Jonathan Rosenthal
Good afternoon. I’m Jonathan Rosenthal and it is my absolutely, you know, sort of, greatest pleasure to be having this conversation with His Excellency, for a couple of reasons. The one is that, you know, Chatham House is, you know – and its fantastic team is just, you know, sort of, leading such great conversations. So, it’s, you know, fantastic to be doing that here. And the second reason is that it’s not very often that when I’m sitting in London, I get to welcome someone onto the stage and call them a compatriot, or as we used to say in South Africa, comrade and compatriot. So, it’s a great pleasure to be inviting His Excellency Wamkele Mene to talk to us about the Africa Continental Free Trade Agreement, which I’m, you know, sure he will elucidate much better than I can, but is, I think, the sort of, driving force for change that is really going to turn around, you know, Africa’s economic prospects.
Just very briefly, His Excellency used to work at South Africa’s Department for Trade and Industry, before being appointed to the Secretariat, and I’m going to start off with, perhaps, an overly broadly question, but let’s just – you know, sketch out for us, you know, what’s at stake here, you know, why do we care about this agreement and what does it mean?
Wamkele Mene
Well, first, let me thank Chatham House for inviting me and organising this event today, and the Foreign and Commonwealth Office of the British Government for facilitating it. It is a pleasure to be here. I – everything – I was just told that everything that I say will be on the record, so Chatham House Rules will not apply at Chatham House today, certainly for me.
Well, we have a significantly ambitious objective and that is to reverse almost 70 years of market fragmentation, to reverse almost 70 years of reliance on exports of primary commodities, to create a – establish a platform that will make the African Continent globally competitive in 20-30 years’ time. That’s really what the AfCFTA is about. It’s not a trade agreement in a narrow sense. It is an economic development tool. That’s why it is there as a flagship project of the African Union, Agenda 2063.
So, we are – in many respects, we have a significant task ahead of us, but we know it can be done. We know that our continent can industrialise. We know that our continent can be as globally competitive as China or India, provided, of course, we do the things that the agreement requires us to do, as a first step to market integration. So, this is what is at stake, in my view. It is a historic moment. If we do not succeed, I can’t imagine that we will have another opportunity again as a continent. So, that’s what’s at stake.
Jonathan Rosenthal
Right, so, you’re not exactly setting a low bar here. This is an ambitious agreement and challenge. Firstly, I also need to thank you, because not only are you, you know, sort of, providing your expertise on the AfCFTA, but you’re also providing some expertise on Chatham House Rules, because I forgot to say the rule does not apply and secondly, I forgot to say that this event is being recorded. So, thank you for setting me right.
We’re at a stage in the agreement now where there is still some tussling about rules of origin.
Wamkele Mene
Hmmm hmm.
Jonathan Rosenthal
87%, I believe, of, sort of, line items have now been covered. Sort of, what is the hold up on the remaining items and, sort of, what is the philosophy or the, sort of, political debate that is going on behind this negotiation?
Wamkele Mene
Well, I – on the way here from Washington, I picked up the latest addition of The Economist and it says that “The rules of origin are delayed because of political wrangling.” But really, it is more than political wrangling. Rules of origin, as you know, the primary purpose they serve is to prevent trans-shipment of goods from entering a market, and once those goods enter the market and they are subject to preferences that they do not deserve, that causes distortion and job losses. So, that’s the first, sort of, classical trade policy tool of rules of origin.
But what we are trying to do is to do more than that, to use rules of origin as a tool for industrial development. We don’t want to have countries bringing in a shirt, put a button on it and say, “Made in the AfCFTA.” That’s not industrial development. And so, in a range of different areas, we’ve said the value addition for meeting the criteria for Made in the AfCFTA is relatively high, the threshold is relatively high. You have to be able to prove that this product has been sufficiently worked in the AfCFTA zone. So, it is – it should be – countries should be very, very deliberate and very, very cautious about agreeing to rules of origin, because this goes to the continent’s industrial development for years to come and so, it should be something that countries take very, very seriously and it should be something that countries are very cautious about.
That said, we have now agreed, as you mentioned, we now have convergence on 87.7% of all products that are traded on the African Continent and around the world. So, if you think about it, close to 5,000 products are traded around the world, according to the World Customs Harmonized System. The – 55 countries, all of us, 55 countries negotiating, have agreed on 87.7% over a period of less than five years and so, as a trade negotiator, I think it’s remarkable that we have achieved such success, in a very short space of time, in reaching convergence. But, of course, as an ordinary citizen of the African Continent, it seems as if it’s moving too slowly, because we – people want to see goods transiting across borders and enjoying the preferences. So, we have to balance this, too, a sense of urgency for this to be implemented quickly, as well as the need to have legally sound and economically sound rules of origin that countries will be able to implement, that are implementable.
