What’s Next: Managing Expectations and Exercising Due Diligence

The effects of the AfCFTA will not be immediate, as each individual region and member state is responsible for managing the 10-year transition towards a tariff reduction of 90%. This timescale has been put in place to allow local governments and regional bodies to resolve the ongoing legal hurdles surrounding trade on the continent. One such problem is overlapping regional economic community (REC) memberships. The Democratic Republic of the Congo, for example, belongs to the Southern African Development Community (SADC), the Economic Community of the Great Lake Countries, and the Economic and Monetary Community of Central Africa. Overlapping regional jurisdictions were previously advantageous for states as they sought to maximise their individual gain but now present a bureaucratic quagmire for the AfCFTA, which operates on a regional basis through local customs unions.

Although all African countries have moved forward on their assent to the AfCFTA, many have not yet approved the resulting changes to the functioning of their local customs union. In practical terms, this means that a company based in South Africa might not be able to participate in the benefits of free trade until Botswana, which has agreed to the AfCFTA, also finalises the process of assenting to the changes. The rate at which governments address these problems will be influenced by local policy priorities, which considering the current financial uncertainty across the globe, may mean first safeguarding key national resources to secure revenue collection. Investors are advised to always confirm the present status of their respective customs union and the host country’s progress on tariff reduction before directing capital toward cost-sensitive projects. Outside expertise can ensure compliance with local revenue authorities, as well as confirmation that organisations can benefit from reduced import tariffs and certificates of origin for cheaper exports.

The opening ceremony of the 38th SADC Summit in Namibia in 2018. RECs like the SADC are a key building block through which the AfCFTA will be implemented. Image courtesy: Paul Kagame/Flickr