trade Area to truly cover the entire geographical landscape of Africa.
They should thereafter embark on harmonizing domestic rules and regulations to institutionalize that integration. The next question then is: why do we need one African market?
The answer to this question is because the key development challenge of Africa is that it is the most fragmented continent in the world. Count the number of countries between Cape Town and Cairo and compare with southern and northern tips of Brazil. Also count the number of countries between Mauritius and Cape Verde and compare the eastern and western coats of the US. You get the picture.
Fragmentation in Africa brings with it small economies, small markets, un-competitiveness and a host of other weaknesses which make African economies fail to grow at rates high enough to reduce poverty and overcome the underdevelopment trap that they find themselves in.
With this structural weakness, our countries are also vulnerable to manipulation, politically and commercially. By creating one African market, we are transforming the landscape to bring in train, a large market of 1.27 billion people (expected to be 1.7 billion in the next eleven years) and large economies of scale and scope which will, in turn, attract largescale and long term investments. Arising from this, the basic incentive for businesses operating in the AfCFTA is that they will face huge and attractive opportunities.
Five Key Opportunities in AfCFTA
The first one is the prospects of higher rates of economic growth that will emerge from a large and growing market capable of attracting large scale and long term investments. Growing economies are sources of increasing buying power and increasing buying power means high rates of profits for businesses.
Today, businesses also use innovation to create new opportunities. In this connection, Africa with a young population and economies with prospects for higher levels of economic growth is ripe for start-ups and business will consequently be motivated to invest in the development of start-ups across Africa.
It is for this reason that the 2020 edition of the IntraAfrican Trade Fair, to be held in Kigali, Rwanda from 1-7 September, will have a pavilion for start-ups developed by the 7 African youth. Selection to exhibit in this Pavillion will be through a competitive process.
The African youth in the Diaspora are encouraged to compete and exhibit in the pavilion. Beyond this, and this is worldwide, small and medium enterprises in which start-ups initially imbed offer the most promising opportunities for employment generation.
Africa is in need of 20 million new jobs every year to cater for our young and growing population. In this respect, it would not be farfetched for business to work with the African Union in conceiving and developing AfCFTA bonds that can be used to finance start-ups and small and medium enterprises.
The second key opportunity are good prospects for rapid economic diversification and structural transformation. This will 8 be anchored on the development of regional and continental value chains competitively linked to global value chains. In the past, many African countries have not been able to achieve lasting economic diversification due to small markets.
The AfCFTA market has changed this and it will be complemented with the African Commodity Strategy to be adopted by the Assembly of the African Union Heads of State and Government at its 2020 Summit. Value addition will be the key lever in the implementation of the African Commodity Strategy. A good start is agro-processing, when fully implemented, will transform Africa from a net importer to a net food exporter.
The third key opportunity is to connect Africa through intercountry linkages in transport, communications and energy. One of the key levers of the defragmentation of African countries and economies is connectivity which will remove their isolation 9 from each other. There are immense opportunities for investments in the development of trade-related infrastructure.
These can either be private sector initiatives or public-private partnerships. The Afro-champions Initiative have come up with a framework which will see Africa overcome its current deficit in infrastructure financing within a decade.
The fourth opportunity is to educate and train the African population and transform Africa into a talent factory that is fit for the digital age. For start-ups, manufacturing and agro-processing to thrive, we will require an educated and trained citizenry that will raise productivity and competitiveness.
A productive African citizenry will, in this connection, be a source of growing consumption which will in turn stimulate higher levels of investment and economic growth in the AfCFTA market. Seen in this context, decent employment will contribute 10 to the growth of the middle class, which is expected to rise to 600 million by 2030. The picture of rising consumption in Africa should be exciting to this Summit.
Currently, private and business to business consumption of US$4.0 trillion. Private consumption in Africa is expected to rise to US$2.5 trillion in twelve years’ time, and business to business consumption in Africa is expected to rise to US$ 4.2 trillion by 2030.
