The African Continental Free Trade Area (AfCFTA) Secretariat has launched the AfCFTA Guided Trade Initiative (GTI). The launch of the GTI is a significant milestone that marks the commencement of 'commercially meaningful' trade in terms of the AfCFTA agreement.
The AfCFTA is the world’s largest free trade area bringing together the 55 countries of the African Union and eight Regional Economic Communities. The purpose of the AfCFTA is to create a single market for the continent by enabling the free flow of goods and services across the continent and boosting the trading position of Africa in the global market. The AfCFTA is expected to expand the size of Africa’s economy to USD29 trillion by 2050.
There have been many delays in implementing the AfCFTA including the Covid-19 pandemic, prolonged and complex negotiations, administrative issues and the overlap with existing RECs and customs unions. However, despite numerous challenges, the GTI is a positive and pragmatic step in taking the implementation process forward.
What is the GTI?
The GTI seeks to allow commercially meaningful trade and will test the operational, institutional, legal and trade policy environment under the AfCFTA. The GTI is an important opportunity to assess the effectiveness of the mechanisms that have been put in place and address any teething issues that may arise. Currently, eight countries are participating in the GTI - Cameroon, Ghana, Egypt, Kenya, Mauritius, Tanzania, Tunisia and Rwanda. The participating countries have all met the minimum requirements and deployed the AfCFTA E-Tariff Book and the Rules of Origin Manual.
When did the GTI commence and what goods does it cover?
The GTI was launched on 7 October 2022. The products earmarked to trade under the GTI include ceramic tiles; batteries, tea, coffee, processed meat products, corn starch, sugar, pasta, glucose syrup, dried fruits, and sisal fibre, amongst others, in line with the AfCFTA focus on value chain development. So far, Kenya has shipped its first batch of batteries and tea to Ghana, and Rwanda has exported coffee products to Ghana.
How will the GTI work and what is the impact for businesses trading in Africa?
The GTI will guide pre-selected shipments of goods through customs clearance, including reduced tariff treatment under the AfCFTA in the receiving AfCFTA countries.
Based on feedback in the market, many businesses are eager to monitor the outcomes of the GTI. Businesses are looking to take advantage of the AfCFTA to facilitate trade – in some instances, between countries that have not traded with each other before. Businesses are particularly encouraged by the offer of preferential / reduced tariff rates and the eventual possibility of zero tariffs. The GTI has also underscored the importance of political will and a broader ecosystem of stakeholders to drive the implementation of the AFCFTA forward. Many countries are looking to enhance their competitiveness by increasing investment promotion incentives driven by increased manufacturing and trade.
Watch the below video where a team of renowned panellists discussed how making a success of the AfCFTA will not only require a focus on trade facilitation, but also investments by governments and the private sector to open up the vast continental market of approximately 1.4 billion (mostly young) people. This discussion took place with Webber Wentzel, in partnership with Invest Africa.