Interview with Dr Joy Kategekwa, Head of the UNCTAD Regional Office for Africa

Dr Joy Kategekwa is the Head of the UNCTAD Regional Office for Africa located in Addis Ababa, Ethiopia. Here she discusses the potential for the African Continental Free Trade Area (AfCFTA), how it can be a catalyst for development and how soon it will be implemented.

 What do you see as the potential for the African Continental Free Trade Area?

 I personally, as well as UNCTAD, see the AfCFTA as a game changer, the game changer that Africa has needed for a while and one that has taken a long time to come to fruition. It is a game changer in terms of unlocking the potential of trade to have a positive impact on the lives of people in Africa.

 Intra-African trade is currently at 15%, and if this is compared to other continental arrangements or other regional groupings, we see that Africa has a lot of potential.-+ Asia is at 61%, Europe at 67% and the Americas are at about 47%. 15% is still better than where we were in 2010, which was 10%. So, there has been an increase in spite of the barriers, but we still see the remaining 85% as a huge opportunity not only to strengthen trade within Africa, but also to use that as a base for more integration into the global trading system.  

 Intra-African trade is low because of the tariff walls across the continent. You find average tariffs around 0% in the East African Community  (EAC), which is really the jewel in the crown in sub regional integration in Africa. Then you see other areas, such as Central Africa where the averages are more like 6%. And remember, these are just the averages. Largely you see a story of high tariff walls, peaks, potential for escalation and so on. What this means is that it is easier for African countries to trade where they have zero rated duties.

 The picture of intra-African trade, when you deconstruct it, is that there is a lot more within the sub regions, such as the EAC, the Southern African Development Community (SADC) and the Economic Community of West African States (ECOWAS). These sub regions have already taken active roles in trying to break down barriers to trade.

 The AfCFTA is coming in as an instrument, almost like a development blueprint on trade integration, that aims to deal with this particular challenge not only by bringing down tariffs, but also other discriminatory tools, such as regulations.

 What this means is that you are looking at the opportunity to increase trade by 33% within this market of1.3 billion people with a $3.4 trillion GDP. So there is a possibility to bring trade back to the people as a tool for economic development. We are really looking at jobs, technology, economic growth,  empowerment and people having money in their pockets to create empowerment for themselves in a sustainable way. We are really looking at a way to create decent lives out of trade.

 It is important to underline that the nature of intra-African trade is different to Africa’s trade with the rest of the world. What Africa sends to the rest of the world is typically low value, low volume raw materials, mostly commodities. When you look at intra-African trade, it is 46% manufactured goods. This is a positive story because it tells us that it is possible for Africa to transform, to industrialise and to export services. Once you add more value to the process, you are creating higher quality jobs and more sophistication.

What needs to be done to bring AfCFTA into operation?  How is progress going in terms of moving toward harmonisation?

 There is an impressive record of how quickly things have moved so far, from the time we officially started the negotiations to the Kigali adoption of the Agreement establishing the AfCFTA. There is a lot of momentum. I would categorise what is left to do to bring it into full operation into three pillars: first, concluding the negotiations, the second is setting up the institutional arrangements and the third is ramping up the productive capacity.

 With regard to the negotiations, there needs to be meat put on the bones, to see how countries transform their tariff structure and services regulations into preferential treatment thanks to the AfCFTA. Members are now involved in the process of seeing what it is they are going to give each other.

 For the trade in goods, there is an initial agreement that 90% would be zero for zero at the start of implementation.. The AfCFTA is a free trade area with a large number of LDCs who are yet to kick start their industrialisation process and there is, therefore, a need to have flexibility. It was agreed that they could have another 7% (sensitive products) that would be phased in a much slower pace – after 10 years for developing countries and 13 years for least developed countries (LDCs). This would be for infant industries and the guidelines on this are still to be worked out. This gives countries space to adjust to the domestic growth ambitions of infant industries.

 In terms of scheduling, the dismantling of tariffs is due to start in July 2020 (for goods). For services, there are five priority sectors: transport, tourism, communication, business services and financial services. From February 2020, countries will be deciding what preferential treatment they are going to give each other in these sectors. In other words, they will be exchanging offers. The building on the legislation of the Regional Economic Communities (RECs) is also important.  

 The other pillar of work I would like to stress is the institutional arrangements. It has been announced that the secretariat will be housed in Accra, Ghana. What is important now is to establish it. The treaty has details in terms of how this is to be done. The Council of Ministers of Trade is to delineate the scope and the roles and functions of the secretariat. The African Union would then get into recruiting the body of people to get the secretariat functional. The secretariat is critical as it is going to be responsible for servicing the implementation of the agreement.

 The third pillar is countries getting ready to utilise the opportunities of zero rated tariffs thanks to the AfCFTA. This will allow the agreement to really be a game changer. What are the countries national strategies? What are the regional value chains? What are the clusters that countries want to focus on? This is where broader considerations of trade related infrastructure would come in as well. It is basically promoting readiness for the AfCFTA. There is a lot of awareness raising, so that businesses can understand the new possibilities.

 The final point is that it is critical to ensure there is a proper nexus between what has happened with the AfCFTA and investment to support the development of productive capacity, to strengthen entrepreneurial capacity and to do the whole linkage of production, trade and industry – it could be the rebirth of industrialisation policy.

 Are there concerns that the AfCFTA could benefit some more than others, and what can be done to ensure benefits are spread across the continent?

 As mentioned, Africa is predominantly an LDCs continent. Therefore, finding a way to allow for trade liberalisation while giving countries the space to pursue industrial trade development policy is important. So, arrangements have been made in a way that can cushion some of the initial shocks that come with opening up markets. The allowances for LDCs as set out earlier are the key way the AfCFTA Agreement does this.

 Another point is that phase two of the negotiations, which has not yet started will deal with issues to do with balancing out how the market plays out, i.e. competition, investment and intellectual property. At the moment one of our team, an expert in non-tariff barriers, is travelling around African capitals explaining to businesses how to identify non-tariff barriers and how to report them.  

Interview conducted by Amy Wevill

Photography by Vianney Le Caer