AfCFTA Structure, Pillars & Protocols

AfCFTA Structure, Pillars & Protocols

The African Continental Free Trade Area (AfCFTA) represents a transformative milestone in Africa’s quest for economic integration and prosperity. Launched on January 1, 2021, after being signed in Kigali, Rwanda, on March 21, 2018, the AfCFTA is the world’s largest free trade area by the number of participating countries, encompassing 54 of the 55 African Union (AU) member states, with Eritrea as the only non-signatory. With a combined population of 1.3 billion and a GDP of approximately $3.4 trillion, the agreement seeks to create a single market for goods and services, fostering intra-African trade and positioning the continent as a formidable player in global commerce. This article explores the structure, pillars, and protocols of the AfCFTA, evaluates its benefits and implementation challenges, and maps the role of Africa’s Regional Economic Communities (RECs) in advancing intra-African trade integration.

AfCFTA’s Structure, Pillars, and Protocols

The AfCFTA is designed as a comprehensive framework to enhance economic integration by reducing trade barriers and harmonizing policies across the continent. Its structure is built on several key pillars and protocols, each addressing critical aspects of trade and economic cooperation.

Structure and Pillars

The AfCFTA operates under the African Union’s Agenda 2063, a strategic framework for inclusive and sustainable socio-economic development. Its institutional structure includes:

• The Assembly of Heads of State and Government: The highest decision-making body, providing strategic direction.
• The Council of Ministers is responsible for trade-related policy decisions and implementation oversight.
• The AfCFTA Secretariat: Based in Accra, Ghana, it manages day-to-day operations, supports negotiations, and facilitates dispute resolution.
• The Committee of Senior Trade Officials: Provides technical expertise and monitors implementation progress.

The agreement is built on three core pillars:

• Trade in Goods: Focuses on eliminating tariffs and non-tariff barriers to boost intra-African trade, particularly in value-added products.
• Trade in Services: Aims to liberalize service sectors like finance, transport, and digital trade to enhance efficiency and investment opportunities.
• Dispute Settlement Mechanism: Ensures compliance and enforcement through a structured process to resolve trade disputes.

Protocols

The AfCFTA agreement is supported by several protocols, each addressing specific trade dimensions:

• Protocol on Trade in Goods: Outlines the elimination of tariffs on 97% of goods over 15 years, with special considerations for least developed countries. It includes provisions for rules of origin to determine product eligibility for duty-free trade.
• Protocol on Trade in Services: Covers liberalization in priority sectors, promoting cross-border service delivery.
• Protocol on Rules and Procedures for Dispute Settlement: Establishes a mechanism to enforce commitments and resolve conflicts.
• Protocol on Investment: Encourages intra-African investment to support industrial development and economic diversification.

• Protocol on Intellectual Property Rights: Protects innovations and fosters technology transfer.
• Protocol on Competition Policy: Addresses anti-competitive practices to ensure fair market access.
• Protocol on Digital Trade: Promotes e-commerce and digital infrastructure to enhance trade efficiency.
• Protocol on Women and Youth in Trade: Aims to ensure inclusive participation, addressing gender and youth empowerment.

Additional protocols, such as those on e-commerce and the free movement of persons, are under negotiation to further deepen integration. Operational tools like the Pan-African Payments and Settlement System (PAPSS), developed with Afreximbank, facilitate cross-border payments, while the African Trade Observatory monitors trade data to support policy decisions. An online mechanism for reporting and eliminating non-tariff barriers (NTBs) enhances trade facilitation by addressing issues like customs delays.

Benefits of AfCFTA Implementation

The AfCFTA holds immense potential to transform Africa’s economic landscape. Key benefits include:

• Economic Growth and Poverty Reduction: The World Bank estimates that full implementation could increase Africa’s income by $450 billion by 2035, lifting 50 million people out of extreme poverty and raising incomes for 68 million others living on less than $5.50 per day.
• Boost in Intra-African Trade: The United Nations Economic Commission for Africa (UNECA) projects a 52.3% increase in intra-African trade by eliminating import duties, potentially doubling if NTBs are reduced. Intra-African exports could rise by 109%, led by manufactured goods.
• Industrialization and Diversification: By fostering regional value chains, the AfCFTA encourages commodity-based industrialization, shifting economies from raw material exports to value-added manufacturing. For example, countries like Zambia could move from exporting raw lithium to producing lithium batteries.
• Investment Attraction: The agreement signals to investors that Africa is open for business, potentially increasing foreign direct investment (FDI) by 111–159%. This brings jobs, expertise, and integration into global value chains.

• Job Creation and Gender Equity: The AfCFTA is expected to create higher-paying, better-quality jobs, with women seeing wage gains of 11.2% compared to 9.8% for men by 2035. The Protocol on Women and Youth in Trade ensures inclusive opportunities.

• Resilience to Global Shocks: By increasing intra-African trade, currently at 15% compared to 58% in Asia and 67% in Europe, the AfCFTA reduces reliance on external markets, enhancing resilience against global volatility.

Challenges of AfCFTA Implementation

Despite its promise, the AfCFTA faces significant hurdles:

• Infrastructure Deficits: Inadequate transport, logistics, and digital infrastructure increase trade costs. Upgrading 60,000 km of critical road links could cost $24 billion, while annual infrastructure funding gaps range from $68–108 billion.

• Non-Tariff Barriers: High NTBs, equivalent to an 18% import tariff, persist due to inefficient customs, border delays, and regulatory differences.

• Overlapping REC Memberships: Multiple memberships in RECs create inconsistencies, complicating harmonization efforts.

• Security and Political Instability: Conflicts, such as those in the Sahel and Lake Chad Basin, disrupt trade routes and increase logistics costs.
• Limited Domestic Capacity: Small domestic markets and supply-side constraints, particularly for micro, small, and medium-sized enterprises (MSMEs), limit competitiveness. MSMEs account for 80% of production but face challenges navigating complex trade rules.

• National Interests vs. Continental Goals: Countries like South Africa prioritize protecting their regional trade dominance, slowing negotiations on issues like rules of origin for textiles.

• Funding and External Reliance: Low tax-to-GDP ratios (16% vs. 34% globally) and dependence on external funding raise sustainability concerns.

Conclusion

The AfCFTA is a beacon of hope for Africa’s economic transformation, with the potential to boost intra-African trade, reduce poverty, and foster industrialization. Its structure, supported by key pillars and protocols, provides a robust framework for integration. However, challenges such as infrastructure deficits, NTBs, and political complexities require strategic interventions. RECs are critical in bridging national and continental aspirations, but harmonizing their efforts remains essential. By investing in infrastructure, promoting inclusive policies, and fostering collaboration, Africa can realize the AfCFTA’s vision of a prosperous, integrated continent. As the AU’s Agenda 2063 emphasizes, the journey to a single African market is a collective endeavor that demands commitment, innovation, and resilience.

Ambassador Salim Kim Walusimbi is an AfCFTA Trade Advisor, Trade Diplomat and a thought leader on Trade policy and Diplomacy, African economic integration and sustainable trade.