Making the African Continental Free Trade Area (AfCTA) work for Zim

TNote from the ZNCC HE AfCFTA is a flagship project of the African Union (AU), established in 2018 to create a single market for goods and services, facilitated by movement of persons, to promote industrial development and sustainable and inclusive socio-economic growth to deepen the economic integration of Africa.

The AfCFTA has created the largest free trade area in the world measured by the number of participating countries. The pact connects 1.3 billion people across 55 countries with combined gross domestic product (GDP) valued at US$3.4 trillion. It has the potential to lift 30 million people out of extreme poverty, but achieving its full potential will depend on putting in place significant policy reforms and trade facilitation measures.

Zimbabwe was among the first countries to ratify the AfCFTA agreement having signed the agreement on 24 May 2019. Zimbabwean businesses now have an opportunity to expand and enter into regional markets within Africa. The AfCFTA facilitates imports and exports among Member States, including Zimbabwe, with lower or no tariffs, free access to the market and market information and the elimination of trade barriers including non-tariff measures. Zimbabwe’s private sector has a lot to benefit from the AfCFTA and deliberate efforts by both the Government and the private sector as well as development partners to enhance the implementation of the agreement will go a long way in ensuring that the benefits are realised.

Despite concrete and deliberate efforts to increase trade among African countries, intra-African trade remains relatively low compared to other regions like the European Union and Asia. In the year 2021, 1 out of 10 products exported by Africa entered the African market, while the remainder was destined for overseas markets compared to 6 out of 10 exported for the EU market by EU countries and 5 out of 10 for the Asian market by Asian countries. Africa’s exports to the rest of the world remain too heavily focused on natural resources, mostly in raw form and some being semi-processed. Nonetheless, trade in Africa tends to be more processed with the share of processed products in intra-African trade accounting for 53 percent.

Indeed, with the right policy choices, African countries can unlock significant export opportunities. Unrealised export potential in Africa amounts to US$25 billion, the highest share of unrealised potential compared to other regions of the world. The African Continental Free

Trade Area (AfCFTA) brings new and different opportunities for intra-African trade and deeper continental integration. There is optimism about the impact of the AfCFTA, yet about 50 percent of the firms surveyed in Africa are unaware of the AfCFTA. As a Business Member Organisation, the Zimbabwe National Chamber of Commerce (ZNCC) has a mandate to equip, capacitate and inform its members on trade and investment opportunities within Zimbabwe and beyond. In this regard, the 2023 ZNCC Annual Congress presents a platform for expert discussion on the best possible ways for Zimbabwe to benefit from the AfCFTA and tape into the opportunities presented. Also, the aim of such a forum is to reduce the information gap and facilitate stakeholder engagement at the highest level. The event will be held from 28 to 30 June 2023, preparations have begun in earnest and registrations are in order.

Since its inception in 2018, the following milestones have been achieved within the AfCFTA Agreement:

◆ As of April 2023, AfCFTA Agreement was ratified by 47 AU Member States, representing 85 percent of the AU Member States

◆ Trade in Goods — 46 schedules of tariff concessions received, representing 85 percent of the AU Membership

◆ Rules of Origin negotiated at 88.3 percent convergence (pending issues — automotive, textile/clothing)

◆ Trade in services — Provisional Schedules of Tariff Concession (PSTC). 46 provisional schedules have been received including four from Customs Unions (East African Community (EAC), Economic Community of West African States (ECOWAS), South African Customs Union (SACU), and Economic and Monetary Union of Central African States (CEMAC). 36 of these offers have been technically verified. Nine (9) State Parties and non-State Parties are yet to submit their PSTC

◆ The AfCFTA Phase II negotiations covering protocols on Investment, Competition Policy, and Intellectual Property Rights (IPRs) completed

◆ The AfCFTA Appellate Body was also established and the Dispute Settlement Body (DSB) recently agreed on the modalities for the selection of members of the Appellate Body ◆ National Implementation of the AfCFTA has begun with 25 State Parties and 1 Regional Economic Community ( REC) validating their strategies of which nine are under implementation. In addition to these, 12 countries and three RECs are drafting their strategies and

◆ Guided Trade Initiative matchmaking businesses and products for export and import between interested State Parties in coordination with their national AfCFTA implementation committees. For Zimbabwean businesses, the time is now to tape into the opportunities being presented by the AfCFTA. The borders are gradually opening up for products originating within the continent and stiff international competition is beckoning. The time for protectionism is phasing out and surely, it is critically not about the private sector’s readiness for the AfCFTA. Whether ready or not, there is always a possibility of some sectors winning or losing in international trade. If the local producers are to be injured from participating within the continental trading bloc, they should be injured while playing.

The government has done its part by signing this agreement and putting in place a national implementation strategy which is crucial in its success. It is common knowledge as already been alluded to that African countries export raw commodities and they are lagging in terms of industrialisation. There are concrete steps that the private sector can take to make the most out of the AfCFTA.

Investing in skills for trade and economic diversification is critical for success in international trade. Skills for

Trade and Economic Diversification ( STED) is a programme that provides sector level technical assistance on identifying the skills development strategies required for future success in international trade.

It is designed to support growth and decent employment creation in sectors that have the potential to increase exports and to contribute to economic growth. Diversification can be achieved if, as a country, we concentrate on the following: developing the right skills for the workforce, strengthening business capabilities of target sectors and enhancing productivity and market competitiveness.

Developing the right skills is premised on the notion that human resources are central to the firm’s capacity to trade and diversify its portfolio. The aim is to create more employment in decent jobs with a focus on tradable sectors to facilitate export-led growth, better remuneration, and expand the opportunities for local firms to tape into local and regional value chains. Strengthening business capabilities of target sectors encompass

continuous improvement in enhancing efficiency and effectiveness of operations, compliance with standards and regulations, management (marketing, sales and channel management, supply-chain management, and logistics) as well as a bias towards development (innovation, design, and product development, and value chain development).

Zimbabwe is still behind in terms of product sophistication and the country’s updated industrialisation strategy should put more mechanisms to support businesses in product development. Better remuneration for workers and thriving to create decent jobs will enhance labour productivity and this should be supported by investments in production and information technology at the firm level. Thus, enhancing productivity is crucial for both domestic and international competitiveness.

Investment policies should drive the creation, modernisation and upgrade of the requisite infrastructure that aid in solving the logistics challenges. Upgrade of the ports of entry should counter smuggling of goods and ensure religious accounting of every export and import.

For the AfCFTA to work for Zimbabwe, trade policy measures need to be continuously taken at national and continental level in the gradual removal of tariff and non-tariff barriers. This can be done through the effective implementation of the AfCFTA in line with the private sector expectations.

In conclusion, tariffs are not the only problem and that’s the mainstream truth. There is a lot of standing blocks in the way of realising the potential of intra-African trade, especially for Zimbabwe.

The notion that African countries are producing almost similar goods and services should not deter us from enhancing the effectiveness and efficient operability of the AfCFTA.

There is a large market in West Africa for East African tea and coffee and a sizeable market in East Africa for plantations and specialised nostalgia products out of West Africa.

There is also a large market for the creative industry, for example, Nigerian movies and music, in the rest of Africa. Africans have a phenomenal potential for intra-continental trade.

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This article was prepared by the Zimbabwe National Chamber of Commerce (ZNCC) for Business Weekly