COVER PHOTO CREDITS: GIZ
Kigen Kiplimo, conducted an interview with Ms. Rose Ronoh, Director of Trade Facilitation at Kenya Trade Network Agency (KenTrade) regarding the future of East African Community (EAC) under the African Continental Free Trade Area (AfCFTA). As of January 1, 2020: 54 countries had ratified the agreement; 34 countries had deposited instruments of ratification; and 41 countries had submitted tariff offers.
AfCFTA is an economic cooperation founded in 2018, with trade commencing as of January 1, 2020. It seeks to create a single continent-wide market for goods and services and to promote the movement of capital and natural persons. AfCFTA is expected to boost intra-African trade as well as Africa trading position in the global market.
KIGEN KIPLIMO: Why is Intra-African trade important?
ROSE RONOH: Intra-African trade currently stands at around 13% of Africa’s trade while intra-European Union (EU) trade is at 60%. This shows that there is a gap and thus a potential that needs tapping. Additionally, many African countries are dependent on foreign aid and debt. Intra-African trade therefore provides an alternative by boosting trade, leading to increased government revenues and jobs.
KIPLIMO: How will AfCFTA affect the EAC? Will it undermine regional integration efforts?
RONOH: It will not affect much. AfCFTA builds on regional blocks like the EAC. If the regional blocks are more advanced in terms of custom union, the better. Africa Regional Integration Index (ARII) in 2020 ranked the EAC as the most integrated regional block in Africa. Therefore, I see no reason why AfCFTA would want to undermine the EAC.
KIPLIMO: There is anxiety in various quarters over the Kenya-USA free trade agreement by some EAC member states. With commitments to the AfCFTA will Kenya or any other EAC member state still be at liberty to enter into such agreements?
RONOH: Firstly, Kenya is a sovereign state and so are the other EAC member states. However, if any of the EAC member states feel that the KE-US free trade agreement is contravening the EAC agreement, they have every right to go to court. Notably, Kenya has extended an invitation to other EAC member states to be party to the US-KE free trade agreement.
KIPLIMO: Many African countries are dependent on primary goods. Economists argue that free trade areas lead to specialization due to competition. How will AfCFTA enhance structural transformation?
RONOH: AfCFTA is supported by the African Union which has various infrastructural programs to boost structural transformation. Furthermore, under AfCFTA, foreign investors will find it cheaper to set up industries in African countries then export to other African countries as opposed to exporting directly from their countries. This will increase the foreign direct investments for building industries as well as transfer of technology.
KIPLIMO: SMEs account for 80% of the continent’s business. Unlike multinational companies, SMEs lack the capacity to trade beyond borders. How will AfCFTA ensure that SMEs benefit?
RONOH: This is proving to be a challenge in many countries. There are various organizations that are carrying out different programs with the aim of enabling SMEs exploit this great opportunity. In Kenya we have the Micro and Small Enterprise Authority (MSEA). Continentally, there is the Nigerian based, Tony Elumelu foundation just to mention but a few.
Currently, I am working with the International Trade Centre (ITC) to develop a curriculum that will be used for capacity building and development of SMEs to enable them to benefit from AfCFTA.
Additionally, SMEs need to believe in their abilities and potential. They should not just think of themselves as small businesses rather as big businesses in progress.
KIPLIMO: How does a lady making sandals in Kariokor (A small-scale traders’ market in downtown Nairobi) know that she now has an opportunity under AfCFTA to export her sandals to Senegal or Botswana duty free?
RONOH: The implementation of AfCFTA majorly rests on the members. They need to sensitize their citizens on what AfCFTA is and how they can benefit from it. Recently, AfCFTA’s Secretary General, Mr. Wamkele Mene was in Kenya and met with President Uhuru Kenyatta where the President committed to a full implementation of the free trade area. Such commitments by heads of state are vital for the success of AfCFTA.
KIPLIMO: When do we expect to see tangible impacts from the implementation of AfCFTA?
RONOH: 2 years. AfCFTA is still at the policy stage. The fruits are not instantaneous. The EU for example took 5 to 10 years to yield results.
KIPLIMO: Some African countries are miles ahead of others in terms of economic development. How will AfCFTA ensure that the vulnerable countries will not be exposed therefore losing instead of gaining from AfCFTA?
RONOH: AfCFTA offers a lee way for such countries. There are seven countries that have requested to protect a higher percentage of their trade compared to what AfCFTA requires. Additionally, countries can utilize their comparative advantages where they produce more of what they can deliver cheapest and most efficiently.
However, there are countries that are experiencing conflict. In as much as I wish that they could get on board as quick as possible; the agreement must go on. Hopefully, if these countries see how their counterparts are moving forward, it may serve as motivation for them to resolve the internal conflicts and focus on trade.
KIPLIMO: I gather that AfCFTA is asking for a bigger percentage of a country’s trade than the EU does. How much trade do you deem substantive enough for a country to open?
RONOH: It varies from country to country. Some open their trade more than others while some open different sectors of their economies more than others. Under AfCFTA countries can spare 10% of their trade. They themselves choose which sector(s) to spare in the 10%.
KIPLIMO: As a Kenyan, which sector would you recommend that Kenya spares in the 10% and why?
RONOH: Agriculture. It contributes the highest to Kenya’s GDP. Majority of Kenyans depend on agriculture directly or indirectly for their income.
KIPLIMO: Does AfCFTA have the capacity to monitor what is now the biggest free trade area in the world (by number of countries) when it comes to rules of origin, trade protectionism among many other possible contraventions?
RONOH: AfCFTA started with a staff of 70 but it is building capacity as time goes by. The members also have a responsibility to watch out for contraventions by other members. Moreover, in the case of disputes, AfCFTA has established a dispute resolution mechanism to address disputes among members.
KIPLIMO: On a scale of zero to ten (0 being very poor and 10 being excellent), rate the seriousness of African countries towards regional integration.
RONOH: I would say five, but I must state that this is an intelligent guess. Some countries are committed to regional integration while others are quite the opposite.
Kigen Kiplimo is a Communication, Campaigns and Outreach intern at the East African Tax and Governance Network (EATGN) and can be reached on Email at: kkiplimo@taxjusticeafrica.net
