Gaborone -The Southern African Customs Union (SACU) has cautioned members to tread with care when implementing the African Continental Free Trade Area (AfCFTA).
The African Union has since announced that the first commercial deal under the continental trade pact will take off on January 1, 2021 and any outstanding issues will be ironed out via virtual engagements.
Recently, SACU ministers responsible for trade held a virtual meeting on AfCFTA and deliberated on likely sticking points on implementation of the pact.
Chairperson of the SACU Ministers of Trade and Industry, South Africa’s Ebrahim Patel told his colleagues that, “The AfCFTA raises a number of questions that go to the heart of policy and strategy. The first question is what we want to achieve from the Continental Free Trade Area.”
According to Minister Patel, Africa had 17 percent of the world’s population but only three percent of global trade and contributed just two percent of manufacturing.
“We are largely exporters of raw materials to the rest of the world; and importers of value-added manufactured goods and services. Across our continent, this is our common reality – in which our national circumstances differ only in degree.”So if the vision of the AfCFTA is to promote a ‘Made in Africa’ platform, then we need to focus on the mechanics of deepening our industrial base,” he said.
Minister Patel said “if we do not take care, (the pact could) simply become at worst, an opportunity for transhipment, in which products made in Asia, the Americas or Europe are simply re-labelled in one of the countries in the Free Trade Area; or at best only basic transformation takes place on the continent, with real value-addition still centred outside Africa”.
Such outcomes, he said, would trap Africa at the bottom rung of development and make a mockery of the continental trade agreement.
“But to deepen the levels of industrialisation, as each of us know, is hard work and it requires that we actively attract investment and provide an environment for industry to flourish. Industrial policy measures and partnerships with the private sector become critical,” he said.
The second question, Minister Patel said, flowing from the AfCFTA was to establish an appropriate role for SACU.
“The AfCFTA has the potential to reduce the value of SACU, as each of our countries increasingly tap opportunities elsewhere on the continent; or it can bring us closer together as a centre of manufacturing and innovation, together gearing up our productive capacities to provide goods and services to the rest of the continent; and integrating our value-chains so that we have critical mass,” he said.
Minister Patel said countries must also tackle the challenges that had delayed the operationalisation of the AfCFTA.
“These relate to a number of issues, including tariff offers and rules of origin as well as the delays in a number of countries ratifying the AfCFTA.
“Nigeria, the largest country by population on the continent, has not yet ratified the treaty. It has cited concerns with both transhipment itself; and the implications of the level of ambition that would be required to meet the 90 percent tariff liberalisation target, given these challenges,” he said.
Discussions on rules of origin have yielded agreement on most products; but a few sensitive sectors not yet been concluded, the South African trade chief pointed out.
“With respect to work on SACU’s offer to the AfCFTA, I am informed that our officials, supported by the Secretariat, have undertaken extensive technical work which has brought us to broad consensus on 86,6 percent of tariff lines but we have not yet achieved consensus on the 90 percent target; and while most rules of origin have been agreed, there are still a number of gaps covering sectors that are important to member states,” he said.
He added that the critical issue is how to ensure that the union would finalise outstanding matters to allow trading to commence under the pact on January 1, 2021.
“As a region, we therefore need to take the lead in the AfCFTA process in order to safeguard, not only the regional strategic interests, but to also consider the collective continental interests and thereby ensure a win-win outcome for the continent as a whole,” he said.
Namibia’s Ministry of Industrialisation also explained the meeting deliberated on issues pertaining to SACU’s approach to AfCFTA negotiations,!including reflecting on strategic and policy interventions on positioning SACU in the AFCTA, approach to the continental industrialisation agenda, SACU’s offer the AFCTA and approach on the outstanding rules of origin.