Africa Continental Free Trade Area: Legal Challenges and How to Navigate

Africa Continental Free Trade Area (AFCFTA) is meant to promote economic development, diversification of economies and reduce dependence on commodities by boosting inter-Africa trade by eliminating tariffs and other barriers which restrict or deter inter Africa trading activities. All African countries, except Eritrea are part of AFCFTA. Whilst AFCFTA is promising, there are a number of legal challenges (among others) for international corporations to effectively participate in AFCFTA.

Key Legal Challenges:

Different Legal Frameworks: Member States still have different legal systems which makes it difficult for international companies to have uniform compliance obligations throughout Member states.

Regulatory Compliance: Each of the Member States impose their own legal compliances, from central Government Authorities, Local Government Authorities and other Governmental Authorities. This means that, whilst AFCFTA allows a free trade area, no exemption is granted to such international companies from complying with local regulatory compliance.

Localization Laws: More and more AFCFTA Member States are adopting local ownership and/or local directorship requirements on foreign / international companies operating in their jurisdictions. In most instances such local ownership is imposed on specific sensitive sectors. Also, it is not strange to find African States having legal requirements which require locals to be given priority in employment and supply services, and some legislations go further to establish the minimum percentages to be attained.

Direct and Indirect Taxes: Notwithstanding signature of AFCFTA by Member States, still the same Member States retain their local tax laws which impose taxes on imports, exports and other taxes imposed within the Member States to all corporate bodies doing business within such countries. It is worth noting that, there are some Member States who have signed double tax treaties in exclusion of other Member States and some States already implement free tax zones or have common tax regime for imports and exports. It remains unclear how these will be handled in co-existence with AFCFTA.

Dispute Resolution: Whilst the AFCFTA has established a dispute settlement mechanism, still Member States retain their own laws and dispute settlement mechanisms. Also, some Member States limit use of foreign law and/or use of foreign dispute settlement forums in some sectors. Such laws are still in place in such Member States which means parties will be restricted from utilizing the dispute settlement mechanism which is established under AFCFTA. In addition, it is worth noting that, some Member States still require foreign arbitral awards or foreign court judgements to be filed and enforced by local courts, which are given wide mandate to set aside such arbitral awards and foreign court judgments.

Intellectual Property Rights: Whilst ARIPO is in place, still Member States may require such trademarks to be registered in the domestic registries to ensure protection. It is important for international companies whilst taking advantage of AFCFTA to consider IP rights and to what extent they are protected under the domestic laws.

Anti-Trust legislations: Some Member States have anti-trust legislations which impose restrictions on various trade practices and consider them anti-competitive. Hence, international companies operating under AFCFTA must ensure that they are in compliance with the domestic anti-trust legislations.

Navigating the posed challenges: International companies operating under AFCFTA or wishing to take advantage of the opportunities offered under AFCFTA must undertake prior comprehensive due diligence mainly legal, tax and compliance to ensure that they are not in breach of any domestic laws. Eventually the Member States may adopt a more uniform legal structure which will ease the international company’s ability to effectively participate in AFCFTA and at the same time, attain the intended objectives of its establishment. International companies must understand the uniqueness and diverse challenges and opportunities that each African country offers.

International companies rely on local and international law firms such as Go 2 Experts to obtain appropriate and correct legal advisory services to assist in navigating and taking advantage of the opportunities offered under AFCFTA. Should you need our assistance, please do not hesitate to contact us.

Disclaimer

The views expressed in this paper are those of the author only and should not be considered as an official interpretation, defamatory or interference of any legislation, laws or policies of any country including Tanzania. The contents of this paper should not under any circumstances be reproduced or used without our express written consent. It should not be considered as a legal advice to any of its recipient(s) and should not be relied upon without obtaining further legal advice. We accept no liability for any loss occasioned or suffered due to the contents of this paper.