We have some outstanding areas, textiles and clothing, which is a significant amount of our tariff lines, it’s about 15.1%, the automotive sector and then, sugar and edible oils and a few other areas. So, we have some work to do. The Heads of States gave us six more months to conclude this work on these areas, but when you think about it, again, if you think about it in practical terms, if you are an investor, you are BMW, you are Toyota and you have been investing in North Africa in the automotive sector and you want to expand now to West Africa or East Africa, we have been subject to different rules of origin for the automotive sector. So, as an investor, you have been constrained in being able to, you know, move your investment around the continent and establish a new commercial presence around the continent, largely because of these different rules of origin.
Now, that we are introducing the same rules of origin, the investor will be able to invest anywhere across the continent and be subject to the same rules. But again, as I said, this is not an easy negotiation for any government to undertake, because you have to think in the long-term about your industrial development, but from an investment point of view, this 87.7% that you’ve mentioned should position the continent for greater predictability and certainty as an investment market and that’s what we are trying to achieve here.
Jonathan Rosenthal
I’d like to push you slightly on these numbers, if…
Wamkele Mene
Hmmm hmm.
Jonathan Rosenthal
…I may. And when you talk about 80% or 87.7, I suppose you’re talking about individual line items and I, you know, I don’t know what, you know, seal skin slippers or something like that will be one of those, even though there’s miniscule trade in that. Whereas the things you’ve mentioned, sugar, you know, automotive, if one had to, sort of, roughly trade weight, sort of, you know, how much of the stuff that is actually traded has been agreed upon, what would that number look like?
Wamkele Mene
We haven’t quantified it, but let me answer your question this way. The automotive sector and the components that make a vehicle constitute about 1.5% of our tariff book. However, there are over 30,000 products or components that go into making a vehicle and these are spread across the 87.7%, and so, the tariff line may be – itself, may appear to be insignificant, but the components that are required, including agriculture to make a vehicle, there’s a value chain connected to agriculture. So, that’s why it appears as if we are moving slowly, but the trade negotiator and the Minister of Trade, they have to take a very comprehensive perspective of the requirements for rules of origin before they agree to anything, because of the trickledown effect on other sectors of the economy. But there are opportunities.
I mentioned this morning an example of how a country like Lesotho has benefitted from a AGOA, through export of vehicles that are going from South Africa to the US. Lesotho is now part of that value chain, Namibia is now part of that value chain, so is Botswana. If you go to East Africa, you could look at a different product and you can see how the value chain – based on rules of origin, how different countries are benefitting from those value chains.
And so, what we would like to see, ultimately, is that through these value chains and through the establishment of rules of origin, that we can have processing of leather in Liberia or Côte d’Ivore, processing of copper in Zambia, that we can see processing of leather seats in Ethiopia, so that we create a truly continental value chain, whether it is pharmaceuticals, the automotive sector. It is possible and when I say it’s possible, people say, “Well, you know it’s difficult.” Of course, it’s going to be difficult, but we know it’s possible because it’s been done by others. Eastern European countries, after they joined the EU, became part of the value chain of manufacturers in the European Union, similarly in South East Asia. So, there’s certainly no reason why it cannot be done in – on the African continent, but what has been missing in our context is the legal framework and the rules of origin. The legal construct of the trade agreement, that’s what’s been missing.
Jonathan Rosenthal
And I’m going to ask you just, perhaps briefly, on the last question, just on rules of origin, you’ve spoken about, you know, the importance of them for industrialisation. It would seem to me that there are very different, sort of, aspirations, potentially, if you’re a developed economy that can, you know, sort of, make the textile and the thread and the button and put it altogether, versus perhaps a Lesotho or a much smaller country that would need to, you know, import many more of those components. How does one strike the balance between the developmental needs of less developed economies, versus…?
Wamkele Mene
Well, we have a – that there are countries that have a GDP per capita of $110. Then you have, on the other extreme, a country that has a GDP per capita of $25,000. And so, absolutely, the differentials in economic development and industrial capacity are quite significant. We dealt with this question in law, or at law, by having what we call a special and differential treatment in the agreement. So, least developed countries get a longer transition period, for example, and a range of other flexibilities.
But the underlying point to your question is absolutely true and that is that – how do you make sure that countries that are not, today, at the same level of industrial development, meaning at the same level of export capacity, the big economies in Africa that are already relatively industrialised, from an export competitiveness point of view, they will be the immediate beneficiaries. But in the long-term, how do we get those countries that today do not have the same export capacity and the same industrial base? That’s really – for me, that’s where we will – that’s where the success of this agreement will turn. If we can’t get that right, the disparities that I mentioned will simply be further entrenched.
