Zim to join AfCFTA’s guided trade initiative

Zimbabwe is expected to be among the second batch of countries to kickstart meaningful intra-Africa trade in terms of the African Continental Free Trade Area (AfCFTA)’s Guided Trade Initiative (GTI), which was successfully piloted by seven AfCFTA member countries since October last year.

Trading under the AfCFTA preferential regime, to which Zimbabwe is signatory and was officially launched in January 2021, became a reality on October 7 last year, with the introduction of the AfCFTA secretariat – driven Guided Trade Initiative (GTI).

Generally, the Guided Trade Initiative seeks to kickstart the implementation of the AfCFTA trade protocols and drive meaningful trade among member countries, which hitherto was constrained by a myriad of unharmonised and costly trade rules.

The AfCFTA is the world’s largest free trade area bringing together 55 countries of the African Union (AU) and eight (8) Regional Economic Communities (RECs). The overall mandate of the AfCFTA is to create a single continental market with a population of about 1,3 billion people and a combined GDP of approximately US$3,4 trillion.

As part of its mandate, the AfCFTA seeks to eliminate trade barriers and boost intra-Africa trade. In particular, it is to advance trade in value-added production across all service sectors of the African Economy.

AfCFTA secretary general, Wamkele Mene, told a Zimbabwe-Ghana Business Forum this week that, without a doubt, the Guided Trade Initiative had been a key development at the continental level and had injected some vitality into the implementation of the AfCFTA.

The Guided Trade Initiative was born after the 7th Meeting of the AfCFTA Council of Ministers responsible for Trade, on October 10, 2021, who adopted the Ministerial Directive on the Application of Provisional Schedules of Tariffs Concessions.

The Ministerial directive provided a legal basis for the countries that had submitted their tariff schedules in accordance with the agreed modalities to trade preferentially amongst themselves within the framework of the AfCFTA.

The Ministerial directive was adopted by the Assembly of Heads of State and Government in February 2022.

However, as commercially meaningful trade had not still commenced under the AfCFTA, the AfCFTA secretariat embarked on a solution-based approach in the form of the AfCFTA Guided Trade Initiative.

During the 9th Meeting of the Council of Ministers held in Accra, Ghana, in July 2022, the AfCFTA secretary general Mene, announced the AfCFTA secretariat Guided Trade Initiative.

The AfCFTA Guided Trade Initiative intends to achieve its goal through matchmaking businesses and products for export and import between the interested state parties in coordination with their national AfCFTA implementation committees.

“Under the initiative, 96 products have been approved to be traded duty-free and quote-free by the State Parties piloting the initiative, namely Cameroon, Egypt, Ghana, Kenya, Mauritius, Rwanda, and Tanzania. This initial batch of countries had their tariff offers on goods fully approved and officially published, and ensures representation from all the five regions of the continent,” Mene said.

He said the trading was taking place across Africa’s regional economic communities (RECs).

Under the GTI, consignments of Kenyan tea and locally made car batteries are already being exported to Ghana, Rwandan exports of coffee going to Ghana, shipment of palm oil, ceramic tiles, and cashew products are coming from Ghana to Kenya and Cameroon, Cameroon’s cargo of dried safou, dried pineapple, and ginger tea are going to Ghana.

Other products are destined from Kenya to Ghana and other African countries, including confectionery, sisal fiber, leather products, avocados and fresh produce.

Mene said the next round of participation in the Guided Trade Initiative will cover all State Parties, which meet the criteria.

The initiative will also cover trade in services on the basis of the criteria to be agreed. Mene told delegates that services were now the backbone of manufacturing and industrialisation, accounting for a significant share of gross domestic product (GDP) in most of our countries.

The inclusion of services would, therefore, significantly boost intra-African trade, he said.

For the countries piloting the GTI, this expands their export markets and benefits their own consumers by importing cheaper products. The Initiative has, indeed, proven that the AfCFTA is truly operational, and the good practices and lessons learnt would be carried forward to accelerate the continental integration processes.

“It is my strong expectation that Zimbabwe will be among the second batch of countries joining the GTI this year. This will greatly support bilateral trade with Ghana, which is already participating in the GTI, as envisaged by the Zimbabwe-Ghana Business Forum,” Mene said.

The AfCFTA secretary general noted that despite longstanding cordial relations, trade between Zimbabwe and Ghana, like the rest of the continent except for South Africa, Zambia and Mozambique, remained minuscule. Commercially meaningful trading under the AfCFTA preferential terms, facilitated by the GTI, has been made possible by the substantial progress made in the negotiations of the protocols and operational instruments of the AfCFTA.

“Phase I protocols of the Agreement, which aim to significantly reduce tariffs and non-tariff barriers to goods and advance the liberalisation of trade in services, have largely been completed.

“Consequently, trading is currently possible for 88,3 percent of tradable goods — nearly 5 000 products — as these have agreed rules of origin in place.

“This means that we have now defined for each of them what constitutes the minimum African content for a product to be traded among countries of the continent on the basis of preferences. Such a high threshold of consensus guarantees that the vast majority of products can be traded,” Mene said.

Negotiations are ongoing on the rules for more sensitive products such as clothing and textiles, automotive and sugar, which we expect to be finalised this year in order to achieve 100 percent of rules of origin coverage.

Furthermore, 46 Member States have submitted their tariff offers, that cover these goods with rules of origin in place, while 52 have so far submitted their specific commitments with respect to the protocol on trade in services.

Also, Mene said, for the first time on the continent, the free trade in goods and services would be backed by a robust dispute settlement framework under the AfCFTA. The importance of dispute settlement in trade and investment cannot be overemphasised.

“It is at the heart of a rule-based trading system, to ensure market certainty and predictability, which is crucial for investment,” he noted.

Importantly, the AfCFTA secretary general said, trading under the GTI is supported by key operational instruments, including the Pan African Payments and Settlement System (PAPSS) and the AfCFTA Adjustment Fund Facility.

Inadequate payment systems infrastructure has been identified as a major constraint to intra-African trade. Payments within the continent are mostly done through correspondent banks in Europe or the US before reaching the recipient African neighbour.

This comes with high transaction fees, compliance costs, applied foreign exchange conversion rates, and liquidity costs.

“With the introduction of the PAPSS platform, last year, spearheaded by Afreximbank, in partnership with the AfCFTA secretariat, companies can pay for intra-African trade transactions in their local currency,” he said.

The PAPSS, therefore, makes it easy to trade across Africa. It makes intra-African trade more efficient as we have always wanted it.

“In the last couple of years, we have worked, also in collaboration with Afreximbank, to deliver an impactful and sustainable adjustment (fund) facility to help AfCFTA State Parties and their private sectors to address short-term disruptions from the implementation of the AfCFTA Agreement.

“The resources required for the Adjustment Fund over the next 5-10 years are estimated at about US$10 billion. Afreximbank has already committed US$1 billion towards the fund,” Mene said.

Earlier this month in Kigali, Rwanda, the AfCFTA Secretariat, Afreximbank, and the Government of the Republic of Rwanda, signed the Host Country Agreement to formalise the status of the Adjustment Fund office in Kigali.

This paves the way for operationalisation of the Fund to support major restructuring events through financing, technical assistance, grants and compensation of State Parties and private entities and persons, including women, youth and MSMEs to help them adapt to, and effectively participate in the new trading environment created by the AfCFTA Agreement.-ebusinessweekly