In a nutshell
This webinar constituted a platform for information exchange on key programmes and initiatives of African development finance institutions, providing an opportunity to explore potential solutions to the logistics infrastructure challenges facing the continent in the framework of the AfCFTA era. Following the presentation of the AfCFTA and its key initiatives by this Secretariat, the webinar featured contributions from Afreximbank, EBID and TDB.
Substantive report
The AfCFTA is a flagship project under Agenda 2063 of the African Union which seeks among other:
- create a single continental market for goods and services;
- expand intra-Africa trade across the RECs (ECCAS, ECOWAS, EAC, SADC, COMESA, AMU, CEN-SAD and IGAD) and the continent in general;
- promote and attain sustainable and inclusive development, gender parity and structural transformation of AfCFTA State Parties;
- promote industrial development through development of regional value chains, agriculture and food security;
- enhance competitiveness of African economies and support economic transformation of RECs;
- lay the foundation for the establishment of a continental Customs Union (CCU).
When fully implemented, the AfCFTA will result in:
- enhanced market size and trade: AfCFTA will create an economic region of 55 African countries, with 1.3 billion people and a combined GDP of about $3.4 trillion;
- export growth: World Bank estimates that by 2035 the volume of total exports would increase by almost 29% relative to business as usual;
- shared prosperity & poverty reduction: Africa is the world’s poorest and most underdeveloped continent with a continental GDP that accounts for just 2.4% of global GDP and accounts for only about 2% of global trade;
- welfare gains: UNCTAD estimates that the AfCFTA will result in total welfare gains of US$ 16 Billion – 24 billion (+0.97% GDP and +1.17% employment).
Status of phase I & II negotiations
The AfCFTA Agreement entered into force on 30 May 2019, after 24 Member States deposited their Instruments of Ratification and the commencement of trading under the AfCFTA was on 1 January 2021.
As on 30 March 2023, all 54 member states of the AU, except Eritrea, had signed the agreement and 46 have ratified it, thus becoming state parties.
The following Protocols have been finalized and adopted with the framework agreement:
- the Protocol in Trade in Goods (including notably the progressive elimination of tariffs and non-tariff barriers);
- the Protocol in Trade in Services (liberalisation of 5 key priority areas: professional services; information & communication services; financial services; tourism services; transport services which essential for addressing logistics infrastructure barriers);
- the Protocol on the Rules and Procedures on the Settlement of Disputes (along the lines of the WTO Dispute Settlement Understanding);
- the Protocols on Competition Policy and on Intellectual Property Rights (IPRs);
- the Protocol on Investment;
- the Protocol on Competition.
Negotiations continue on E-commerce/Digital Trade & Women and Youth in Trade.
AfCTFA instruments
The AfCFTA instruments enable trade to happen and consist of:
- the Guided Trade Initiative (GTI): the Secretariat facilitates linking counties so that they start trading;
- the E-Tariff Book to ensure that tariff concession schedules are easily accessible to Trade and Customs Authorities;
- the Rules of Origin Manual –a guide for the operationalisation of Annex 2 on Rules of Origin, which is an essential part of the AfCFTA;
- the Intra-African Trade Fair (IATF) –a platform for businesses to access an integrated African market, organised by Afreximbank in collaboration between AfCFTA Secretariat and the African Union (AU). The 3rd IATF is scheduled to take place in Abidjan, on 21-27 November 2023;
- The Pan-African Payments and Settlements System (PAPSS) –a centralised Financial Market Infrastructure enabling the efficient and secure flow of money across African borders developed in partnership with Afreximbank;
- The AfCFTA Adjustment Facility to support African countries and the private sector to effectively participate in the new trading environment established under the AfCFTA;
- The AfCFTA Business Forum – a platform for public-private engagements among businesses and governments to unlock trade and investment opportunities in AfCFTA;
- The AfCFTA Trade Observatory – a platform for updated and reliable data to inform business and policy decisions and to monitor the implementation process of the agreement and its impact.
