In a free trade area, human beings trade, not machines. Stakeholders’ engagements and effective communication are key to a successful implementation of any trade liberalization agenda particularly one that is at its early stage as the African Continental Free Trade Area (AfCFTA).
Business owners and prospective investors intending to do business within the AfCFTA require access to periodic information on the phased negotiations of the various concessions and agreements reached by the member States towards the implementation of the trade deal. Just the same way, access to reliable and timely information is regarded as a hallmark of a democratic society.
Following the start of trading in the AfCFTA on 01 January 2021, negotiations are currently ongoing on some aspects of the treaty, particularly in the areas of trade in services, intellectual property, competition, and investment policies. Barring any confidential issues concerning some aspect of the negotiations, it is expected that there would be a periodic update on milestone achievement in the course of the negotiations.
In the same vein, considering that only 37 out of 54 of the AfCFTA-member States have ratified the agreement, there is a need to understand the continent-wide efforts in the incremental implementation process. Interactions with some entrepreneurs, business owners, investors and SMEs across Africa including Nigeria reveal a lack of access to information and understanding of the implementation process as well as the impact of the free trade agreement.
As far back as 2019, participants at the Economic Commission for Africa (ECA) workshop on trade and gender had agreed that “to scale-up AfCFTA impact, there was a need for coordination through a network for the exchange of information.” Though the focus of the workshop was on gender and inclusive implementation, there was a consensus on the need for proper dissemination of the AfCFTA-related information.
Amongst the priorities for implementing the AfCFTA, effective communication remains crucial, and each member State owes its citizens that duty to put in place a monitoring and evaluation system that will measure the phased implementations and provide constant progress and status report. For business owners and investors, prior knowledge of government policy direction is often key for planning purposes. Sometimes, investors and business owners’ concerns are not the lack of government policy but the failure to communicate existing policies and implementation process effectively. The knowledge of what is being done helps businesses to make projections and budget accordingly.
Granted that the AfCFTA implementation is to be done in phases and one may start noticing meaningful impact in years to come, the people still need basic information that will guide them in measuring the progress of the trade liberalization. In Nigeria, as it is with most African countries, getting information on government programmes and policies is often difficult partly because of the lack of a database and equally due to poor communication of these policies. In an era of knowledge and digital economy, it is worrisome that government institutions and agencies do not update their websites and social media handles despite the huge amount budgeted for this purpose annually.
It is not enough that some of these agencies are on social media if the handlers of such platforms hardly provide current information on critical policy issues affecting businesses and citizens. A lot of people, particularly SMEs are asking questions on what is being done following the commencement of trading. The AfCFTA Secretariat located in Accra Ghana is expected to champion the information dissemination by collating continent-wide updates and reports on the phased implementation. However, not much information is being disseminated as the Secretariat is still trying to put structure and its personnel in place.
For instance, the AfCFTA Secretariat needs a functional website and social media handles to aid information dissemination. And while available information suggests that the Secretariat has created its own website, recent attempts to access the site have not been successful. The understanding is that the COVID-19 pandemic has slowed down the pace of work at the Secretariat and it is hoped that with the gradual return to normalcy, we will start witnessing heightened activities and public engagements from the Secretariat.
Beyond this, each member State should put mechanisms in place to engage the local populace. After all, the implementation is expected to be driven by the member States with the AfCFTA Secretariat only playing a complementary role in this regard. While it is appreciated that some of the negotiations are at technical stages which makes it premature to release certain information to the public, this nonetheless, does not obviate the need for constant engagements of the public on the implementation process.
In Nigeria, the National Action Committee on AfCFTA has been engaging the stakeholders across the States, the last of such reported engagements was in Ogun state where stakeholders brainstormed on various issues ranging from Trading Under AfCFTA, Rules of Origin, Export Market Strategy and Product Prioritization, Maximizing AfCFTA for MSMEs Development, Investment Support Programme, Harmonization of Standards across AfCFTA member States amongst other topical issues. Such stakeholders’ engagement is crucial and should be held across the Nigerian States. Often times, people do not know about these workshops and programmes. One way to make it more accessible to the public is to air such events on National television to give a larger audience the opportunity to participate.
A lot of people are enthusiastic about the AfCFTA and are eager to access information that will aid their understanding of the opportunities and benefits under the enlarged market. People want to know about the implementation stages of the AfCFTA. They want to know the progress made so far, the tariffs concession, steps to address non-tariff barriers, what has been agreed and what is outstanding, the stages of negotiations and milestone achievements. Which countries have started trading and what are they trading? What are the potential challenges that may be faced by traders and what is being done to address the challenges? The public needs constant information on these and other critical issues that are necessary for the effective implementation of the free trade agreement. It is hoped that the relevant government agencies of the AfCFTA Member States will work with the AfCFTA Secretariat to address this information gap in relation to ongoing negotiations and implementation.
