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African Continental Free Trade Agreement and the cold chain industry

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By Lizelle van der Berg, director – GCCA South Africa

The African Continental Free Trade Agreement is the biggest free trade agreement globally since the formation of the World Trade Organisation.

The Global Cold Chain Alliance

GCCA Member, LHL Attorneys (LHL) and their affiliate company Africa Rising Corporate Advisory (ARCA) provide insight into the Cold Chain industry across Africa and have advised various cold storage service providers on the prospects of domestic and continental expansion.

Lizelle van der Berg sat down with LHL and ARCA to find out what impact the African Free Trade Agreement will have on the African cold chain.

Not many cold chain storage service providers necessarily track the progress of political trade agreements, please could you provide us with a short description of what the AfCFTA is?

Zunaid Lundell from LHL explains that the African Continental Free Trade Area (AfCFTA) is a free trade dispensation constituted by sovereign state parties of the African Union, pursuant to the finalisation of the African Continental Free Trade Agreement in 2018.

The free trade area will reduce barriers to imports and exports on the African continent and allow trade and services move more freely between African countries. The AfCFTA covers a market of 1.2 billion people and a gross domestic product (GDP) of 2.5 trillion US Dollars.

Even more interesting is the rate of Africa’s population growth and the prospect of Africa holding the largest and youngest continental population by 2050.

In a recent webinar, The SkyConnect Leadership Dialogue, attended by ARCA, Miss Emily Mburu Ndoria, the Director of Trade – Services from the African Union made it clear that ACFTA will not only focus on trade issues but will also look at providing a legal framework to assist in liberalising trade by facilitating integration between the different methods of trade along the supply chain – for example, production, manufacturing, transport, and visa regulations.

Once the regulations relating to these elements have been harmonised between countries, Africa should experience an economic boom on the continent.
However, Ndoria acknowledged that a challenge to the anticipated economic boom is poor transport routes and basic infrastructure, inadequate warehousing, and storage facilities.

What impact will AfCFTA have on the cold chain in Africa?

Lundell notes that Ms Ndoria’s discussion highlights the importance of the cold chain industry in Africa and the opportunity AfCFTA holds for cold chain operators wishing to expand into different African markets. The new trade routes brought about by AfCFTA are set to increase the need for warehouse operators and professional freight forwarders specialising in project cargo and cold chain logistics, infrastructure, and specialised services which Africa currently has very little of.

LHL candidate attorney, Maricia Smith noted further that AfCFTA can contribute to agricultural development by attracting domestic and foreign investment to sectors such as cold storage facilities and warehousing. Lundell also noted that although there would be increased investment interest in Africa it would be important for companies position themselves favourably to investors and take advantage of the competing bids Africa is set to receive from across the US, Asia, and Europe.

“The pandemic has limited transport and trade between African countries, and this is set to continue so lang as the pandemic remains a pervasive threat across the Continent.”

ARCA, which provides corporate advisory services to companies looking to expand into Africa noted that the intra-continental development of infrastructure and logistics routes will benefit cold chain service providers in the long term. African countries regularly export meat, flowers, and fresh produce to Asian and European countries. Moreover, as the population in Africa expands more cold storage services will be required which ensure that perishable products reach destinations across the African Continental Free Trade Area freshly and in good condition.

From left: Zunaid Lundell and Maricia Smith of LHL Attorneys.
From left: Zunaid Lundell and Maricia Smith of LHL Attorneys.

Has the Covid-19 pandemic had any effect on AfCFTA?

The pandemic has limited transport and trade between African countries, and this is set to continue so lang as the pandemic remains a pervasive threat across the Continent. The pandemic also resulted in the rescheduling of the operational launch of AfCFTA to the start of 2021 and made negotiations between various countries almost impossible due to connectivity problems and the unpredictability of trade and movement restrictions across sovereign and provincial borders of Africa.

Smith advised that the issues surrounding the AfCFTA have been separated into three negotiation phases. Phase I concerned the trade in goods and services and the actual AfCFTA, while Phases II and III concern competition policy, investment, intellectual property, and e-commerce. The rounds of negotiation allow different party states to agree on policy for a specific issue in that round. The negotiations are currently still ongoing with some issues regarding rules of origin, tariff concession and specific commitments on trade in goods and services.

At the Extra Ordinary Sitting of the African Union Assembly on 5 December 2020, the clear narrative was to have the implementation of Phase I issues finalised by June 2021. Thus, LHL believes that the forecasted African economic boom and all its benefits described above will see a delay of at least 12 to 18 months, however, once Phases II and III reach completion there is the real prospect of increased trade, economic activity and flow of services and goods between what were once siloed jurisdictions.

It is clear to see that there will be long-term opportunities once AfCFTA has been fully implemented by all state parties. Lundell advises that as short-term objectives, cold storage service providers should start positioning themselves and their operations to be able to capitalise on the opportunities once they arise.

The Global Cold Chain Alliance (GCCA) is a trade association representing the temperature-controlled supply chain, including cold storage, transportation, construction, equipment suppliers, and service providers.