Compiled by Eamonn Ryan, derived directly from a presentation by Chris Hattingh, head of policy analysis at the Center for Risk Analysis (CRA).
The following presentation was made at the second annual GCCA African Cold Chain Conference held previously in Cape Town. This is Part 1 of a three-part series.
Chris Hattingh, head of policy analysis at the Center for Risk Analysis (CRA) emphasised that his presentation often left audiences “stony faced” at the depth of risks and challenges with cross-Africa trade, but noted that commensurate with the high risk, came the opportunity for high rewards for early movers.
Hattingh, an expert in trade and economic policy, addressed the audience on the significance of the AfCFTA in the HVAC&R sector. Hatton is a member of the Advisory Council of the Initiative for African Trade and Prosperity, as well as a senior fellow at African Liberty and member of the executive board of the Global Trade and Innovation Policy Alliance. The following is his presentation:
The African Continental Free Trade Area (AfCFTA) has been hailed as a transformative agreement that has the potential to revolutionise trade and economic growth on the African continent. AfCFTA aims to lower barriers to trade, reduce tariffs, and facilitate the flow of goods, services, and materials, ultimately leading to increased economic growth, job creation, and an improvement in living standards for the people of Africa.
Hattingh emphasised the transformative potential of the AfCFTA, stating that it could be the most significant change Africa experiences in the next 50 years. Currently, Africa only accounts for 2% of global trade, with 17% of African exports being intra-continental compared to 59% for Asia and 68% for Europe. Exporting within Africa is often more expensive than exporting to Europe, which calls for a change.
Connecting 1.3 billion people and with a combined GDP estimated at USD3.4-trillion, the agreement holds the potential to boost regional income by 7% or USD450-billion, lifting 30 million people out of extreme poverty by 2035. The trading under AfCFTA officially began on 1 January 2021, although implementation is being carried out in stages, and several policy barriers still need to be addressed.
The HVAC&R sector stands to benefit significantly from the AfCFTA. It is estimated that Africa’s exports could increase by USD560-billion, with a particular focus on manufacturing. Furthermore, intra-continental exports are expected to rise by 81%, and inter-continental trade by 19%. If successfully implemented over the next 20-30 years, AfCFTA could generate a combined consumer and business spending of USD6.7-trillion by 2040.
Hattingh highlighted some of the key objectives of the AfCFTA, including the reduction of trade costs and the facilitation of border operations. By streamlining licensing, documentation and operations at ports and railways, AfCFTA aims to make trade more efficient. Additionally, the agreement aims to position Africa to take advantage of the current global environment, where there is a shift in supply chains and investment due to a ‘risk off’ sentiment. Hattingh posed the question of whether – as global supply chains look for better returns on investment – Africa could potentially attract these investments and benefit from the relocation of value chains away from countries like China.