Capacity building key in unlocking Africa's free trade potential - Expert

As Africa progresses towards full implementation of the Africa Continental Free Trade Agreement (AfCFTA), key industry experts continue to emphasize the importance of understanding and complying with the agreement’s core principles.

One of such is Mette Werdellin Azzam, Lead Origin Expert for the World Customs Organization’s (WCO) EU-WCO Rules of Origin Africa Programme, who recently shared her insights during a discussion on Eye on Port, Ghana’s premier maritime trade television program.

She joined a panel which included Chief Revenue Officer Jonathan Dabrah, the Acting Head of Tariff and Trade at the Customs Division of the Ghana Revenue Authority and Nana Fredua Agyemang Ofori-Atta, the President of the Customs Brokers Association of Ghana (CUBAG) following a 3-day Rules of Origin Training Programme they all participated in the week earlier in Accra.

Explaining the crux of the rules of origin, Ms. Azzam highlighted their critical role in ensuring that only countries that have ratified the AfCFTA can enjoy preferential trade benefits.

“A free trade agreement is negotiated so that trade can be boosted between partner countries by removing customs duties. This makes products more competitive and cheaper. However, we need to ensure that this preferential trade only takes place between countries that have signed up for the agreement, and that is where the rules of origin come in,” she said.

The official from the World Customs Organisation elaborated that the rules of origin serve as a means of determining the economic nationality of goods. There are two broad categories: wholly obtained goods, such as cocoa from Ghana or livestock bred in a specific country, and goods that incorporate inputs from other nations. For the latter, rules of origin dictate the necessary transformations required to consider them as originating within the AfCFTA member countries.

Mette Werdellin Azzam, who has worked extensively in Ghana and other African countries, was impressed by the level of knowledge and understanding of the rules of origin among stakeholders in the country.

“From the trainings we have conducted in Ghana, we have seen a remarkable understanding of the rules of origin within the private sector, including customs, freight forwarders, and traders. Not everyone knows all the details, but the foundation is strong,” she noted.

However, she stressed that to fully harness the benefits of AfCFTA, more work remains to be done. The negotiation of the rules of origin is still incomplete, with some products, particularly textiles and vehicles, awaiting finalized rules.

“A little more than 90% of the rules have been completed, but for some products, we still cannot say what qualifies as an originating product. Once these are finalized, it will be critical for everyone in the supply chain to be trained on how to obtain and comply with these rules, both for imports and exports,” she said.

The Lead Origin Expert for the EU-WCO Rules of Origin Africa Program shed light on the Guided Trade Initiative, which started in 2022 as a means of kick-starting trade under the AfCFTA among a limited number of countries and products.

She described the initiative as a “handheld” approach that initially involved only seven or eight countries and just under 100 products, allowing these nations to begin trading under the AfCFTA framework. However, she was quick to note that the scope of the Guided Trade Initiative is limited compared to the vast potential of the African market.

“We need to move beyond guided trade to real trade among all AfCFTA members. Currently, only a fraction of products can be traded under this initiative, but Africa produces so much more. The potential is enormous, and we must strive to include all 54 countries and a broader range of products,” she urged.

When asked about compliance challenges faced by traders in Africa, Ms. Azzam acknowledged that there are always a few “bad apples,” but she commended most companies for their willingness to comply.

“Compliance is key, but it can only be achieved if traders fully understand the rules. That’s why continuous training and capacity building are essential,” she said.

One major challenge Ms. Azzam identified was what she termed as “spaghetti bowl phenomenon," which describes the complexity of navigating multiple free trade agreements with differing rules of origin.

"Globally, there are over 400 free trade agreements, and even within Ghana, there are at least four different agreements, including AfCFTA and the ECOWAS Trade Liberalisation Scheme (ETLS). Each agreement has its own set of rules, which makes it difficult for traders to determine which agreement to use for a particular trade," she explained.

The Danish origin expert emphasized the importance of understanding the differences between these agreements to help traders make informed decisions.

"It’s a business decision at the end of the day. Traders need to know which agreement is most beneficial for them. If the rules are too complex or costly to comply with, traders might opt out of using the free trade agreement entirely," she said.

This underscores the need for simplicity and education so that businesses can benefit from preferential trade arrangements.

Ms. Azzam concluded by advocating for continuous education and collaboration between all stakeholders in the trade ecosystem—customs officials, brokers, traders, and policymakers. She noted that in the past, there was often a sense of division between customs authorities and the private sector, but this has been changing, especially in Ghana.

"Traditionally, customs and the private sector have seen each other as almost adversaries, but we’re now witnessing a shift towards collaboration, where all stakeholders work together for the common good. Continuous training is crucial because it helps build trust. When everyone knows that we are all working towards the same goals, operations will flow more smoothly," she said.

Mette Werdellin Azzam who joined the discussion virtually from Brussels assured the audience that the EU-WCO Rules of Origin Africa Program would continue supporting Ghana’s efforts to implement the AfCFTA through ongoing training and capacity building initiatives.

"We are committed to contributing to the economic development of Ghana and ensuring that the country fully benefits from its various free trade agreements," she said.

She hinted that with ongoing efforts to finalize the remaining rules and expand trade under the AfCFTA, there is optimism that African nations, including Ghana, will soon unlock the full potential of intra-Africa trade.