The African Continental Free Trade Area: A cause for optimism?

 

 

FUNGAI CHIMWAMUROMBE/ LEON GONA

 

The recently created African Continent al Free Trade Area (AfCFTA) has been the cause of much optimism among businesses across the continent.

Indeed this author subscribes to the notion that an increase in cross border trade consequently translates into poverty alleviation within communities.

Moreover, FTAs avail businesses with the opportunity to create synergies creating new product markets and value chains in the process.

This is a marked advantage in light of the global Covid-19 pandemic, as businesses have been made to appreciate the benefit of multi-layered value chains which have given sustenance to those participating within.

Such potential is magnified by the fact that intra African trade constitutes a paltry 12% of African trade whereas Asia Europe and the Americas enjoy intra regional trade of over 50%  of trades.

However, nothing exists in vacuum, moreover an attractive and profitable business environment is underpinned by a robust and comprehensive legal order. The following discourse will analyse various tenets that have underpinned the success of FTA’s in other regions  and interrogate the completeness of the much celebrated AfCFTA.

Chief among the AfCFTA’s aims is to create a liberalised market for goods and services.

This will be achieved through eliminating  tariffs on intra-Africa trade, thereby opening markets for a variety of products from within the free trade area.

The success of creating a single market rests with dismantling protectionist policies that discriminate goods on the basis of source or origin. Non- discrimination is a principle that is vital to the sustenance of any FTA.

It is also a principle beneficial to businesses as goods and services are placed on parity and given the chance to compete with other products.

A single market would also result in a uniform standard of  goods however they maybe a case for member states to regulate standards such that competitive market forces do not instigate a  ‘race to the bottom’ phenomenon where the market standards devolve to minimum standard.

A single market is founded on four fundamental freedoms, that is free movement of persons, free movement of capital , free movement of goods and the free movement of services. Herein lies the sternest challenge to the AfCFTA’s success. These four freedoms lay squarely in the domain of member states sovereign duty to legislate as they deem appropriate, hence the divergence in national laws.

Lessons  from the European Single Market suggest such project is not a mere economic mechanisation, but it is indeed state craftsmanship wherein member states cede a level of sovereignty to ensure functionality of the single market.

A truly free market not only requires equal  access of goods from other member states into markets throughout the geographical area of the free trade area, it requires people to move freely across those geographical areas absent of any burdensome restrictions such as visa or permits, minimal bureaucratic authorisations to movement of capital in and out of member states among other essential tools that underpin a single market.

The practical effect of such legal machinery is that the operational costs of business is rationalised, competition instigates infrastructure development, technology and certainty for the business fraternity vis-a-vis product standards/guidelines across the single market and a uniform standard on labour regulations.

OHADA ,that is, the  Organisation for the Harmonisation of African Business Law, covers a geographical area of 16 Central and West African countries and has been a relative success with regards to harmonisation of business law within that bloc. This has attracted inflows of  foreign direct investments and also spurred economic activity that has grown the collective economies.

Finally, a single market is a legal order in its own right,  as such a comprehensive dispute resolution mechanism should be established. The success of such  lies with the willingness of member states to cede a degree of sovereignty to make such single market functional.

AfCFTA provides for a dispute resolution mechanism however it is limited in its scope of application since it will only entertain disputes between states and furthermore this forum will not entertain human rights disputes.

This is in contrast to ECOWAS,COMESA and the EAC the respective dispute resolution forums of each has the remit to hear matters between non state actors and human rights disputes. It is unfortunate that the AfCFTA adopts a limited scope in this regard as the global trend now appreciates that human rights and commerce are not mutually exclusive hence initiatives such as the UN Global Compact.

The AfCFTA does not offer a robust dispute resolution mechanism hence this might translate to uncertainty amongst those within the business fraternity due to their need for certainty which is a key considerations in their decision making matrix.

The AfCFTA is a real cause for optimism among member states and more importantly business within the geographical area of the 39 members to date.

However the commercial needs that have driven this initiative ought to be balanced by legal mechanisms that would make the AfCFTA a functional reality.

The optimism is restrained upon the realisation that the mechanics required may be incongruent to divergent national policies and laws.

It will be interesting to see how the AfCFTA evolves and the resultant impact on businesses across its 39 member states.

 

 

Fungai Chimwamurombe is a registered legal practitioner and Senior Partner at Chimwamurombe Legal Practice and can be contacted for feedback at fungai@zenaslegalpractice.com and WhatsApp 0772 997 889. Leon Gona is an Associate and can be contacted on leon@zenaslegalpractice.com

 

 

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