Africa Continental Free Trade Area to boost Intra-Africa Trade

One of the biggest challenges African countries face to develop their trading base and volumes has been linked to enshrined historical colonial trade ties that has seen most Afro countries trade (import and exports) being concentrated with their former colonial masters. There has been some progress in diversifying trade partners but it has largely been trade with other major global players were the negotiation power is mostly steeped against the African countries.

These enshrined historical trade deals are so complex and opaque such that the national taxation authorities have limited capacity to understand their underlying transaction and thereby effectively tax them. Moreover, even getting the forex volumes trickling back into the local economies and banking sectors has been limited leading to volatile local forex markets as well as limited sizes of the money markets.

Zambia is no exception to this scenario. Despite its greatest potential for the best trade deals and growing its export volumes being with neighboring countries such as Angola and the Democratic Republic of Congo – DRC which have huge markets for primary products such as fresh farm produce, the country has seen more trade missions to Europe, Asia and the USA.

What these advanced economies need from Zambia for instance is mostly primary goods, Efforts to attract upstream investment in areas such as processing of copper to final goods manufacturing has been met with mere promissory notes. Even diplomatic efforts and establishing of good transport infrastructure to the neighboring Angola and DRC have moved at snails pace when these are the markets that are a low hanging fruit to strike trade deals with.

Zambia hosted for the first time the meeting of the African Union on the Continental Free Trade Area – CFTA from 10th to 15th September, 2018 in Lusaka. “The main purpose of CFTA meetings is to review and consult on outstanding issues on modalities for tariff liberalization, rules of origin and Trade in Services among African Union Member States in order to provide parameters that will guide member states to schedule their tariff and services concessions, and designate their sensitive products and products that will be excluded from liberalization,” Trade Ministry public relations officer Godfridah Chanda told the Zambian Business Times – ZBT

Chanda told ZBT that the African Continental Free Trade Area – AfCFTA is expected to create opportunities for scaling up production for producers, not only in Zambia but in the whole of Africa if properly implemented. The AfCFTA is expected to provide huge market access for produce, and ultimately contribute to job and wealth creation for Zambia in particular and African Countries as a whole.

However, there is a caution that the benefits under the CFTA are not automatic, individual countries such as Zambia need to prepare with their private sector to build the necessary capacity to trade and take advantage of market openness while minimizing the negative impact. Outstanding issues on modalities for negotiations on trade in goods relate to the version of Harmonized System of Commodity Coding and Description will be used as the basis for tariff concessions.

And the proportion of tariffs to be designated as sensitive products and those to be excluded from liberalisation based on options provided during an earlier meeting held in Senegal. The options are 5% sensitive and 5% exclusion; or 7% sensitive and 3% exclusion; or 9% sensitive and 1% exclusion; whether to apply anti-concentration to ensure that countries do not exclude an entire sector from liberalization; how to treat countries that are in a Customs union composed of Least Developed Countries (LDCs) and Non-LDCs and how to apply flexibilities,” she narrated.

The AfCFTA envisages liberalizing trade of goods and services for African Countries and extends its coverage to investment, competition policy and intellectual property rights. AfCFTA, once fully operational, will be the largest trading bloc in the world, bringing together fifty-five (55) African countries with a combined population of more than one billion people and a combined gross domestic product of more than USD 3.4 trillion.

Intra- Africa trade remains a key economic lever that African countries need to take advantage of. Zambia which has eight neighboring countries should put more efforts in completing roads, bridges and transport infrastructure to connect and link up these nearby markets. The country’s diplomatic efforts should also follow a similar trend and facilitate the striking of more trade deals with these neighboring and Great Lakes region countries which are in close proximity and do not need multi-billion dollar capital base for local entrepreneurs to engage in trade.