Online retail business in Africa is expected to grow to US$75 billion by 2025. All these offer good prospects for growing business operations in Africa.
The fifth opportunity is the growth of intra-African trade. Intra African trade is expected to increase by 52.3% by 2022 and double that rate if there is an effective elimination of Non-Tariff Barriers (NTBs).
With the recent launch of an online Non- Tariff Barriers Monitoring, Reporting and Elimination Mechanism, we are confident that the removal of NTBs will significantly contribute to the development of intra-African trade. Increased Intra African Trade Area will in turn, open up additional opportunities for business to business deals as well as improved prospects for an increased share of Africa in global trade. Trading with Africa has, in this context, very bright prospects.
Against this background, the AfCFTA is a multilateral trade agreement that it also developmental in character as already reflected in its expected contributions to higher levels of economic growth as well as economic and structural transformation. Another good example of its developmental character is that it offers good prospects for wealth creation, the most reliable guarantor of poverty reduction.
Related to this, inclusiveness at the community, national and continental levels is a key area of focus in the AfCFTA, hence our confidence that it will lead to poverty reduction. The AfCFTA will make sense to the ordinary Africans if it substantially contributes to their decent livelihoods.
We are committed to making it deliver on this promise. At this stage, let me deal with the current status of implementation of the AfCFTA Agreement. I will begin by stating that the AfCFTA is a set of legal instruments concluded in Kigali, Rwanda, on March 21, 2018, when the Agreement was opened for signature. The Agreement invariably provides traders with the legal predictability needed for them to trade in full confidence in the new market.
The set of AfCFTA legal instruments comprise:
- A Framework Agreement Establishing the African Continental Free Trade Area;
- A Protocol on Trade in Goods;
- A Protocol on Trade in Services; and,
- A Protocol on Rules and Procedures on the Settlement of Disputes.
The Protocols have Annexes and Appendices. Work will begin this year to negotiate protocols on Investment, Competition Policy and Intellectual Property Rights which will be part of the AfCFTA legal regime.
Against this background, the AfCFTA Agreement is anchored on trade liberalization. The Agreement, has, in this connection, modalities of tariff liberalization. Let me briefly outline them now, beginning with trade in goods.
We have a level of ambition of 90% tariff liberalization over a period of 10 years and 13 years for the Least Developed Countries (LDCs). This is aimed at spurring manufacturing as well as facilitate increased volumes of trade in manufactured goods. Already, about 42% of intra-African trade is in manufactured goods. There are also flexibilities are granted to countries, whilst ensuring that the commercial value of the AfCFTA Agreement is safeguarded.
For example, even though countries are allowed 15 exclude 7% of total tariff lines for sensitize products and 3% of the total tariff lines for excluded products, they are also required to ensure that excluded products shall not exceed 10% of total import value from other State Parties.
Similarly, while a transitional period of 5 years or less is available for countries which require this flexibility before the start of liberalization of Sensitive Products, countries are required at the same time to eliminate tariffs by the end of the phase-down period.
Furthermore, whilst a small number of countries have been granted additional flexibilities regarding the timeframe to achieve the 90% level of ambition of tariff liberalization, it is on the condition of reciprocity. May I now turn to the provisions on levels of ambition for Trade in Services.
Countries will undertake the preparation of their schedules of specific commitments in the agreed priority sectors: business services, communication services, financial services, transport and tourism with a deadline of January, 2020. There will be a signaling conference in Cape Town in September this year on the margins of the World Economic Forum-Africa where business will be sensitized at continental level on the key provisions of the Protocol on Trade in Services.
Trade liberalization is the platform for increasing intra-African trade. To this end, Africa decided to launch the Operational Phase of the AfCFTA on July 07, 2019 in Niamey, Republic of Niger, during the 12th Extraordinary Summit of Heads of State and Government of the African Union.