That’s why we are working with Afreximbank and others to make sure that we introduce tools that will enable us to overcome – in the short-term, to overcome these differentials. For example, we’ve launched, recently, and signed – and by the way, in your article you said that we’ve “had more launches than NASA.” We’ve recently launched the Adjustment – the AfCFTA Adjustment Fund, mobilised about $1.2 billion, because our estimates are that – exactly as you pointed out, that there will be countries who will suffer short-term revenue losses as a result of reduction, or ultimately, elimination of tariffs. So, what does that country do in the meantime? And so, this amount, we will eventually mobilise us to $7 billion, this amount that we’ve mobilised thus far is intended to assist those countries to overcome the short-term effects of the trade agreement.
It’s not money for budget support. So, the Minister of Forei – Finance will not be able to say thank you very much, I need this to pay salaries. No, it’s intended for productive sector investment and there will be criteria that will be developed to enable those who make the decision, to enable them to determine whether or not a country qualifies. But what we want to make sure that this AfCFTA Adjustment Fund does is to help countries to overcome, in the short-term, that differential.
Let me give you another example. There are countries that are already producers and manufacturers of vehicles. Between South Africa and Morocco, almost a million vehicles are manufactured a year, but Rwanda, Namibia, Ghana, Nigeria, Kenya, Ethiopia, these are countries that have expressed a very strong interest to join – to be part of the value chain, the value chain of the auto sector. They are at the early stage of their industrialisation in the auto sector. So, South Africa and Morocco must create the space. We estimate that we need about 25 new, completely knockdown manufacturing capacity of vehicles in Africa. Those 25 factories are not going to be in South Africa and in Morocco, they cannot be. They have to be, if we are serious about the AfCFTA spreading the benefits, they have to be across other parts of the continent.
So, that’s what I mean about overcoming the differentials, is by ensuring that as we rollout and implement these value chains, that we do so, in the long-term, in a way that will uplift other regions or other countries on the continent. If a country is interested in agriculture, Malawi is interested in agriculture, Zimbabwe has now started exporting oxygen, how do we get pharmaceuticals, Pfizer, or whichever global manufacturer, to encourage farmers in Malawi, in Zimbabwe, to be part of the value chain for production of pharmaceuticals?
I’m not expressing new ideas. We know that this has been done before, at a much larger scale, in China, in South East Asia. So, this is the long-term, how we overcome these differentials. In the short-term, we will have to mobilise resources to help countries to overcome the differentials.
Jonathan Rosenthal
I suppose in the Secretariat, part of your job and one of the big challenges you must face is, in some senses, you’re herding cats in trying to get, you know, all of the countries onboard. We may disagree on this, but I would argue that, you know, there is a lack of, perhaps, political will amongst some of the big economies, and I’m not going to pick out, you know – well, you know, I suppo – yeah, but we know who they are.
Wamkele Mene
Yeah.
Jonathan Rosenthal
And…
Wamkele Mene
The Economist mentioned who they are.
Jonathan Rosenthal
You know, and these are the economies that actually do stand to benefit, but are not necessarily driving forward…
Wamkele Mene
Yeah.
Jonathan Rosenthal
…the trade agenda. Is that, I mean, is that a fair observation and, sort of, how does one cajole them or encourage them to be…?
Wamkele Mene
Yeah. Well, it’s, firstly, it’s a member driven organisation. It’s a member driven process. The Secretariat is – it cannot compel countries to do what they do not want to do. Certainly, the Secretary-General is – more often than not, is really a Secretary. The General part is not always there. But we have 42 countries that have ratified the agreement. The fastest instrument in the history of the African Union to be ratified is this and that, to me, speaks volumes about political will and commitment. Only one country has not signed the agreement. We have – even those countries that have not yet ratified it are countries that are saying, “We are not opposed. However, we have to follow our due process, our constitutional requirements for how international agreements are entered into.”
The question of protectionism is – I think that when you look at what has been happening around the world in the last five to ten years, we’ve seen a backlash against trade agreements. We’ve seen a President come in, in another part of the world and say that “Trade agreements are not good intrinsically” and that “They are benefitting only the large corporations” and that “They ship opposite – jobs abroad.” So – which, of course, is a very unsophisticated analysis, to be expected from that gentleman, very unsophisticated analysis of what the state of the global economy, globalisation and trade agreements, what it is. However, as we’ve all seen, it did have electoral appeal.
