SA Launches its Trade under the African Continental Free Trade Agreement

Latest Developments on The AfCFTA

By Jessie Taylor

South Africa launched its trade under the African Continental Free Trade Agreement (AfCFTA) with the first shipment dispatched at the start of the year. This follows the publication in the Government Gazette of the terms under which South Africa will participate in the new free trade agreement.

South Africa is among 12 countries to have finalised their legal modalities that will enable the trade of thousands of product lines, ranging from food and beverages to steel products and equipment, taxis, pharmaceutical and personal care products, chemical products and household goods such as fridges and televisions.

South Africa is one of four of the five Southern African Customs Union (SACU) countries to practically realise the AfCFTA Agreement.

Charting A New Course for Africa

The AfCFTA is a trade agreement between all 55 member states of the African Union. The AfCFTA aims to significantly boost intraAfrica trade, particularly in value- added production and trade across all services sectors of Africa’s economy.

Officially launched in 2021, the agreement has significant potential to unlock economic activity on the continent. The AfCFTA aims to remove several barriers that the region has faced in trade and competitiveness and opens up opportunities for Africa to join regional and global value chains.

The preferential trade agreement aims to increase international exports and intra-African trade, unlocking tremendous opportunities for businesses to access new markets across the continent. The AfCFTA creates a single market, which is projected to grow to 1.7-billion people and $6.7-trillion in consumer and business spending by 2030. With a GDP of approximately $406billion, South Africa represents one of the largest economies on the continent. The successful implementation of the AfCFTA is likely to provide South African exporters with new market access opportunities to key markets in the continent beyond the Southern Africa Development Community.

This, in turn, is likely to unlock further growth in the economy while providing market access in turn for other African countries to the SA market. Taking a leading role in trade President Cyril Ramaphosa officiated the dispatch of the first shipment. H.E. said: "For South Africa, as with many other African countries, the start of preferential trade will create great opportunities for growth and development. Not only will it benefit our country’s producers, but it will also see a huge increase in traffic through our ports, our airports and our land-based border posts."

Officiating the launch of South Africa's first shipment and preferential trading under the AfCFTA, the President said the levels of intra-African trade have been growing in recent years, but remain small by global standards. Intra-Africa exports are reported to stand at around 16% of Africa’s total exports, compared to 55% in Asia, 49% in North America and 63% in the European Union.

“African countries trade with the rest of the world but we have limited trade among ourselves. The reason for this is clear: we are principally exporters of raw materials, selling rocks and black liquid to the world, instead of harnessing our oil and the minerals to industrialise our continent. We need to change this," - President Ramaphosa.

“We have a unique opportunity to lift millions of people out of poverty by empowering women and young people to change the continent’s business environment. That is why, as the South African government, we are focused on implementing our Freight Logistics Roadmap to improve the efficiency and competitiveness of the country’s rail lines and ports."

The President said the implementation of the agreement will accelerate the development of regional and local value chains - the opportunities are vast, with prospects in food and beverages, in cars and trucks, in clothing and textiles. The successful implementation of the AfCFTA is expected to lead to diversification of exports, increased productive capacity, growth acceleration, investment, employment opportunities, and incomes.

The World Bank projection is that AfCFTA has the potential to lift 100 million people out of poverty, 60 million Africans out of abject poverty, and the rest out of moderate poverty. It could also contribute about $450-million to Africa’s overall GDP and could potentially increase wages by close to 9%. AfCFTA allows the continent to chart its own path, with its citizens able to actively diversify economies, foster regional value chains, and promote the export of home-grown products.