African trade agreements a boon for SA

The African Continental Free Trade Area and the Tripartite Free Trade Area could see trade barriers fall and future trade zones being created, significantly enhancing intra-African trade.

Although South African agriculture contributed about US$10 billion (about R139 billion) to the nation’s exports during 2017, it has yet to benefit fully from exports to Africa, valued at US$60 billion (R832 billion) annually.

This was according to the head of Agribusiness at Standard Bank, Nico Groenewald, who said that only about 16% of the continent’s agricultural production was traded between African countries. The rest was exported.

“Intra-African exports are artificially constrained by tariffs and border controls,” he said. “These reduce the benefits associated with the lower logistic costs for intra-Africa and sub-Saharan African trade.

“The African Continental Free Trade Area [AfCFTA] and the Tripartite Free Trade Area [TFTA] could change this. The AfCFTA agreement, already signed by 44 African Union member states, commits countries to removing tariffs on 90% of goods, with 10% of ‘sensitive items’ being phased in later.”

A free-trade zone could help ensure that food produced in Africa stayed in Africa.

“Loosening controls over agricultural imports could boost the creation of local production facilities for beneficiation of imported crops while creating job opportunities.”

The African Centre for African Transformation had estimated that 1,2 billion people and states with a combined GDP of US$2,2 trillion (R30,5 trillion) could be affected, according to Groenewald. The opportunities for South African exporters would be massive.

He cautioned, however, that the AfCFTA benefits could be muted by the non-participation of some major countries due to concerns about a trade zone’s impact on jobs. This might delay the introduction of the agreement.”

South Africa last year became a signatory of the 2015 TFTA as a basis for participating in the AfCFTA negotiations. TFTA would only come into force once ratification was received by 14 member states.

“Both these trade agreements could transform intra-African trade in agricultural products and related goods, but finalisation of the accords may take several years to conclude,” says Groenewald. “The results, as far as South African agriculture is concerned, will be worth waiting for.”