And so, the challenge is, how do you get a trade agreement to be inclusive, so that the protectionism that you mention is a lesser consideration for governments? If we can demonstrate that it is possible to have a trade agreement that is inclusive, both in terms of benefits and also in terms of participation, my view is that that would be a start to respond against that backlash that we’ve seen and against the protectionism that we’ve seen. And so, if we can have, as I mentioned earlier, value chains that include small/medium enterprises, that include farmers for supply chain developments with large corporations, large corporations of, you know, of farmers – I’m sorry, large co-operative schemes with farmers, I think that we will turn the narrative against that backlash of the lack of inclusivity of trade agreements, that’s the challenge.
Governments are expressing what is the view of their own citizens, so we have to move beyond the – in order to move beyond the protectionism, in my view, how do we address this question of inclusivity? Is it only South Africa that benefits? Is it only Nigeria that benefits? Is it only Morocco that benefits? If we don’t succeed to do that, I will be the first one to admit that the agreement will fade and that it will benefit only the large corporations on our continent, who already have the capacity to make use of it. Next week a large bank can move to a new part of the continent and make use of a new market access.
So, I think the way to overcome this challenge of protectionism is by demonstrating that, actually, a country has more to benefit when its small/medium enterprises are able to expand from West Africa to East Africa, from Southern Africa to North Africa, and take advantage of this large market of 1.3 billion per year.
Jonathan Rosenthal
I’m going to come to the floor in just a minute. So, if you’ve got any questions, start, you know, sort of formulating those. I’d also like the online audience – I believe there are, you know, a few 100 people watching this, you also have the opportunity to send questions through, so please do that and I’ll come to those. But I’m going to hog you for another minute or two, before I have to share you with everyone else. Non-tariff barriers, all the other kinds of issues that hold things up, you know, slow borders, you know, sanitary requirement, you know, all of those other issues that have come up for trade, I mean, I believe you’ve just signed an agreement this morning that was meant to help, you know, address some of those. If you could tell us about the agreement, but then, more broadly, sort of, how much scope have you got and, sort of, how – you know, what are the main areas of work that need to be done on these other issues?
Wamkele Mene
Tariff barriers are actually the least of our problems, as you suggest in your question. You know, there’s a timeline, you can reduce and eliminate tariff barriers by year ten. Where the constraints are, constraints to – and increased levels of trade on the continent, that is in non-tariff barriers and customs procedures, transit rules that are different, you know, across the continent. And so, we have been in discussions with the Government of the UK about the type of support that the Government of the UK can provide, and I have been saying for some time, not just to the Government of the UK, but to our international partners, that “The support that we need is not ten people to be sent from Brussels, or Washington or wherever, to come and, you know, read for us. This is Article 26, it says A, B, C, D.” No, no, no, that doesn’t work.
What does work is what kind of a long-term impact, both for investment and for trade, what kind of support is provided? The support that the UK Government is providing is primarily for trade facilitation, so how do we make sure that there is efficient transit of goods, that our trade corridors are as competitive as any other trade corridor in the world? How do we make sure that the harmonisation of customs procedures, which is already agreed to in the agreement, how do we make sure that it is implemented in such a way that, indeed, all our customs authorities eventually are able to apply the same rules, so that the goods can transit from one part of the continent to another part of the continent, based on the same rules? That’s how you provide support to a partner and then, of course, UK investors will benefit, too, in the process.
So, what we signed last year was a memorandum of understanding that identifies these areas and today, the government announced support of up to £55 million, over a period of time over a number of years, and the bulk of that will go to our partner, TradeMark East Africa, who really have the expertise and the success in ensuring that trade facilitation does work and that it does lead to results. And here, actually, we don’t need to go outside of the continent to look at success stories. If you look at the East African community and how, ten years ago, it was taking about 12/15 days for goods to transit from the Port of Mombasa to Kampala. Today it takes up to three days, and there are digital systems that have been introduced to make sure there’s efficient transit of goods and that has had a very positive impact on intra-Eastern African trade upward.
So, these are the practical, long-term impactful support mechanisms that we’ve seen work and that can work, not, you know, to send people from one part of the world to the other and say, you know, “We’ll help you build your capacity.” That model doesn’t work anymore. It did to – and it, you know, it belongs in the old days, and they were not happy days to begin with. So, we wanted to rethink how we’re going to have partnership and we want to rethink about how we are going to have partnerships that are mutually respectful and that benefit both.
Jonathan Rosenthal
Excellent. I’m going to come to the floor, so, if there are hands. Okay, we’ve got a hand at the back, and I think the rules are that you are – you know, sort of, please identify yourself and your affiliation and, you know, and a brief question, sort of, rather than a long speech. But if we could perhaps – right over here, please, thank you.