Tasks before the AfCFTA dispute settlement body
The success of the AfCFTA will depend largely on the willingness of the member states to adhere to the agreement.
The Dispute Settlement Body (DSB) of the African Continental Free Trade Area (AfCFTA) held its inaugural meeting on 26 April 2021 at the AfCFTA Secretariat in Accra Ghana. The DSB is composed of the representatives of the State Parties and shall have the power to establish Dispute Settlement Panels and an Appellate Body responsible for settlement of disputes between the member States.
The mandate of the DSB also extends to adopting the reports of the Panels and Appeal Body as well as monitoring and ensuring the implementation of the ensuing decisions. In carrying out its mandates, the DSB will work with the AfCFTA Secretariat while maintaining its independence in the area of dispute settlement.
The inaugural meeting signals the readiness of the AfCFTA dispute settlement infrastructure to take up any disputes that may arise in the course of trading amongst the member States. Disputes are inevitable in any free trade area and when any such disputes arise under the AfCFTA, the resolution is to be in line with the Protocol on Rules and Procedures on the Settlement of Disputes which forms part of Phase I Negotiation.
Recognizing its importance to the success of the trade deal itself, the Protocol proclaims that “the dispute settlement mechanism of the AfCFTA is a central element in providing security and predictability of the system” and “shall preserve the rights and obligations of State Parties under the Agreement and clarify the existing provisions of the Agreement in accordance with customary rules of interpretation of public international law.”
Though inspired by the World Trade Organization (WTO)’s dispute settlement architecture, the AfCFTA framework is meant to address some of the lapses in the WTO. In an exclusive opinion piece for “The Africa Report”, Mr Wamkele Mene, Secretary-General of the AfCFTA, explained how the AfCFTA will work in order to avoid the pitfalls of other trading blocs. As noted in the report:
“The WTO’s tribunal of final instance for global trade disputes, the Appellate Body, has been reduced to irrelevance over disagreements on its composition. The paralysis of both the WTO’s negotiating and dispute settlement arms means that trade disputes between China and the United States, two of the WTO’s largest members, have flared into open hostility.”
Drawing from the WTO experience, the African States in negotiating the free trade treaty cherry-picked the aspects of the WTO’s dispute settlement system that have worked and jettisoned the problematic parts.
At the Virtual Press Conference held on 04 May 2021 to update the public on the status of the implementation of the AfCFTA and the progress made so far, the AfCFTA Secretary-General re-echoed the importance of the dispute settlement mechanism to the success of the AfCFTA while answering questions from journalists across Africa. Commenting on the milestone achievement recorded with the inaugural meeting of the DSB, he noted that:
“The dispute settlement is really the mechanism and is at the heart of the African Continental Free Trade Area. And it is at the heart of what we mean by a rule-based trading system. And at the heart of what we mean by market certainty and predictability. For the first time on the African continent, there is a dispute settlement body that will have oversight over all the disputes that arise under the agreement whether there are investments related, trade in goods, trade in services, market access related disputes. This body will have oversight over all of that.”
All eyes are now on the AfCFTA DSB as it shoulders the task of ensuring that disputes between member States are resolved in an efficient, transparent, fair and impartial manner. The starting point is to ensure that persons appointed to be members of the Dispute Settlement Panels and Appellate Body have the expertise and experience in the subject matter of the dispute and are chosen strictly on the basis of objectivity.
There is an even more important corresponding duty on the State Parties when nominating persons to be included on the indicative list or roster of individuals to serve as Panelists to ensure that nomination is based on merit and proven expertise on the subject matter. The member States should eschew any nepotistic or tribal considerations in nominating State representatives. The Nigerian government should resist the temptation to premise its nominations on Federal Character or other ethnic or religious considerations as we’ve seen in recent appointments.
Recent events such as the reported discriminatory measures against Nigerian traders in Ghana, the closure of the Nigerian border with Benin Republic, the Xenophobic attacks in South Africa on African businesses and the retaliatory attack on South African-owned businesses present examples of the kind of disputes that may come up before the AfCFTA DSB assuming that similar issues arise in the future. Others may include disputes over conflicting public policies, tariffs and non-tariff barriers, rules of origin, dumping, regulatory excessiveness, standardization, trans-shipment, taxation, market access, and consumer protection etc.