The Launch of the Operational Phase of the AfCFTA was significant in many respects. Let me start with a legal perspective. The Launch of the Operational Phase of the AfCFTA followed the Entry into Force of the AfCFTA on May 30, 2019, after the deposit of the 22nd Instrument of Ratification with the Chairperson of the AU Commission on 29th April 2019.
As of today, 27 countries have ratified and deposited their instruments of ratification. We are in this respect remaining 1 with 28 countries yet to deposit their instruments of ratification to have a truly one African market encompassing all the fifty-five Member States of the African Union. Burkina Faso, Chad, Cote d’Ivoire, Congo, Djibouti, Egypt, Equatorial Guinee, Ethiopia, Gabon, Gambia, Ghana, Guinea, Kenya, Mali,
Mauritania, Namibia, Niger, Rwanda, South Africa, Sahrawi, Senegal, Sierra Leone, Sao Tome & Principe, Eswatini, Togo, Uganda and Zimbabwe.
Fifty-four countries have so far signed the AfCFTA Agreement, leaving only Eritrea, which made a strong statement of intention to do so as soon as possible during the 12th Extraordinary Summit of Heads of State and Government of the African Union, attended by all fifty-five African Union Member States.
AfCFTA state of implementation from an institutional and administrative perspective
Let me now look at the issue of the state of implementation from an institutional and administrative perspective. Pursuant to Article 13 (2) of the AfCFTA Agreement, “the Commission shall be the interim secretariat until it is fully operational”. Paragraph 6 of Article 13 also specifies that “the roles and responsibilities of the Secretariat shall be determined by the Council of Ministers of Trade”.
In this regard, the African Union Commission, in its capacity as the Interim Secretariat of the AfCFTA, will work towards establishing the AfCFTA Secretariat and activating the various institutions envisaged under the AfCFTA Agreement.
The draft organizational structure of the AfCFTA Secretariat is being refined following the 9th Meeting of African Ministers of Trade. It will be used by the Member States in their national consultations before the draft organizational structure is further discussed by the AfCFTA Council of Ministers of Trade at their first meeting planned before the end of this year.
The immediate priorities of the Interim AfCFTA Secretariat are four.
The first one is to convene the first meeting of AfCFTA State Parties, which will take place in Eswatini.
The second priority is to negotiate and conclude a Hosting Agreement with Ghana, which is the hosting country of the permanent AfCFTA Secretariat.
The third priority of the Interim AfCFTA Secretariat is to prepare all the necessary logistics and trading documents, including AfCFTA customs Declaration Forms, the roster for panelists for the dispute settlement mechanism as well as electronically linking customs administrations in the AfCFTA to facilitate the efficient movement of goods and services.
Fourthly, the Interim AfCFTA Secretariat has the priority to ensure that the supporting instruments launched during the July Extraordinary Summit are fully operational by July 2020.
These are: Rules of Origin; Schedules of Concessions on Trade 21 in Goods, Online Non-Tariff Barriers Reporting, Monitoring and Elimination Mechanism; Pan-African Payments and Settlements System (spearheaded by the African Export-Import Bank); and, the African Trade Observatory. In addition, State Parties to the AfCFTA Agreement are also required to designate their national enquiry and points of contact as provided for under the various Protocols.
State of implementation
Let me now look at the issue of state of implementation from a market access perspective. As already indicated, the Niamey 12th Extraordinary Summit decided that the start of trading is 1st July 2020.
This has implications is several respects.
With respect to Trade in Goods, Member States are required to finalize their tariff offers covering 90 % of tariff lines by end of September 2019 and tariff offers covering the remaining 10 % of tariff lines by end of November 2019.
Final Schedules of tariff concessions are to be submitted to the Summit by January 2020. In the same spirit, Member States will maintain their current levels of tariffs on intra-African trade (standstill on tariffs) and further ensure that we achieve the objective for tariff liberalization as agreed in the modalities.
