SPECIAL FEATURE
A new era in trading has begun The African Continental Free Trade Area offers enormous opportunities for expansion. down to detail on this agreement, rather than leaving it in “talking shop” mode. Tariffs on 90% of items are due to be reduced in the next decade. More time has been allocated to poorer countries to allow them to adapt, 7% of items will take longer and 3% can stay protected. The African market of 1.3-billion people is expected to grow to 2.5-billion by 2050 but the key statistic targeted by AfCFTA is intra-African trade. If the agreement is to have meaning, then the insipid figure of 16.6% in 2017 must grow. This compares with 69% in Europe and 59% in Asia (United Nations Conference on Trade and Development and Brookings Institution). Exports to the rest of the world made up between 80% and 90% of Africa’s total trade from 2000 to 2017 (UNCTAD). In 2019 only about 27% of South Africa’s exports were delivered to the rest of the continent. Just four countries currently account for 41.7% of intra-African trade, South Africa, Namibia, Nigeria and Zambia, according to the Export Credit Insurance Corporation of South Africa (ECIC). The ECIC has invested in the African Export Import Bank in an effort to boost intracontinental trade to $250-billion. The South Africa-Africa Trade and Investment Promotion Programme has the same goal. Areas with existing regional trade blocs that function well – such as the Common Market for Eastern and Southern Africa (COMESA) and the Southern African Development Community (SADC) – will likely be the quickest to gain from AfCFTA. These regional groupings are best placed to start thinking beyond tariffs: more efficient customs posts, lower air-freight costs, better-run ports, regulatory alignment and improved rail and road infrastructure. Railways, roads and ports are not the only kinds of logistics infrastructure that is needed. South African-based investment fund African Rainbow Capital is a participant in a $100-million
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n 1 January 2021 a new era in African trade began. All but one of Africa’s 54 countries have signed on to the African Continental Free Trade Area (AfCFTA) and 34 countries have ratified it. Implementation was postponed for six months because of Covid-19. Eritrea is the outlier but fully 41 members have already submitted tariff reduction schedules, suggesting that there is an appetite for getting
AFRICAN BUSINESS 2021
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