Africa can develop its own market by granting tariff-free access to goods produced in the continent’s special economic zones (SEZs), which will help to insulate it from the impact of the US global trade war.
Wamkele Mene, secretary-general of the African Continental Free Trade Area (AfCFTA) secretariat, told Business Times that the weaponisation of trade and tariffs, along with economic nationalism, had “a materially adverse impact on the African continent”.
Since taking office in January, US President Donald Trump has imposed, cancelled and reimposed a range of import tariffs on various countries and products, including a 10% baseline tariff on all imports from nearly every country that is still in effect.
“An increase of 10% tariffs on all African countries amounts to the nullification of the benefits of Agoa [the African Growth & Opportunity Act],” Mene said.
“So Agoa, as we know it, no longer exists. I don’t think we should blame the US. Agoa was not a trade agreement ... it was a unilateral preference. In other words, it was charity.
“Now that it has ended, we are in a crisis because we were overly reliant on that market and… the increase in tariffs has exposed the vulnerability of the continent of Africa in terms of lack of sufficiently diversified export markets.”
A recent meeting of African trade ministers agreed to pursue diversification of export markets and deepen trade ties with countries such as China and Brazil, as well as focus on using AfCFTA to create a regional market.
“South Africa exports automotives to the US market. Close to $4bn [R75bn] are some of the estimates, it could be more. The fact that the US market is one of the most important markets for the auto sector in South Africa is actually a reminder that there is an equally, if not more important, market on the African continent,” Mene said.
“Africa, by the year 2035, will require 5-million unit passenger vehicles, according to the Association of Automobile Manufacturers of Africa. That means that we have the capability and the opportunity to shift our production structures, market concentration and export market to the continent of Africa.”
Where the AfCFTA presents an opportunity is that the goods that we produce in the SEZs have a ready market in the AfCFTA general market
— Wamkele Mene, secretary-general of the African Continental Free Trade Area (AfCFTA)
At a regional AfCFTA conference on special economic zones in Djibouti this week, it was agreed that the goods produced in SEZs across the continent must enjoy full AfCFTA benefits, Mene said. Many of these products were previously treated as “third country goods”.
“It is agricultural products, it is the automotive sector, it is pharmaceuticals, it is manufactured goods. Where the AfCFTA presents an opportunity is that the goods that we produce in the SEZs have a ready market in the AfCFTA general market.”
AfCFTA — which seeks to turn Africa and its 1.54-billion people into the largest free trade area in the world — has 54 signatory countries.
Addressing a Financial & Fiscal Commission round-table this week, Deputy President Paul Mashatile said South Africa must learn from China and other nations by focusing on industrialisation and investing in infrastructure, and promoting SEZs.
“The creation of economic zones allows us to offer investment opportunities for both domestic and international investors. And for this, the timing is particularly opportune with the introduction of the [AfCFTA].”
He said South Africa must take advantage of its membership of Sadc and its status as a gateway to the rest of the continent.
“The free trade agreement is expected to boost intra-African trade by over 50% by 2035, boosting economic activity by reducing reliance on raw material exports and promoting value addition.”
Ayabonga Cawe, chief commissioner at the International Trade Administration Commission, said the post-war trade system now faced a real risk of unravelling.
“On the Trump issue … A big part of it is that there has to be some dialogue. We have to engage precisely with the US because around 48% of our entire export basket by value is now going to be subjected either to section 232 tariffs for national security reasons or the reciprocal tariffs.”
He said South Africa should do all it could to smooth tensions with the US, but “much of what South Africa does next will have to be calibrated towards finding alternative markets”.
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