Tanzania’s ratification of the AfCFTA: What does it imply?
By Salha Salim and Godluck Mushi
September 9, 2021 was a milestone date for Tanzania as it became the 39th country in Africa to deposit its instrument of ratification of the African Continental Free Trade Area (AfCFTA). The other East African Community (EAC) member countries of Kenya, Rwanda, Uganda and Burundi had ratified the agreement earlier, and - with Tanzania now on-board - only South Sudan that has not ratified the agreement.
The relevance of ratification is that it is the necessary legal instrument for a country to be bound to an international agreement. In particular, much as an international agreement may have entered into force, it binds only those states that have consented to be bound by it.
In the context of AfCFTA: what does consent imply? What have we committed ourselves to? In brief, it is a consent to liberalise 90 percent of tariff lines, meaning that Tanzania will reduce, and ultimately eliminate, tariffs on 90 percent of products traded under the AfCFTA. Much as Tanzania’s categorisation as one of the Least Developed Countries (LDCs) is not a source of pride, at least it comes with the advantage of a longer (10-year) period to accomplish this; by contrast, non-LDCs have a five-year period.
The commitment is also not absolute in the sense that Tanzania can provide a list of sensitive products capped up to seven percent of tariff lines, which will be fully liberalised over an even longer period of time - namely 13 years (while non-LDCs are provided with 10 years). In addition, 3 percent of tariff lines will be excluded from tariff liberalisation.
So far, 41 countries have submitted their schedules of tariff concessions and have agreed on approximately 81 percent of tariff lines; this also includes customs union members from the Central African Economic and Monetary Community, the Southern Africa Customs Union, the EAC and the Economic Community of West African States.
However, an immediate practical challenge is that only a few countries (such as Cameroon, Egypt, Ghana and South Africa) have in place the needed customs procedures as required by the relevant AfCFTA provisions.
In this regard, the administrative procedures to receive imports under the AfCFTA in the Tanzania market are not yet in place.
The tariff offer, rules of origin, and tariff schedule to the tariff book are not gazetted hence the AfCFTA preferential tariff column is not yet added to the tariff book.
One challenge is how to manage a scenario where some but not all members of a regional economic community have ratified AfCFTA. For example, from the EAC perspective does South Sudan’s non-ratification prejudice the ability of other EAC member states to implement AfCFTA? Conversely, will Tanzania grant preferential access to any individual country that has ratified AfCFTA even if the country is a member of a customs union, where not all members have ratified AfCFTA - or will such access be conditional on ratification by all members of the relevant customs union?
A December 5, 2020 decision by the Assembly of the African Union sought to manage this balancing act by confirming that a member of a Customs Union can still trade under the AfCFTA (notwithstanding that not all customs union members have ratified the AfCFTA) provided that its domestic law permits it to individually implement the Customs Union’s schedule of concessions. It is, however, unclear how practical this will be to implement. So, it is quite urgent that countries which are part of a Customs Union but have not yet ratified the AfCFTA to do so, as this will help to ensure coherence in future trading arrangements under the AfCFTA.
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Salha Salim and Godluck Mushi are specialised in Indirect Tax Services at PwC Tanzania.