Jones Awuah
Hi, my name is Jones Awuah from Vox Africa and also Channel 7. Your Excellency, you’ve spoken about rules of origin, but I wanted to know if you could touch more on intellectual properties, because this is an area that a lot of people have spoken of. And secondly, with the level of instabilities across certain parts of the continent, what impacts will that actually have on the AfCFTA? Thank you.
Jonathan Rosenthal
Excellency, shall we take, sort of, three questions at a time and chunk them?
Wamkele Mene
Yeah.
Jonathan Rosenthal
A hand over here, Patrick.
Patrick Smith
Hi, thanks, Patrick Smith from Africa Confidential. The world seems to be heading towards a situation of competing spheres of influence, both in terms of diplomatic, economic wars being waged, one against the other and retribution for each party. How do you think that is going to affect Africa? Is it going to force Africa to take sides, and not just take sides politically and diplomatically, but also economically? And are there any advantages for Africa in, sort of, great power competition? Can it – is there anything Africa can really exploit, apart from flogging oil and gas?
Jonathan Rosenthal
Thanks, Patrick, and is there a hand on that side of the room? Okay, Paul? Yeah.
Paul Melly
Hi, yeah, yeah, so, Paul Melly from Chatham House. We did a report a few years ago looking at Nigeria’s trade relations with Niger and Benin and overwhelmingly, the thing that came out of it were the practical obstacles that the, sort of, state machines put in the way of smaller, either informal traders, or small businesses that wanted to trade more effectively. What tools are you developing to help overcome those barriers, including for payment and, also, to shift the cultural mindset of, shall we say, the big state bureaucracies where they always want to regulate rather than facilitate? Thank you.
Wamkele Mene
Good, well, thank you very much for the questions. First, I think that what we have seen from the pandemic is that the overreliance – Africa’s overreliance on global supply chains, whether it’s for pharmaceuticals or whatever the product is, but in this case of IP, is a very bad thing. Our continent imported $16 billion worth of pharmaceutical products in 2019. When the pandemic hit, the continent suffered the most because countries began – started to implement export restriction measures and so, the germ killing products, whatever pharmaceutical therapeutics were required, we were at the back of the queue because of these export restrictions, in part.
And when you look and think about – when you think about what is the role of intellectual property rights in all of this, it’s very, very clear that as we negotiate this intellectual property rights regime, which we have started to negotiate, at the foremost of our minds, we must ask ourselves, as Africans, does this tool, this intellectual property rights tool – is it at the service of Africa’s industrial development? Do we use intellectual property rights to facilitate the establishment of a generic drug industry? And second, and more importantly, is this intellectual property rights regime at the service of public health, to save the lives of millions and millions of Africans?
And if we answer that – those questions in the affirmative, that yes, the AfCFTA must meet these objectives, then we must have an intellectual property rights regime that will be bold enough to say, “Well, actually, because there’s a global pandemic, millions and millions of people are dying. Why are we enforcing patents when people are dying?” So, we use public funds for innovation, to come up with a patent, public funds, and then we want to exclusively assert a right.
So, for me, the challenge is to have an intellectual property rights regime that will be bold enough to ask these big questions about enforceability of intellectual property rights when confronted with a public health crisis. This is the – we tried, at the WTO, many, many years ago, we tried, we did not succeed. We tried through the TRIPS Amendment, we didn’t succeed and now, I think we have an opportunity to have an intellectual property rights regime that will say where there’s a public health crisis, a global pandemic, and you have a patent, the patent was supported, the innovation was supported by public funds, I’m not sure that you should enjoy exclusive rights in that context. We should have a limited period of time where those patents are freely available, the technology is transferred, to save lives. Then, after three years, or two years, then you can get back to exclusive protection and enforcement of the intellectual property rights.
So, that is what we are going to achieve in the intellectual property rights regime of the AfCFTA. Of course, it is not going to be very popular, but it is the right thing to do. It’s the right thing to do for our continent’s industrialisation. It’s the right thing to do for our continent’s public health. It is absolutely the right thing to do. That is why, in part, we have less than 10% Africans that are vaccinated today, because of the nature of the regime, the global regime on intellectual property rights.
The levels of instability are troubling. We now have three countries that, as you know, went through coup d’etats, in one country twice in less than 18 months. So, this is a very troubling development, but I’m very, very happy that the African Union Commission and the Assembly of Heads of States, have been very clear, they have condemned unconstitutional changes of governments. In the last summit that we attended, they were very, very clear that that is completely unacceptable. Similarly, ECOWAS, under President Akufo-Addo, has been similarly, very, very strong in condemning these acts of unconstitutional changes of power.