This is very important as it is reaffirmation our commitment to creating a commercially meaningful free trade area. With respect to Trade in Services, Member States are required to undertake three key activities.
First, they must finalize their 23 Schedules of Specific Commitments in the five priority sectors (Business Services; Communication Services; Financial Services; Transport Services; and, Tourism Services). These are to be submitted to the Summit by January 2020.
Secondly, Member States are required to finalize work on the Regulatory Cooperation Frameworks by June 2020; and, thirdly, conclude work on the remaining Services Sector by December 2020.
At this stage, let me point out that we are committed to concluding Phase II of the AfCFTA Negotiations. These, as earlier mentioned will focus on Investment, Competition Policy, and Intellectual Property Rights. At the 7th meeting of the African Ministers of Trade (AMOT) held in Cairo, Egypt in December 2018, the African Ministers agreed on the deadline of December 2020 for the conclusion of Phase II negotiations.
The draft legal texts will be submitted to the January 2021 Session of the Assembly for adoption. Preparations for the negotiations have already started. We have so far hired an investment expert. Other key experts will soon be hired. We are confident of meeting the deadline. As part of preparations for effective implementation of the AfCFTA Agreement, there is realization that for the AfCFTA Agreement to deliver, there is need to engage a wider base of stakeholders such as the private sector, civil society and informal cross-border traders. As regards the private sector, we have been engaging them at the national and continental levels.
At the national levels, Member States continue to sensitize the private sector and other market players on the opportunities that this huge and growing market offers to them. This will encourage them to start investing in accordance with the size of the continental market, which is now the new domestic market for Africa.
That advocacy will intensify as we move towards the start of trading. At the continental levels, there are five elements of private sector engagement. The first one is increased the involvement of the African private sector in trade policy formulation, negotiations, and implementation.
During their 9th Meeting held in Niamey, Niger on July 1-2, 2019, African Ministers of Trade directed the “AUC to invite the Pan-African Private Sector Trade and Investment Policy Committee (PAFTRAC) to its future meetings and requested PAFTRAC to articulate African private sector views and report on progress made towards becoming the African Business Council.”
PAFTRAC membership comprises the Pan-African Chamber of Commerce (PACCI), the Afro-champions Initiative and Club, regional business councils, and African businesses with footprints in more than one African region.
The decision quoted earlier is a very important development as it marks a paradigm shift in trade policymaking in Africa. The decision is a recognition of the fact that it is the private sector 27 that engages in trade and investment and that its contribution is essential in the trade policy formulation and implementation processes.
With this new development, we anticipate that non-African businesses operating across Africa, including US businesses, will also be able to contribute to the trade and investment policy processes through PAFTRAC.
This will be possible by joining regional business councils or working closely with national chambers of commerce, which are represented in PAFTRAC through PACCI. We are also engaging the private sector operating in Africa through the AfCFTA Business Forum.
Following the successful convening of the inaugural AfCFTA Business Forum in 2018, attended by close to five hundred business leaders, the AfCFTA Business Forum 2019 took place in Niamey, Niger on July 6, 2019.
This is now set to become an annual platform through which African policymakers and business meet to discuss pertinent issues related to facilitating greater involvement of the private in investing and trading across Africa.
It was at the Niamey AfCTA Business Forum that the Afro-Champions Initiative/Club rolled out the framework on the financing of trade-related infrastructure.
The third lever for continent-wide engagement with the private sector is the Intra-African Trade Fair (IATF) series. The African Union Commission has partnered with the African Export-Import Bank (Afreximbank) in the IATF series. This is in line with the recommendations of the Action Plan on Boosting Intra-African Trade (BIAT). BIAT recommends, among others, the convening of regular regional trade fairs and sector-specific expos to share information on business, export and other market opportunities across Africa as well as to promote networking and information sharing among businesses and chambers of commerce.
BIAT also recommends the promotion of “Made in Africa” products and services. As already stated, the second edition of IATF is scheduled for September 1-7, 2020 in Kigali, Rwanda.
IATF 2020 will bring together leading continental and global business enterprises to showcase and exhibit their goods and services whilst simultaneously providing business leaders with a platform to explore business and investment opportunities in the AfCFTA market. It is expected that the IATF2020, which will take place 30 one month after the start of trade under the AfCFTA regime, will attract more than 1,000 exhibitors and generate a minimum of $40 billion in trade deals.
The IATF will have four segments: Exhibition, Conference, Business to Business Transactions and a Virtual Trade Fair. I urge all businesses present here to register and participate in this continental landmark event which is being publicized during this Business Summit.
IATF Ambassador Toyin Umesiri, the convenor of this Business Forum and a team from the African Export-Import Bank will be on hand to assist you with all aspects of participating in IATF 2020. I look forward to seeing you all in Kigali next year.
The fourth lever of continental level private sector engagement is popularizing the AfCFTA to the Private Sector through a Web-based and Mobile-based AfCFTA Application for Business.
The application, still under development, will be used by the business community and general public as a one-stop-shop for access to information about the AfCFTS. It will in this respect serve as an electronic AfCFTA Handbook for Business.
Furthermore, it will be accessible to a larger audience which would not have been the case were it a physical handbook. The Web-Base and Mobile-Based AfCFTA Application is a testimony that Africa has harnessed modern technology at both the policy and operational levels of continental integration.
This innovation and others will facilitate real-time interactions among policymakers, private sector entities and other stakeholders with all aspects of doing business in the AfCFTA. It is also a recognition that digitalization will be a key enabler of a successful AfCFTA.
The fifth lever of private sector engagement at the continental level is special attention to the informal sector as it trade across Africa. According to the African Export-Import Bank, informal trade across Africa is in the range of US$60-90 billion annually, representing a significant portion of intra-African trade that does not enter official statistics.
With this in mind, the Commission will enhance its collaboration with the Regional Economic Communities to implement the simplified trade regime, in order to cater for the needs of Small to Medium Cross Border Traders. We have also been assured by the African ExportImport Bank that the Pan African Payments and Settlement System will capture informal cross-border trade.
Once all these are achieved, we foresee significant rise in Intra-African trade from the current low level of 18% just from recording informal cross-border trade in addition to the contributions to be made by tariff reduction and elimination of Non-Tariff Barriers. Within the scope of broadening stakeholder engagement, let me now tackle the important issue of a People Driven AfCFTA.
As recommended by AU Heads of State and Government during their 32nd Summit in Nouakchott, Mauritania, the AU Commission convened the inaugural AfCFTA Civil Society Forum on July 3rd, 2019 in Niamey, Niger.
The purpose of the Forum was to enhance civil society engagement on the implementation of the African Continental Free Trade Area (AfCFTA), and share knowledge on the priority issues of the AfCFTA.
The event was attended by representatives of civil society organizations, as well as representatives from other key stakeholders (AU Member States and Regional Economic Communities) and representatives of the African Diaspora in the US and the Caribbean. Some of you who were there should be able to give your personal impressions during the discussion that will follow my presentation.
Colleagues, My next and final task is to look at what lies beyond the launch of the operational phase of the AfCFTA. I will begin by stating that the launch of the operational phase of the African Continental Free Trade Area on 7th July 2019 brought to the forefront key issues that require immediate attention. The first one is continued advocacy for all fifty-five African Union Member-States to be State-Parties to the AfCFTA Agreement before the start of trading on 1st July 2020.
This should be followed by enhanced sensitization of business African Union Member States on emerging opportunities in the AfCFTA and getting them ready to operate to the scale of that market. Crucially, businesses should have a new mindset of seeing the AfCFTA as the new domestic market, not national markets.
This then brings in train the third key issue which the scaling up manufacturing as it is a strategic sector in economic transformation, productivity, competitiveness, and innovation 36 across the AfCFTA.
