4 - The African Landscape: The Road to the African Continental Free Trade Area

Summary

On 30 May 2019, the African Continental Free Trade Area (“AfCFTA” or the “Agreement”) officially entered into force. According to the United Nations Economic Commission for Africa, the AfCFTA will cover a market of 1.2 billion people and a gross domestic product (GDP) of USD 2.5 trillion. The massive economic integration of 53 countries has been predicted to generate as much as USD 35 billion in increased trade between African countries. The AfCFTA will allow African nations to capitalise and build on their collective strengths, by breaking down barriers to the movement of goods, services, people, capital and ideas. This alone is expected to increase the bargaining powers of African nations. At the same time, the Agreement is likely to encourage foreign entry into the continent, by creating a single, more attractive, market. This chapter looks a bit closer at this Agreement, with a particular focus on the dispute settlement mechanisms that exist thereunder.

The African Union, in 2015, fast-tracked the AfCFTA by putting negotiation of the Agreement at the top of its priorities for the continent. This followed the initial introduction of the idea at the 18th Ordinary Session of the Assembly of Heads of State and Government of the African Union, held in January 2012. During this meeting, a decision to establish a continental free trade area was adopted, putting in motion the negotiation process for this continental document. In an action plan adopted in 2014, titled “Action Plan for Boosting Intra-African Trade and Fast-Tracking the Establishment of a Pan-African Free Trade Area”, the African Union expressed concern over Africa’s inability to use trade to create sustainable economic growth. The plan states that, “[t]he failure of African trade to serve as a catalyst for sustainable economic growth and poverty alleviation stems partly from its three interrelated basic features: size, structure and direction”. The African Union noted that Africa’s share of global trade was insignificant, at only 3%. At the same time, trade was heavily concentrated on primary commodities that have slow growth and high price instability. Finally, and perhaps most notably, it referenced the fact that the overwhelming majority of African trade was external, with only 10% of trade on the continent being intra-African.