This has an impact on implementation of the AfCFTA. It has an impact – it slows down trade and, of course, the biggest impact is on the border, communities that are trading across borders. That’s where, you know, the informal traders, the small/medium enterprises, they are the ones who suffer the most. The elite can fly to Paris or London, or Washington, to procure the goods that they need when a country is under suspension, but the small/medium enterprises, they suffer because a market has now been sealed off. And so, issues of peace and security, they are obviously not within our mandate. However, it is important that we have stability on the continent, because if we don’t have stability, goods cannot transit and jobs are not created. So, certainly, we are aligned there about the need for stability.
The state of the world, the geopolitical context, has changed, as you suggested, immensely in the last two to three years, since the AfCFTA has been established and certainly since I was elected. It is a completely different world. I think one of the reasons why this agreement has to succeed is because COVID-19 and the geopolitical tensions have really made it abundantly clear that the African Continent has to do more to be self-sufficient from an industrial capacity point of view. Today we’ve seen new figures about how the conflict is going to impact on food security on our continent because of the overreliance on the export – on the import, rather, of wheat from Russia and Ukraine, combined. And so, we have to make sure that in this realignment that is happening in the world, that the continent, from an economic standpoint, the continent, and from a standpoint of trade, accelerates industrial development, accelerates – which will enable the acceleration of self-sufficiency.
I do think that it is also an opportunity for the African Continent to present itself as a market in all of this that is happening, to present itself as a market where certainty, predictability, the rule of trade law, where all of that happens. So, it is a crisis, but it is also a crisis that compels us to look at opportunities about how we can reposition the African Continent from the perspective of global trade and our contribution to global trade and our competitiveness within the current conflict.
Regarding the political dimension of it, I think countries, individual countries, have taken a view. As you are aware, I’m sure, individual countries have expressed their views at the UN and at their capitals and so, from that perspective, I would leave that – I would leave this at that.
The – I think the question on how we overcome some of these barriers, in part, we have an opportunity in digital tools. For example, we now can have customs procedures on a digital tool that can create a single window on a digital platform and minimise interaction with Customs Officers and ensure that goods transit much faster. So, we are now working with the Afreximbank, our partner, to create and design a platform where we will have customs procedures embedded in it, so that the small/medium enterprises can make use of that, and they already are, by the way. Small/medium enterprises are already miles ahead of governments.
I made an example yesterday and today about how, in Kenya, with the introduction of M-PESA, we’ve seen an increase in small/medium enterprises’ economic activity and in small/medium enterprises circumventing exactly what you’ve described and that is the barriers, the non-tariff barriers. So, I would say that the deployment of digital tools, making them accessible, is really the tool that will enable us to include small/medium enterprises.
In the digital tool that I’m referring to, you, as a small/medium enterprise, will be able to connect with another small/medium enterprise in another part of the continent. There will be due diligence information. There will be information about rules of origin, market intelligence about where you want to do business in, and all of that in a digital platform, to enable traders to trade from Ghana to the East part of the continent, in Kenya, really without having to go through all of the bureaucratic challenges that you set out.
The mindset is very important. We will have to do a lot of work of the advocacy, so that people can see the advantages of a new trade agreement, a new – a first of its kind, that includes digital tools for the purpose of inclusivity and as you mentioned, payments is a massive challenge in Africa. We have 42 currencies. It costs us $5 billion a year and this is the cost of currency convertibility. So, with the Pan-African Payments and Settlement System that we have produced with Afreximbank, you will now be able to trade, in your own country, in your own currency, with a counter-party in another part of the continent. They will receive their currency, their local currency, without relying on the third currency. So, we know that this cost of currency convertibility, we estimate it is about $5 billion annually. What we don’t know, and what is probably difficult to quantify, is the cost to efficiency, the cost to – in terms of affordability of trade and the cost, in terms of access to trade for small/medium enterprises. This is really the – one of the reasons why we have not been able to accelerate intra-Africa trade.
Jonathan Rosenthal
Excellency, oh, sorry, I’m butting in again.
Wamkele Mene
Yes, please.
Jonathan Rosenthal
We’ve got a lot of questions coming in from online, so I’m going to make an appeal to you, which is to give as many people an opportunity to ask their questions and you to respond, I’m going to ask you to try to, sort of, have the responses brief. There have been a few questions on regional economic communities and how you are going to interact with those. What is that relationship and how is that evolving?
Wamkele Mene
Well, regional economic communities are the building blocks of the AfCFTA. We are not intending to replace regional economic communities. Our role is actually to connect regional economic communities as, sort of, an overarching trade regime. The regional economic communities will always continue to – they will continue to exist. However, where we do become a customs union, that is where we will have to relook at the mandate of the regional economic communities, so that the trade dimension, the investment dimension of the work of regional economic communities, where we are a customs union, that it is undertaken by the customs union. So, it’s a very important step towards integration of the continent.
Jonathan Rosenthal
Thank you. Meera Shah has asked a few questions, in fact, so full marks for enthusiasm.
Wamkele Mene
Yes.
Jonathan Rosenthal
I wonder if we can bring Meera in, in particular to ask your question about environmental issues. Can we unmute Meera and hear you? Thanks.
Meera Shah
Hi, can you hear me?
Jonathan Rosenthal
Yes, thank you.
Meera Shah
Great, hi.
Jonathan Rosenthal
Go ahead.
Meera Shah
Thank you for your talk today. I was just wondering if there are any mechanisms being developed within the AfCFTA to ensure that greater trade is done in an environmentally and climate friendly manner? Thank you.
Jonathan Rosenthal
Thank you, Meera, and would you mind just telling us, sort of, who you are and, sort of, what your affiliation is, at least?
Meera Shah
Sure. I’m a Research Associate at Imperial College London.
Jonathan Rosenthal
Thank you very much. Shall we chunk these questions…
Wamkele Mene
Yeah.
Jonathan Rosenthal
…again? Sure, okay, Nick Westcott has got a question on the – and Nick, shall we unmute you and can you – can we hear you or should I just read…
Nick Westcott
Hi, it’s Nick Wes…
Wamkele Mene
…this out? Thank you.
Nick Westcott
Nick Westcott here. I was just wondering about the relations with the African Union in Addis Ababa, because there are a number of political obstacles that need to be overcome that require a political push, and I wondered how you, sort of, liaise with the Commission and with the AU bodies to try and overcome those obstacles to accelerating the implementation of the AfCFTA. Thanks.
Jonathan Rosenthal
And Nick, you’re with the Royal Africa Society, the…
Nick Westcott
Sorry, yes, Director of the Royal African Society, thank you.
Jonathan Rosenthal
Okay, and I’m going to read out one more, which is just that – from someone by the name of Andreas Schneiders, which is that “Legal challenges are likely in most trade regimes. How will these be handled for the AfCFTA?”
Wamkele Mene
Again, thank you for the questions. We have not included environmental aspects in the agreement, because we thought that that would be exceeding the scope of the mandate that we were given by Heads of States. But obviously, there are linkages, green trade, transition to green economy and those are all important questions, but we have not included them in the trade agreement. We will wait for member states to come to a convergence on that.
As far as AU – relations with the AU are concerned, the AfCFTA is one of the organs of the African Union. We report to the Assembly of Heads of States. I have to report to the Assembly of Heads of States twice a year about the progress that we are making. I also report individually to Heads of States, as the need arises. Our work complements the work of the African Union Commission. The African Union Commission is responsible for trades relations, for policy setting for industrial policy. We implement the trade agreement. That’s the extent of our mandate and so, there is a complementarity there.
The last question, on the legal challenges, yes, of course, there will be legal challenges and it’s to be expected. This agreement was drafted by Lawyers, by Economists and Politicians and some of the provisions in the agreement make no legal sense. They make a lot of political sense, but no legal sense, because that’s how you – in a multilateral negotiation, that’s how you move forward, you reach for political consensus, and so, we will require a very, very strong dispute settlement mechanism. Some of the provisions, actually, were drafted at three or 4am in the morning and so, they will need to be further clarified.
So, this is a very important part of us being able to develop our own jurisprudence. That’s why we now have a dispute settlement mechanism, which created a dispute settlement body, and the dispute settlement body will adjudicate on all disputes that arise within the scope of the agreement. It is similar to the understanding on dispute settlement of the WTO. We’ve made some changes here and there. There will be – it – and it actually has all the principles of law. You will be able to initiate action. If you claim injury, you are able to initiate action. There’s – a panel is established, too, which is the Court of First Instance. You don’t like the outcome, you go to the Court of Final Instance, which is the appellate body, and it will make a ruling.
So, we have – we – it is anticipated, the question is absolutely correct, there will be legal challenges, there will be disputes. It’s not a bad thing. It is – it enables us to clarify the trade law. It enables us to build our own jurisprudence on the African Continent and it enables us to build our capacity amongst our young Trade Lawyers, so that we’re able to enforce the agreement.
Jonathan Rosenthal
Brilliant, and is there one more question I’m going to take from the room? And then I’m going to have one more. So that gentleman at the back.
Humphrey N. Ndi
Thank you, Excellency. My name is Humphrey N Ndi, I’m from the High Commission of Cameroon, I’m the Cultural Counsellor. So, I was just wondering if you factored in the influence of China on the African continent and the fact that African Governments receive a lot of aid from China, some of which is tied to trade. How do you think the continued reception of this aid could undermine this treaty on the African Continent? Thank you.
