Trade and industry stakeholders have called on the government to fast track the implementation of African Continental Free Trade Area (AfCFTA) agreements, saying while there is some measurable progress in the export of textiles, much more needs to be done to improve transport and logistics infrastructure on the continent.
Business Day reported on Monday the AfCFTA secretariat would soon finalise a plan for a common tariff and customs policy among all signatories to the agreement.
According to a report from the secretariat of the AfCFTA this month, “significant progress has been made on the regulatory frameworks”, especially for communications and financial services, “which aim to enhance market predictability and transparency”.
This includes an implementation plan about the “rules of origin,” common procedures in determining the eligibility of products to the AfCFTA and the “granting of tariff preferences” as provided for under the agreement.
Once this has been done, it is expected to encourage cross-border digital payments and data transfers and “developing the protocol on intellectual property rights” as mandated by the 36th ordinary session of the assembly of the AU.
These processes are expected to be concluded by February 2025.
The report further states that once the communications and financial services road map is in place, work will begin in earnest on “transport and tourism services frameworks”. The report was presented to the AfCFTA council of ministers this month in Addis Ababa, Ethiopia.
Transport and logistics — that is a big lever to bring costs down. With more cars, comes more regular shipments and the lower the costs... I think SA is playing a vital role, and [it is] crucial to encourage trade in Africa.
— Martina Biene, Volkswagen Group Africa MD
Volkswagen Group Africa MD Martina Biene says the AfCFTA is “the key to SA’s future [economic] success.”
“It is a very crucial plan. We need the automotive sector plan concluded as well as the roots of origin statement. On that, I think 40% local African content is a good amount to encourage localisation. There is hope to conclude some of this in February,” she said.
Biene added that the easiest way to get things moving would be to reduce the cost of transporting goods across the entire continent.
“Transport and logistics — that is a big lever to bring costs down. With more cars, comes more regular shipments and the lower the costs... I think SA is playing a vital role, and [it is] crucial to encourage trade in Africa,” Biene said.
Nineteen AfCFTA countries have gazetted their tariff preferences on the initial 90% coverage of tariff books. SA and other Southern African Customs Union countries are expected to be able to boost trade with the countries outside the region including Algeria, Egypt, Ghana, Kenya and Rwanda, among others.
The AfCFTA is an ambitious economic initiative of the AU that seeks to address the challenge of Africa’s low level of participation in the global economy and world trade.
It is anchored on the development integration approach, which places emphasis on market integration, infrastructure development and industrial development, to boost intra-Africa trade and support sustainable economic growth.
However, CEO of XA Global Trade Advisors Donald MacKay has said that not enough is happening fast enough in terms of the AfCFTA to allow SA to achieve 3% economic growth by the end of 2025.
“The infrastructure focus is good. As an aside, a large bank recently told me there is no shortage of capital for infrastructure, but with the chaos in Africa, [there are] concerns [about] getting paid back and the projects actually [being] completed,” MacKay said.
The AfCFTA, as one of the flagship projects of the AU’s Agenda 2063, aims to build an integrated African market of more than 1.2-billion people with a combined GDP of about $3.4-trillion. If successful, the AfCFTA secretariat believes that by 2035 the volume of total exports is expected to increase by $560bn (29%) with intra-Africa exports increasing by 81% and exports outside the continent by 19%.
While some of the benefits of the AfCFTA would be derived from reduced tariffs, the biggest gains are expected from lowering trade costs by reducing non-tariff barriers and improving hard and soft infrastructure at the borders.
This is particularly significant given SA Reserve Bank governor Lesetja Kganyago’s warning last week that the brighter outlook for inflation in the country could be short-lived in light of global geopolitical tensions and the protectionist policies of US president-elect Donald Trump’s administration.
“There is, however, a rise of protectionism about the globe and there is a concern that the protectionism that we are seeing could impact global trade, and global trade is the lifeblood of the global economy,” Kganyago said.
With Business Times
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