In order to maintain territorial integrity, countries regulate the entry of aliens, foreign goods, services and investments into their territories. Free flow across borders is only possible if there is agreement amongst countries.

Such agreements are bilateral if only two countries agree between themselves or multilateral when several countries, regions or continents come into agreement. The African Continental Free Trade Agreement (AfCFTA) is an example of a multilateral free trade agreement.

The decision to establish the African Continental Free Trade Area (AfCFTA) was taken by African Heads of State during the 18th ordinary session of African Union (AU), held in Addis Ababa, Ethiopia in January 2012. The eventual agreement establishing AfCFTA was signed by African Heads of State in Kigali, Rwanda on 21st March 2018.

The agreement is a clear, transparent, predictable and mutually advantageous rule among state parties for resolving the challenges of multiple and overlapping trade regimes, in order to achieve policy coherence, and also consolidate relations with third parties. AfCFTA as an action plan for boosting intra-African trade is expected to be a game changer for socioeconomic development in Africa when the agreement is fully implemented.

Design of the agreement establishing AfCFTA aims at integrating African markets for the promotion and development of continental value chains. It reflects an explicit commitment to creating the framework for deeper socioeconomic integration and improved cooperation that enables trade in goods and services together with investments, and the mobility of business people, to support the creation of wealth.

The policy is to bring about free movement of capital, goods and services which are crucial for deepening economic integration in Africa, thus promoting agricultural development, food security, industrialization and structural economic transformation.

AfCFTA is expected to enhance competitiveness at the industry and enterprise levels through exploiting opportunities for economies of scale and continental market access which can facilitate the efficient allocation of resources. The agreement covers trade in goods and services, investments, intellectual property rights and competition policy.

According to the agreement, the general purpose of AfCFTA is the reduction or progressive elimination of tariffs and elimination of non-tariff barriers to trade and investments. It lays the foundation for continental customs union. By the agreement, state parties are committed to expanding intra-African trade through the harmonization, coordination of trade liberalization and implementation of trade facilitation instruments across Africa.

They are also committed according to “Most Favoured Nation Status” treatment to one another. The Agreement leaves room for state parties to negotiate preferences which shall be granted on reciprocal basis.

AfCFTA subscribes to anti-dumping rules of GATT and WTO agreement on subsidies and countervailing measures. Goods eligible for preferential treatment must originate from member states. The agreement provides for the protection of infant industries. AfCFTA recognizes the right of state parties, which are African countries that have ratified or acceded to the agreement, to regulate within their territories with flexibility so as to achieve legitimate public objective in areas including public health, safety, environmental protection, public morals, maintenance of public order, customs enforcement, protection of patent, trademarks and copyrights.

It also recognizes the right of state parties to the protection of national treasures of artistic, historic or archeological value, conservation of exhaustible natural resources, or restrictive measures in line with WTO rules if a state party is faced with a balance of payment challenge. The agreement reaffirms existing rights and obligations with respect to each other under other agreements to which the signatories to AfCFTA are parties.

Furthermore, AFCFTA agreement shall not nullify, modify or revoke rights and obligations under pre-existing trade agreements that state parties have with third parties. However, in the event of any conflict and inconsistency between the agreement and any regional agreement, AfCFTA agreement shall prevail to the extent of the specific inconsistency. AfCFTA protocols provide mechanism for the resolution of trade disputes between state parties.

It preserves the rights and obligations of state parties and clarifies the existing provisions of the agreement in accordance with customary rules of interpretation of public international Law including the Vienna convention on the Law of Treaties, 1969.

Through it’s expansive provisions on trade facilitation and liberalization, the agreement is, indirectly, supportive of capital market growth and development across Africa. The bigger market that will be available to corporate issuers of securities will enhance corporate fundamentals and make them attractive to investors. The larger wealth that will be created through the continental free trade will also empower African investors with more financial resources to invest in their capital market.

By accepting the market access rules contained in the agreement, it means a state party shall not limit the participation of foreign capital in terms of maximum percentage limit on shareholding or the total value of individual or aggregate foreign investment. A state party is also prohibited from applying restrictions on international transfers and payments for current transactions relating to it’s specific commitments.

These open up the continent for free movement of capital and investment. Without restrictive capital control, African investors can directly invest in any capital market on the continent. This increases the investment outlets available to investors in Africa. It also increases the number of subscribers available to an issuer from any part of Africa.

Therefore, the agreement lays the foundation for African investors to share in the wealth   created by economic enterprises notwithstanding where they are located on the continent. As a result of AfCFTA, any African entrepreneur can cite his manufacturing industry or service organization in any part of Africa as it shall not be considered and treated as foreign direct investment but as domestic investment. This has the potential of increasing the number of business enterprises in areas of Africa where the success factors are available.  

Without doubt, AfCFTA has the potential to boost capital formation and also spread economic prosperity across Africa, if implemented with iron determination and sincerity. It can change the narrative of a continent that trades little within and which contributes minimally to global trade.

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