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 2 of a three-part series.
The agreement aims to eliminate 90% of tariffs, the existence of which can have both positive and negative effects on trade. Tariffs can be beneficial if used effectively by governments to support small businesses, but they also discourage the flow of goods and services between countries, making it more difficult and costly for goods to move.
Non-tariff barriers are also a significant issue that AfCFTA aims to address. These barriers include delays at border posts and ports, which add costs to business operations. The Free Trade Area aims to create a single market with the free movement of goods and services, simplifying customs procedures and cutting red tape. This will help reduce costs and promote trade within Africa.
In addition to facilitating trade in goods and services, AfCFTA also addresses other important aspects of economic growth such as the movement of persons and labour, competition, investment, and intellectual property. Encouraging skilled individuals to come and invest in African countries is crucial for upskilling the local workforce and achieving inclusive growth.
He reviewed the five key instruments of the AfCFTA:
- Rules of origin
- Tariff concessions
- The elimination of non-tariff barriers through an online mechanism
- The Pan African Payment and Settlement system
- The African Trade Observatory – a portal for trade within Africa
There has been a trickle of improvement under AfCFTA. Kenya, for example, has seen increased trade activities, including the export of coffee beans to various African nations. However, it is important to acknowledge that the process of fully implementing AfCFTA will take time due to the complex nature of the challenges it aims to address across the 55 countries.
One of the key obstacles that must be overcome is the need for policy reforms to ensure the smooth flow of trade. Reforms must be implemented promptly, and the involvement of the private sector can bring much-needed expertise and accountability. Hatton described the pace of reform as ‘glacial, and that’s being kind’.
Governments have a responsibility to implement necessary reforms. For instance, fuel subsidies need to be reformed to prevent the excessive burden of fuel taxes on businesses. Complex export procedures and limited export requirements currently create uncertainty and hinder trade. High tariffs on imports further restrict the growth of the HVAC&R sector.