Some of the key initiatives in this area are the implementation of the African Small and Medium Enterprises Strategy; promotion of start-ups, development of Pan-African fashion industry; development of the African pharmaceutical industry; development of continental automotive value chains as well as the development of agro-processing. In addition, the establishment of networks of producers is also high on the agenda of the AfCFTA.
As a way of promoting private sector engagement in the development of productive capacities, work is underway to come up with a Pan-African Manufacturer’s Association to build on the work of the AfroChampions initiative which has a memorandum of understanding with the Africa Union Commission.
Furthermore, the African Chambers of Mines and other Associations (ACMAA) is also working on a memorandum of understanding to be signed with the African Union as a platform for engagement on matters related to mining across Africa. As a key and urgent priority, we are also going to enhance collaboration with Regional Economic Communities as part of our preparations for the start of trading on 1st July, 2020.
The Regional Economic Communities were established as building blocks to the African Economic Community, to which the African Continental Free Trade Area is part of. This logically means that, right from the start, there should be close collaboration between the AfCFTA Secretariat and Secretariats of Regional Economic Communities. Some of the immediate areas of collaboration are on facilitation of small scale crossborder trading; trade facilitation in general; development of trade related infrastructure as well as monitoring, detection and elimination of trade deflection; among several others.
To this end, and given the strategic importance of this collaboration, one of the key priorities of the Interim AfCFTA Secretariat before the end of this year will be the development of a framework of collaboration on AfCFTA implementation with the eight (8) Regional Economic Communities recognized by the AU.
In addition, the July 2019 Extraordinary Summit also agreed that the Chairperson of the AfCFTA and the Chief Executive Officer of the AfCFTA Secretariat will be part of the annual coordination meetings between the African Union and the Regional Economic Communities.
Beyond this, there is also on-going work on the implementation of other key enabler projects and initiatives aimed at deepening integration and in the process, making it more attractive to invest and trade in Africa.
We are in this connection implementing projects aimed at bringing into operation, the Single African Air Transport Market which was launched in January 2018 by the African Union Summit. The Single African Air Transport Market has opened up opportunities for investments in the African civil aviation market to remove the isolation of African countries from each other.
We, in this connection, challenge US investors to partner with the African private sectors to come up with budget airlines in Africa that will connect all the African capitals and major commercial centres to facilitate increased travel and tourism.
We are also continuing with advocacy for signature and ratification of the Protocol to the Treaty Establishing the African Economic Community Relating to Free Movement of People, Right of Residence and Right of Establishment which is yet to enter into force. Once it enters into force, we will be able to start work on the development of the African passport and mutual recognition of qualifications; among its numerous provisions. We are also committed to rapid development of African Quality Infrastructure.
This is key to facilitating trade in high quality and safe products as well as removal of technical barriers to trade. Before I end my statement, let me state that American business has in the past, brought us two major concerns about investing and trading in Africa.
Their first concern has been the small sizes of the markets of African countries. Their second one has been the numerous and sometimes conflicting rules and regulations business has to face in operating across Africa.
The AfCFTA has removed these two key concerns. We are creating one large and integrated market with equally large economies of scale and scope. At the regulatory level, we are, through the Protocol on Trade in Services going to promote regulatory cooperation.
As we deepen integration, there will also be complete harmonization of rules and regulations so that we a have a truly internal market. Against this background, Africa is now commercially attractive to large scale and longterm investments from the United States of America and other parts of the world. We have brought this exciting development 42 to the attention of the US Chamber of Commerce and we expect them to react favourably.
I will conclude by stating that AfCFTA is the largest trade bloc since the establishment of the World Trade Organization in 1995.
Its successful realization rests on a number of parameters some of which have been highlighted in my intervention. Businesses will be a key player in this undertaking and its successful execution.
Today, I ask you and US business at large with a focus on Africa to join us in operating in the emerging African market of limitless opportunities.