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African common market plan faces challenges

Publish date: 09 September 2019
Issue Number: 840
Diary: IBA Legalbrief Africa
Category: Trade

The African continental free-trade agreement (AfCFTA) is facing several challenges and it could be decades before there is a common market in which tariffs are largely abolished. A Business Day report says the challenges include infrastructure constraints and disputes between countries, and between governments and companies. These must be overcome to ensure the free movement of goods, services and eventually capital and people. The Trade Law Centre says the agreement will bring together all 55 member states of the AU, covering a market of 1.2bn people and a combined GDP of $3.4trn. Eritrea is the only country that has not signed the agreement. Trading under the agreement will begin in July 2020. Speaking at the annual tax indaba in Sandton, Old Mutual’s Sayuri Moodliar said the EU has the Rolls-Royce of trade agreements. It took almost half-a-century before the EU established a single market with harmonised laws that did not conflict with the agreement. However, the intent with the AfCFTA is not to have a single market in which domestic legislation is harmonised, Moodliar said. ‘What we are trying to achieve in Africa is to facilitate easier trade between the member countries. The initial issues will be around reducing or abolishing tariffs and getting the free movement of services and goods, and ultimately people and capital. Each will pose its own challenges.’ Bowmans’ Julia Choate said the Southern African Customs Union (Sacu) presents a ‘regional snapshot’ of the opportunities and challenges that a continental free-trade area might face. Any common market area has to deal effectively with contraventions of the agreement, Choate said. In the Sacu agreement, the revenue-sharing formula seems to present ‘challenges’ in this regard.

Full Business Day report