The AfCFTA dispute settlement mechanism is restricted to State-to-State disputes. The treaty is silent on the mechanism for the resolution of disputes between private individuals. Notwithstanding this limitation, the private sector participants such as the SMEs and other business entities will be able to petition their governments to implement the rights and obligations set out in the agreement establishing the AfCFTA. That way, the rights of the private sector can be enforced using the State instrument.
For instance, in a situation where citizens of a member State are being subjected to discriminatory measures in another AfCFTA member country, the affected country may decide to refer the case to the DSB on behalf of its citizens, after exhausting the amicable settlement options such as Good Offices, Consultations, Conciliation and Mediation. It is not yet clear what yardstick will guide such referrals or to what extent such anti-free-trade measures will impact on the citizens of the member state before it decides to challenge the infractions at the DSB. Whatever the case, where a member state fails to protect the rights of its citizens, the affected traders may seek other legal remedies available under the national laws or within any bilateral and multilateral instruments applicable to the disputes.
In relation to investment disputes, the ongoing negotiation of the AfCFTA Protocol on Investment is meant to clarify the uncertainty around the framework for resolving investor-state disputes. The member states in choosing to resolve their disputes within the AfCFTA framework should be aware of the fork-in-road provision under article 3(4) of the Protocol, which precludes a State Party who has invoked the dispute settlement procedure under the Protocol with regards to a specific matter from invoking another forum for dispute settlement on the same matter. Another area of interest is the enforcement of decisions reached under the AfCFTA dispute settlement process.
The effectiveness of a dispute resolution mechanism is often measured with the 3 E’s which are efficiency, expertise, and enforceability. Challenges will likely arise in relation to compliance with decisions under the AfCFTA as we have seen under the WTO and other regional trade treaties. It is hoped that the desire to enhance investors’ confidence and the spirit of amity will spur the AfCFTA members to comply with decisions made by the dispute settlement bodies. In the end, the success of the AfCFTA will depend largely on the willingness of the member states to adhere to the agreement and to eschew any form of self-help when they perceive any breach of the trade deal.
Insurance Recapitalization: The quest for efficiency
To tap into this, however, would require players to come up with innovative products.
As the phase II deadline for the recapitalization of the Nigerian Insurance Industry draws nearer, cracks are beginning to emerge from the wall. The most recent being the National Insurance Commission’s (NAICOM) revocation of UNIC Insurance Plc’s license with effect from the 25 March 2020. Consequently, the firm was handed over to a receiver/ liquidator to ensure a seamless liquidation process.
According to Mr. Sunday Thomas, the Insurance Commissioner, the company currently manifests every symptom of a business that would not survive the recent wave, and all efforts to resuscitate it are being frustrated by its owner.
Over the years, especially since the last recapitalization in 2007, the industry has been engulfed in a brawl between the laggards and the high-fliers. While the underperforming entities constantly have issues of delay in claims payment, which has created distrust for the general insurance proposition in Nigeria, the “high-fliers” have continued to battle that narrative through increasing levels of efficiency.
NAICOM has also been coming up with policies to ensure seamless insurance delivery. Recall that in 2019, NAICOM instituted measures to ensure that players in the industry make prompt claims and benefits settlement a priority as part of its quest to restore the eroding public trust for Insurance in Nigeria.
Since the policy of recapitalization was proposed by the regulator, activities have intensified in the industry as players seek to meet the stated deadlines. For instance, we saw a flurry of bonus issuance of shares in December 2020, as firms sought to meet the Phase I deadline by converting retained earnings to paid-up capital as directed by NAICOM. This followed in the track of the series of takeovers that were announced in late 2019 and early 2020. We note that beyond improving underwriting capacity in the industry, the recapitalization exercise would eliminate operationally weak firms that have been a spanner in the wheel of the industry over time.
In our view, there is enormous potential for the players in the insurance industry in Nigeria given its untapped potentials as insurance penetration remains significantly low. To tap into this, however, would require players to come up with innovative products.
One of such innovative ideas in our view is developing products targeted at millennials and Gen Z, who are currently excluded from the insurance net in Nigeria; despite constituting a sizeable number of Nigeria’s population. Opportunities in the insurance industry are widely unexplored and a combination of favourable policies from NAICOM and efficient delivery by surviving players can help open more untapped areas.
CSL Stockbrokers Limited, Lagos (CSLS) is a wholly owned subsidiary of FCMB Group Plc and is regulated by the Securities and Exchange Commission, Nigeria. CSLS is a member of the Nigerian Stock Exchange.
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