The institutional framework
The institutional framework consists of the Assembly, the Council of Ministers, the Committee of Senior Trade Officials and the Secretariat.
Addressing barriers in logistics infrastructure in support of the AfCFTA through the Corridor Approach
The AfCFTA Secretariat will implement Trade Facilitation measures beyond simplification, harmonisation, involving transport, infrastructure and logistics using the Corridor approach, with Abidjan-Lagos as a pilot project.
In this context, work has already been undertaken to identify the nature of the corridor and possible areas of intervention (eg. interconnectivity, harmonisation of procedures, transit, language, OSBP, etc). Benchmarking and learning experiences from other corridors and addressing NTBs along the corridor are essential tasks in this regard.
Addressing barriers in logistics infrastructure in support of the AfCFTA: Afreximbank’s perspective
The starting point for Afreximbank is access to trade and market intelligence/information to support the implementation of the AfCFTA and its instruments. For the Bank, addressing demand’s perspective is the prerequisite to deal with infrastructure challenges in Africa in a sustainable way.
In this context, a recent UNECA report outlines that infrastructure financing gap has increased (from a reference of USD 130 billion) as a result of the COVID crisis and the Russia/Ukraine war. Moreover, according to this study, transport infrastructure is largely led by road (constituting 3/4 of freight), followed by maritime transport (22%), train (3%) and 1% by air) as modes of transport.
Against this background, Afreximbank’s key interventions for the AfCTFA State parties and the private sector include:
- soft infrastructure like the One-Stop-Border-Post (OSBP) and border market infrastructure;
- warehouses and cold storages facilities;
- railways infrastructure (with THELO TB);
- ports, maritime coasts and inland waterways (notably in Nigeria, in the lower river Niger);
- E-logistics platform to deal with logistics challenges;
- airline industry and the single aviation market;
- African Collaborative Transit Scheme (a programme designed to facilitate the smooth transit of goods across Africa through a continent-wide single technology enabled transit guarantee scheme);
- MANSA Due Diligence Repository (a single source of primary data for conducting customer due diligence checks on counterparties in Africa);
- industrial parks and Special Economic Zones;
- the Pan-African Payments and Settlements System (PAPSS);
- Africa Trade Gateway;
- Africa Trade Exchange (ATEX, a B2B and B2G platform to enable procurement in bulk of basic commodities to ensure countries’ access to scarce supplies in a transparent manner).
Addressing barriers in logistics infrastructure in support of the AfCFTA: EBID and TDB’s perspectives
EBID and TDB outlined 4 key challenges for barriers in logistics infrastructure in their respective regions (West Africa, Eastern and Southern Africa):
- customs and border procedures and the need to address delays and lack of border coordination (such as the border post between Zambia and DRC in Kasumbalesa) and the importance of single entry;
- hard infrastructure and logistics across various modes of transport;
- ICT and the increased use of digital technology (need to address the huge infrastructure deficit);
- human resources (despite mechanisation).
The public sector is essential for the enactment of PPPs and the legal frameworks, hence creating the enabling framework for the private sector. For the latter, the bankability of infrastructure projects is key. Addressing the gap between the enactment of policies and implementation in the ground is essential.
Against this background, key interventions from the Banks include:
- improving border clearance process and narrow the performance gap between agencies (beyond customs: security, health);
- investing in various modes of modes of transport (particularly railways and supporting road rehabilitation in the Northern and Southern corridors in TDB’s members states), leveraging export credit financing;
- investing in blockchain technology to facilitate trade (TDB’s case);
- Decarbonising measures in freight transport through railways;
- Support for trading in agri-inputs and agricultural commodities and the push for intra-African trade in West Africa.
Concluding the webinar, the AfCFTA Secretariat outlined that for the efficient implementation of the AfCFTA cooperation on soft issues of trade facilitation needs to go along with elements of infrastructure. This dual approach is an essential for the cooperation with African DFIs in the framework of addressing logistical barriers in support of the AfCFTA.
Presentation