AfCFTA should eliminate tariffs on goods traded between member states

In this final article, we will look at other factors that may hinder intra Africa trade and movement of people between African countries.

Upgrading and expanding transport routes is just one way of stimulating trade and movement of people between African states. But much more is still needed. We also need to focus on the types of goods that are traded within Africa. The March 2021 trade figures for Botswana show that diamonds accounted for 94 percent of total exports in that month and that they were exported to countries outside Africa, especially in Asia. Here there is a growing demand for diamonds in both India and China, countries where there is a rapidly growing middle class. Also, it comes as no surprise that few, if any, diamonds landed up in other African countries. After all, diamonds are luxury items and so would not feature in the budgets of most African citizens; most African countries are poor with a poorly developed middle class. And 48 percent of our imports came from South Africa and consisted chiefly of chemicals, fuel and manufactured goods. This shows that Botswana, like most other African states, exports mainly raw materials such as minerals and agricultural products. Such goods are then sent to countries outside Africa where they are changed into manufactured goods. This had its origins during the colonial era when African raw materials were exploited only to be sent to factories in European countries where they were changed into other goods for use by the colonial power. Thus it comes as no surprise to learn that only 17 percent of African exports are intended for other countries on the continent.

Recently, iron ore deposits have been found in Ngamiland, Botswana. But once mining begins, we will not be able to sell this iron ore to neighbouring South Africa since that country also produces it even though it is also an Anglophone country. And also we would not be able to sell it to other iron ore producers in Africa such as Zimbabwe, Mauritania, Liberia, and Angola. And a nearby noniron ore producer, such as Zambia, might import iron ore from any one of these African countries and not Botswana. So, Botswana might be forced to export its iron ore to industrial countries in Europe where it can be used to make iron and steel. However, if Botswana were to set up an iron and steel plant, then other African countries might be interested in buying our iron and steel instead of importing it from distant European countries. So, our trade with other African states would increase and so we would sell less to European countries. But setting up an iron and steel plant, like other heavy industries, is costly and requires highly skilled labour which, probably, will not be locally available. And these problems face the majority of states on the continent.

Likewise, Algeria would not be able to sell its oil to Chad, another oil producer. However, if it were to develop a petrochemical industry, then Chad might be interested in buying such products like plastics and industrial chemicals. Botswana has one of the continent’s largest reserves of soda ash. At present, we do not process it; instead, we sell it to South Africa where it is processed to make things such as chemicals and glass. Although there may be a market for such products elsewhere in Africa, at present, Botswana does not have the skills required to make them.

Beef is one of Botswana’s major exports. However, very few of the by products from the BMC abattoir in Lobatse are further processed into other products. Over 150 000 hides are harvested each year from the abattoir and yet they should be further processed in Botswana to make leather products such as belts, handbags, shoes etc. By doing so, Botswana would be more likely to sell such goods to other African countries. In contrast, many African countries produce hides when they slaughter cattle and they would have little, or no, interest in buying unprocessed hides from Botswana. Hopefully, the proposed Lobatse Leather Park may help Botswana to become a major exporter of leather goods in Africa. After all, the country has a comparative advantage in the raising of cattle!

Trade between different countries and peoples also has to be built on trust between sellers and buyers. A seller has to trust that the buyer for his goods actually pays for them in good time. And once a buyer has paid for his goods, he then has to trust the seller, not only to actually send them, but to also ensure that the goods are of an acceptable quality. Since buyers and sellers may live in countries that are far apart, there is no way that they can physically meet so as to better ensure that the deal is completed to the satisfaction of both parties.

Let us say that a South African im

porter of cocoa beans has a choice of importing cocoa beans from elsewhere in Africa, let us say, Ghana and Côte D’Ivoire ( Ivory Coast). Now which country is he most likely to buy cocoa from? They are both located along the coast in West Africa and are neighbouring states. And let us assume that the cost of the beans is the same in both countries. He would almost certainly choose Ghana since he would most likely trust a seller here than from one in the Ivory Coast simply because Ghanaians are also English- speaking and probably have a more similar mindset.

One major obstacle to free intra Africa trade are tariffs. A tariff is a kind of tax paid on imported goods. Let us say that a maize importer in Ghana wishes to buy South African maize at a cost of R2 000 per ton. But the Ghanaian government wishes to restrict maize imports by imposing a 20 percent tariff on maize imports. Now the Ghanaian maize importer would not only have to pay R2 000 per ton to the South African maize producer, but would also have to pay the Ghanaian government R400 ( 20 percent of R2 000). This means that the total cost of one ton of maize to the importer would be R2 400. And this would be the minimum price that the importer could afford to sell the maize in Ghana; after all, he has to make a profit! However, this price might now be too high for Ghanaian consumers who may then buy locally grown maize or other foodstuffs.

One of the most common arguments for tariffs is that they provide much needed revenue for African governments. Also, tariffs may be needed to allow and encourage local infant industries to get started and make profits.

Hence in our example, the Ghanaian government may wish to assist local maize producers to expand production and so reduce the need for imports of South African maize. Hence South Africa may now be forced to reduce maize exports to African markets. But this may lead to South Africa retaliating, for example, by reducing the importation of Ghanaian goods. Hopefully, the African Continental Free Trade Area will reduce, or better still, eliminate tariffs on all goods traded between member states. But only time will tell.

And in Botswana, as elsewhere in Africa, we also need to change our mindset. Batswana have traditionally been an isolated people and have had little contact with other Africans, even from neighbouring countries such as Zambia. We need to reach out more to other peoples on the continent by learning to speak other languages such as French and Portuguese; by doing so, we will more likely visit countries where such languages are spoken and be more willing to trade with them.

And that South African buyer of cocoa beans, with a knowledge of French, may now be more willing to trade with cocoa growers in Ivory Coast! So, it’s time for us to get out of our comfort zone! I myself have made several visits to six Francophone countries simply because I can communicate in French!

Finally, let us look at the European Union ( EU), a political and economic union of 27 nations with an estimated total population of some 450 million. The EU aims to ensure the free movement of people, goods, services and capital between member states. And passport controls and tariffs have even been abolished at borders for travel between member states! And no visas are required by nationals of an EU state to visit another EU state.

This, together with an excellent transport network, facilitates trade and movement of people across the EU. In fact, people move to other member states for a variety of reasons: vacation, work, study and retirement. And many countries in the EU belong to the Eurozone, a monetary union of 19 member states of the EU that have adopted the Euro as their currency ( the Euro is the second most traded currency in the world after the United States dollar). This means that trade is further helped by not having currency differences to deal with amongst most members. No wonder, then, that EU member states trade extensively with each other more than with other major trading powers. In fact, 68 percent of trade conducted in Europe is between European states alone.

So, perhaps we can learn much from the EU in facilitating trade and movement of people across Africa. In so doing, we need to remove all those manmade obstacles to trade and freedom of movement within Africa – differences in language, culture, traditions, religion, and mindset, poor transport routes, bureaucracy, tariffs, political conflicts and instability, banditry, corruption, lack of government will power. But there is a glimmer of hope as we have seen at Kazungula – the bridge there is a step in the right direction! Let other African states now emulate what the presidents of Botswana and Zambia have achieved. This is no time to hear of excuses to explain why intra Africa trade and movement of people cannot be realised!