Jonathan Rosenthal
Thank you, sir. I’m also going to invite one more person from the online audience to ask a question and here I’m going to risk an accusation of a, potentially, a pro-South African bias, because this looks like a South African name. But Pamela Ngubane, if we are unable to unmute you to ask your question about intellectual property rights. Can we – are you with us? No, okay, I’ll – in – Pamela’s question, I suppose, was more of a challenge than a question, which was to say that she thought “Your comments on IP are, sort of, open-ended and a bit nebulous” and that “It’s the, sort of, open-endedness that hamstrings development.” I suppose the question is, sort of, how does one make those, you know, much more concrete?
Wamkele Mene
Well, as I mentioned, a broa – maybe she wants me to draft Article 18 of the IPR Protocol. I can draft it now. “We hereby undertake that state parties shall allow flexibility in the exercise of intellectual property rights when confronted with a public health crisis.” That’s a broad provision that you can start with. You – then, of course, you go into trademark, patents, but the overall objective of intellectual property rights must be to balance public health, as well as the right holders, right holders and communities. That’s, really, the overall objective. So, the language that I’ve just crafted on the stage is really the chapeau, in my mind, maybe member states won’t like it, but it’s the chapeau of an intellectual property rights that takes account of the imperatives of the African Continent.
The other question, remind me again, please, was it on…?
Jonathan Rosenthal
China.
Wamkele Mene
On China, yes, from our colleague on China. China is an important partner to the African Union and, certainly, an important partner to us, the African Continental Free Trade Area. We signed a memorandum of understanding with China. China does have a very big interest on the continent. However, we have not entered into a trade arrangement with China. We have not had a bilateral offer and exchange of market access. That is something that continues to be at the exclusive jurisdiction of individual countries. Countries will decide who they want to enter into an arrangement with, whether it is trade or investment. They will continue to be the ones that decide who they enter into these arrangements with. There are countries on the continent that are negotiating trade agreements with third countries outside of the AfCFTA and that’s perfectly allowable under the rules of the AfCFTA. The key question is, once you enter into an arrangement with a third country, you have to provide the same preferences, or better, to AfCFTA countries, than those outside.
So, China will continue, in my view, to be a strong partner for many, many countries on the continent, a strong partner for investment and trade. Where we – what we should be really asking ourselves is our capacity to export value-added production to China, a significant market, so that we leverage on the strength of the numbers of the AfCFTA for export capability into China. But the direct answer to your question is that that still remains the exclusive jurisdiction of – and competence of the countries themselves.
Jonathan Rosenthal
Excellency, I’m going to abuse the Chair’s privilege. We’re out of time, but I’m going to ask you one last question, and that question is, earlier, you said to us that your role involves, sort of, a bit – you know, more Secretary and perhaps not enough General. If, you know, we could snap our fingers and say by order of this house, we’re, you know, we’re giving you the powers of a General for a day to implement this, what would be the, sort of, top two things on your wish list that you would want to implement right away?
Wamkele Mene
Well, the first is, and I think we will achieve this by the middle of the year, the first is to have what we call a tariff book. So an AfCFTA tariff book which will enable traders from across the continent to see all the products that we mentioned in the rules of origin. What is the rule of origin? What is the applicable tariff? And you click on a button and you can trade. This is something that I believe is achievable in the next six to nine months.
The second would be to see more countries ratifying the agreement, to see countries and regional economic communities moving together as a bloc to implement the agreement. At the moment, for example, if you look at SACU, there – one country still hasn’t ratified, ECOWAS, three countries still haven’t ratified. So, we need to make sure that customs unions move together, at the same time, in the implementation of the agreement.
But let me just say this, that I am not as worried as The Economist about all of this, because it took the European Union 72 years to be where it is today. So, we need to think in the long-term about the difficulties of implementing a trade agreement. It’s not an easy task. To integrate a market is not easy. So, yes, there’s a sense of urgency, but I think we must also be realistic and look at the experience of others.
Jonathan Rosenthal
Excellency, I think I speak for all of us when I say, you know, I’d like to thank you not just for the insights and detailed knowledge you’ve offered us, but also for your frankness and your, sort of, blunt and plain speaking on issues that need blunt and plain speaking. So, you know, I’d like to ask all of you to put your hands together and join me in thanking His Excellency [applause].
Wamkele Mene
Thank you. Thank you very much.
Jonathan Rosenthal
Thank you.
Wamkele Mene
Yes, I hope I did not chat to you too much [applause].
