South Africa: The African Single Market Takes A Step Forward As The African Continental Free Trade Area Agreement Becomes A Reality

Gambia paves the way for the entry into force of the largest free trade zone in the world. On 2 April 2019, Gambia became the 22nd country to ratify the African Continental Free Trade Area ("AfCFTA") Agreement, which is now poised to enter into force.

The AfCFTA is a big step towards the dream of economic unity across Africa, and the fact that it has moved towards entry into force in a relatively short time period shows the dynamic of goodwill for such measures across Africa. However, it is just one part of the process. We look briefly below at the process of trade reforms that has now begun with the Treaty (2) as well as the way forward, with the potentially thorny issues of competition, intellectual property and in particular the possibility for investors to enforce their rights under the treaty – which alone has already provoked much discussion – still to be negotiated (3).

Key changes:  the AfCFTA Agreement has begun the creation of the African single continental market 

The AfCFTA Agreement consists of four main sets of rules aimed at enabling the creation of a single continental market for Africa: 

  • An overarching agreement that sets out the AfCFTA's institutional structure. It provides, inter alia, that the AfCFTA will be administered by four bodies, namely: (1) the Assembly (which will have the exclusive authority to interpret the AfCFTA Agreement); (2) the Council of Ministers (which will be responsible for the effective implementation and enforcement of the AfCFTA Agreement); (3) the Committee of Senior Trade Officials (which will consist of permanent officials responsible for the monitoring of the AfCFTA); and (4) the Secretariat (whose role and responsibilities remain to be defined by the Council of Ministers). 
  • A Protocol on Trade in Goods that sets out the party states' general obligations, inter alia, with regard to: (1) the most-favoured nation principle (which prevents parties from discriminating between each other's goods); (2) the national treatment principle (which prevents parties from discriminating between domestically-produced and imported goods); (3) the reduction/elimination of import tariffs (which remain to be negotiated); (4) the elimination of quantitative restrictions (e.g., import prohibitions/restrictions); or (5) trade remedies (i.e., anti-dumping, countervailing and safeguard measures). 
  • A Protocol on Trade in Services that sets out the parties obligations, inter alia, with regard to: (1) mutual recognition of domestic standards/requirements; (2) the definition of domestic regulations affecting trade in services; (3) monopolies an exclusive service suppliers; or (4) specific commitments (which remain to be negotiated).  
  • A Protocol on the rules and procedures for the settlement of disputes that provides for a dispute settlement mechanism similar to the WTO's dispute settlement body. The dispute settlement mechanism consists of the following: (1) a dispute settlement body (which will establish the relevant panels and appellate body, adopt panel and appellate body reports and authorise the suspension of concessions and other obligations under the AfCFTA Agreement); (2) dispute settlement panels (which will be responsible for dealing with disputes in first instance); and (3) an appellate body (which will be responsible for dealing with appeals against panel decisions). 

In this way, the Treaty acts as a basis for the development of free trade across Africa. The authoritative bodies are put in place, general principles are enshrined and there is even the possibility for party states to bring disputes against each other and enforce these rules. This is still the beginning though, and as well as more detailed, specific rules, the state parties will need to discuss how investors themselves are protected.

What's next? Specific trade rules and investor protection provisions 

As a first step, negotiators still need to agree on three key aspects of the AfCFTA Agreement, namely: (1) the parties' market access offers (i.e., import tariff commitments) which are expected to be finalised by January 2020 (it is worth noting that the parties have already agreed to liberalise 97% of tariff lines accounting for at least 90% of trade within the AfCFTA); (2) applicable rules of origin (setting out the conditions under which goods can benefit from preferential market access under the AfCFTA Agreement) which are expected to be finalised by June 2019; and (3) the parties' specific commitments in trade in services (setting out the services sectors that the parties are willing to liberalise) which are expected to be finalised by January 2020.    

As a second step, negotiators will then focus on rules pertaining to intellectual property rights, competition policy and investment, which they aim to finalise by June 2020. 

A further area to be dealt with, which has already provoked much discussion, is that of investment protection, including a potential provision for investor-state dispute settlement. This will be addressed in Phase II of negotiations. African Union ministers have agreed a deadline for completing these negotiations by June 2020. While this leaves more than a year until the investment community is presented with the final instrument, more information on the terms of the Investment Protocol is expected soon, notably by means of a Terms of Reference document, announced for Spring 2019.

The investor protection provisions receive particular attention, as the African continent has often been seen as being on the receiving end of investment arbitration decisions, with the benefits to African states or investors more difficult to identify. Linked to this view, recent investment treaties have sometimes sought more of a balance in terms of placing obligations on investors as well as states. Africa has often been seen as leading the way in this respect, with examples seen in certain provisions in African regional treaties, such as the COMESA Treaty covering states in Eastern and Southern Africa, the Pan African Investment Code and also certain recent intra-African bilateral treaties.

The AfCFTA Investment Protocol may continue this balancing trend, as would suggest the fact that figures within the African Union have cited the Pan African Investment Code, which includes such provisions, as a key guiding text. The aim would be to seek a compromise between encouraging investment by creating a stable legal and economic environment while also reflecting Member States' concerns regarding the wide scope of investors and investments that are protected. This could take the form, for example, of substantive obligations on investors or potentially overt recognition of states' rights to regulate in certain defined areas. It is not even certain at this stage whether investors will have access to international arbitration in the traditional sense, and if they do, there could in any case be limitations on the right to start such disputes. Another interesting issue is the extent to which the AfCFTA Investment Protocol may lean towards African dispute resolution institutions (rather than the traditional international fora), as arbitration as a method of dispute resolution continues to grow on the continent. These issues all currently remain the subject of negotiations. 

A step for Gambia, a leap for international trade?

Gambia's ratification represents a historic step for African continental integration. The AfCFTA aims to bring together 54 African countries with a combined population of more than one billion people and a combined gross domestic product of more than US $3.4 trillion. The process of implementation will soon begin – but a huge amount of work remains, both in terms of building the institutions and processes already set out in the AfCFTA Agreement, and negotiating the further (and potentially controversial) provisions on competition, IP and investment protection. Navigating this difficult road will undoubtedly take significant time, resources and the strong will of member states – but the end goal is a huge leap for intra-African trade which could have a knock on effect globally.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
 
Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Related Topics
 
Related Articles
 
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Mondaq Free Registration
Gain access to Mondaq global archive of over 375,000 articles covering 200 countries with a personalised News Alert and automatic login on this device.
Mondaq News Alert (some suggested topics and region)
Select Topics
Registration (please scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions