Investors looking to invest in Africa will find that there are less options in 2021. A sizable number of African governments have realised that the in-country weak investment situation will not change if there are no drastic changes to policy. In 2019, 99% of African states signed up to the African Continental Free Trade Agreement (AfCFTA) with the purpose of improving trade within the African continent. We predict that AfCFTA will fail dismally due to the following reasons:
- Most African governments were not interested in implementing AfCFTA as they still believe they are better off trading with Europe and Asia.
- The reason AfCFTA has become mainstream in Africa 2021 is, Covid-19 has wreaked havoc and exposed badly managed African countries.
- AfCFTA is the only policy that can be sold to specific African constituencies which already know that their governments are failing.
When it comes to implementing such a large move in policy at a regional scale, it takes objective intent and subjective support to see this through, just like what was expected in the creation of the EU bloc in 1951. African governments are for many reasons, not in a position to take this policy forward with the exception of trade which has some partially accepted points as discussed below:
Tariff structure – Most African governments have agreed to a 90% basket of goods for free movement and 10% of sensitive products will eventually have free movement in the long term (we estimate that to be at least 10 years).
Rules of Origins – Specific details relating to rules of origins have not been concluded and many African countries still need to submit their proposals of product-specific rules of origin. The rules of origin will also be unpacked with respect to goods obtained from Special Economic Zones.
Dispute settlement – African countries are still in the process of agreeing on the home base for dispute settlement. This will be important in the success of AfCFTA in attracting African companies to make use of free trade to do business within the African continent.
Secretariat – Rwanda has played a key role in ensuring that the AfCFTA has structure, lobbying for African countries to agree to a certain budget, the location/country that will manage the administration and the management organogram of the AfCFTA Secretariat. The AfCFTA Secretariat has since been agreed to be located in Accra, Ghana. However, all African countries still have to agree on the implementation of structure, budget and management.