There has been much excitement in official circles about the adoption of the African Continental Free Trade Area (AfCFTA).By the industry not so much – mainly because those responsible for moving freight on the continent understand the bottlenecks that still need to be unblocked.
For a start, as President Cyril Ramaphosa pointed out in his acceptance speech as the chair of the African Union for 2020, the problem is coming to an agreement about just what constitutes an African product or service. “We must all ensure that the AfCFTA does not become a conduit for products with minimal African value addition to enter and penetrate our local markets under the guise of continental integration.
“There must be a reasonable standard set for what constitutes a product that is Proudly Made in Africa ,” he said.“Rules of origin” negotiations are still taking place, and are likely to continue long past the one-year presidency of Ramaphosa. A report by the UN Economic Commission for Africa (ECA) and Trademark East Africa states that rules of origin can “make or break” the AfCFTA.Exporters would rather pay tariffs than comply with strict rules of origin, leading to low utilisation rates of tariff reductions, according to the report.
One of the biggest challenges to intra-African trade is border delays due to a combination of red tape, corruption, inadequate systems and skills shortages.“The problem with every border is the fact that they are government controlled,” Nick Porée of Nick Porée and Associates told FTW.Porée and his team have been involved with border post projects throughout Africa.
He says that government inertia can be overcome. Trade in East Africa has grown through the implementation of one-stop border posts thanks to conditions laid down by international donors.Cross-border traffic in the Southern African Development Community (SADC) region is also being facilitated by the establishment of one-stop border posts.Progress has, however, been slow.
Despite the success of the Chirundu one-stop border between Zambia and Zimbabwe in 2009, the one-stop border post between Mozambique and Ressano Garcia only opened nine years later, in 2018.It was only in 2019 that work started in earnest on the next one – at Beitbridge. Agriculture appears to be the sector providing the biggest opportunity.
According to Stephen Karingi, director regional integration and trade division at the ECA, the organisation estimates that the AfCFTA has the potential to increase the value of agricultural and food exports within the continent by US$16.8 billion by 2040.The biggest opportunities lie in textile, wearing apparel, leather, wood and paper, vehicle and transport, agro-foods such as milk and dairy products, sugar, beverages, vegetables, fruit, nuts and rice.
However, the report warns that this will not happen if the needs and concerns of businesses of all sizes are not addressed by the policy makers.Other bottlenecks identified in the report include narrow markets, poor infrastructure networks, and cumbersome administrative procedures. In addition, member states are reluctant to cede sovereignty in key sectors to the African Union.
Then there are the conf licts in Central Africa, the Horn of Africa, Northern Africa and West Africa.Another challenge – particularly in this period of global economic meltdown – is the funding of the regional and continental integration.The agencies needed to facilitate and manage the process need to be financed.
On the subject of finance, perhaps the biggest hurdle is the potential loss of revenue to participating states. The United Nations Conference on Trade and Development (Unctad) estimates that governments could lose up to US$4.1 billion in revenue (representing 9.1% of current tariff revenues) if all tariff barriers are dropped. Member states have agreed to liberalise 90% of tariff lines. The agreed timeframe for achieving this level of ambition is 10 years for LDCs (least developed countries) and five for non-LDCs.Of the remaining 10% of tariff lines, 7% can be designated sensitive and 3% of tariff lines can be excluded from liberalisation.
