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New UNECA report shows that complying with rules-of-origin requirements is the aspect that firms consider as the most restrictive on African trade

The Africa Country Business Index (ACBI) is a tool that describes how businesses based in Africa and/or trading/investing across African countries perceive trade under the Free Trade Agreements that are already in force across African countries, including the African Continental Free Trade Area (AfCFTA). Differently from other integration indices, the ACBI is informed entirely by private-sector perceptions, built through online surveys and telephonic and face-to-face interviews. Launched by the United Nations Economic Commission for Africa (UNECA) in 2018, the Index targets three groups of countries, corresponding to the 3 phases of its implementation. Phase 1 covered Cameroon and Zambia, while phase 2 expanded the analysis to additional seven countries, namely: Angola, Côte d’Ivoire, Gabon, Kenya, Namibia, Nigeria and South Africa, all nations that have already signed, ratified and deposited their instrument of ratification for the AfCFTA. In the third phase, the Index will be rolled out in the Democratic Republic of the Congo, Egypt, Morocco, Rwanda, Senegal and Tunisia.

In February 2022, UNECA revealed the summary results of the phase-2 countries assessment, by analysing 3 main trade-related dimensions, further divided in sub-dimensions (see the table hereunder):

A new version of the executive summary of the ACBI has now been made available that further articulates the key policy recommendations already formulated in the February 2022 version of the Index, in view of better addressing the problems related to the implementation of the AfCFTA (a version in French is also available here).

The key lessons that can be drawn from the April 2022 version of the Index are that in order to fully benefit from the AfCFTA, businesses need to be supported in identifying strategic interests and market opportunities. AfCFTA national implementation strategies are key in such a purpose, even though African nations are still lagging behind in their adoption and publication. Moreover, further work needs to be done to remove tariff and non-tariff barriers (especially for what regards unauthorized charges and other charges on trade), as well as to improve customs procedures and remove additional fees, all areas where surveyed firms appear to have particularly negative perceptions. In particular, unauthorized charges refers to bribery and corruption at a country’s border posts or along transport routes, while “other charges on trade” refers to additional customs, border and product surcharges; price controls; reference prices; additional variable charges on goods; statistical taxes; and import licence fees, which are perceived among the measures that most restrict trade.

The Index also shows that the perception on difficulties in intra-African trade is different between small and medium-sized enterprises on one hand, and large businesses on the other. Surprisingly, these perceptions are more positive for small and medium-sized enterprises than large businesses in most pillars, including customs administration, technical barriers to trade, sanitary and phytosanitary measures, and specific limitations on trade. Similarly, there is a clear distinction in perceptions between men-owned and women-owned businesses, with the latter finding trading across borders more challenging. The report concludes by inviting African countries to design specific policy responses to support the gender-inclusive implementation of the Area. Specifically, African policymakers should give special attention to addressing the challenges faced by women-owned businesses in trading across borders, trying to guide them in better understanding customs tariffs and customs procedures.

For what concerns the awareness and use of free trade agreements, the report shows that only 64 per cent of firms across all phase-2 countries are aware of their country’s participation in the AfCFTA. This suggests that more needs to be done at the country and subregional levels to raise awareness of the Area and its mechanisms of operation, as well as to inform businesses of its potential benefits. This can be achieved through deeper engagement with the private sector and business associations when country and regional implementation strategies are developed and, subsequently, through wider dissemination of the strategies once they have been developed to create the necessary incentives for businesses. Another important measure is for countries to develop a national communication strategy for the AfCFTA development avenues as part of their investment promotion policies to support the Area and in line with the African Union’ Agenda 2063.

Complying with the rules-of-origin requirements of a free trade agreement remains the aspect that firms consider as the most restrictive on trade. Indeed, the excessive complication of such rules makes it hard and expensive for the private sector to conform to them, especially informal traders and women-owned businesses, who need simplified procedures and certificates to be implemented at border-crossing points, similar to what COMESA, EAC and SADC have done with their respective Simplified Trade Regimes (although the SADC-STR is not yet implemented in the region). In this regard, already the UNCTAD Economic Development in Africa Report 2019 noted that rules of origin could be a game changer for the continent as long as they are simple, transparent, business friendly and predictable, inviting the African Union institutions to consider the adoption of a Continental simplified trade regime for shipments valued below a given threshold, to ensure that the outcome of the Continental Free Trade Area is as inclusive as possible.

The conclusion is that for business to benefit from AfCFTA, there is need for a flexible, clear predictable rules of origin. Access to information on rules of origin is also reported as challenging, which also suggest the opportunity to develop further tools for guiding traders in understanding and fulfilling these rules. A model, for instance, could be the International Trade Centre (ITC) Rules of Origin Facilitator or, looking more closely at the African context, the COMESA/EAC/SADC Tripartite Rules of Origin Database.

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