Exciting times ahead for dealers despite expected dental problems and COVID-19
One day in February 2020, Accra-based coffee and cocoa trader Meron Dagnew visited the Secretariat of the New African Continental Free Trade Area (AfCFTA) to introduce herself, even before the secretariat was fully operational.
“I could not wait,” she told Africa Renewal in a recent interview. “I need free trade in Africa to get started as soon as possible; it will be so good for my business.”
The AfCFTA Secretariat officially opened in Accra on 17 August 2020, although free trade will now start due to the COVID-19 pandemic on 1 January 2021 instead of the original date of 1 July 2020.
Ms Dagnew is keen to take advantage of reduced tariffs and a consolidated market – potential spinoffs from AfCFTA – to expand the operations of her company, BE Kollective, which imports Ethiopian coffee to Ghana and exports Ghanaian cocoa to Ethiopia.
“I hope not to pay as much as 35 percent rates on my goods; I hope that soon I can take my added value cocoa and coffee to African countries without problems with rules of origin. Then I can make more profit, expand my business out and hire more people, ”she says.
Ethiopia is one of the largest coffee producers in the world, and Ghana is the second largest cocoa producer in the world, after Ivory Coast. Me. Dagnew is particularly attracted to the market of 380 million people in West Africa.
High tariffs and non-tariff barriers, such as the delay in customs and administrative bottlenecks at border posts, highlight the challenges facing Afrikaans traders, while at the same time emphasizing a strong desire by traders for a free trade zone.
The AfCFTA eliminates tariffs on 90 per cent of the goods produced on the mainland, tackles non-tariff barriers to trade and guarantees the free movement of persons.
Me. Dagnew’s business slowed in March 2020 just as the pandemic began to rage. As African economies slowly begin to open up as they adapt to the reality of the pandemic, Ms. Dagnew plans to resume trading soon.
Yet she is concerned about other structural challenges to trade within Africa, such as competition with major global brands competing on an unequal playing field. BE Collective thing for example according to me. Dagnew with Nescafé, which is imported by retailers in Ghana.
“The problem is that importers of Nescafé from countries in Europe or Asia pay much less tariffs than I do, because those countries have favorable trade agreements with African countries,” she emphasizes. “That is why the chance is currently stacked on our intra-African traders.”
Dagnew is also concerned that countries’ customs services do not have sufficient information about the AfCFTA.
“I did not go to the customs service in Ghana not long ago and told them that I do not have to pay tariffs at some point because of AfCFTA. They did not understand what I was talking about,” she recalls. “There are a lot of traders who have no idea what AfCFTA is all about.”
She recommends a massive information campaign to raise awareness of AfCFTA among customs services, traders and other key players in countries participating in the free trade area.
Lack of infrastructure
A lack of adequate modern transport infrastructure also hinders the willingness of traders to take full advantage of free trade, studies show. With the right transportation infrastructure and high integration, consumer goods manufacturers can earn up to $ 326 billion a year, according to McKinsey & Company, a US management consulting firm.
And according to the World Bank, it takes about three and a half weeks before a container of car parts is cleaned by Congolese customs. While East African countries introduced Tanzania and Uganda as a one-stop border post to reduce freight time between them, new delays in the form of divergent standards for goods quickly emerged, highlighting the mutating nature of non-tariff barriers.
According to the UN Conference on Trade and Development, the UN agency dealing with trade investment and development issues, African countries can earn $ 20 billion a year by tackling non-tariff barriers that slow down the movement of goods.
The efforts of the African Union (AU) to promote infrastructure through its Infrastructure Development Program in Africa (PIDA) are expected to include the Lagos-Abidjan Transport Corridor, the Zambia-Tanzania-Kenya Power Transmission Line, the Lagos Highway Algiers and the Brazzaville-Kinshasa Bridge, among others.
But experts encourage individual countries to invest in modern port, airport and rail infrastructure.
The challenges facing female traders are widely discussed in intra-African trade talks.
Women make up 70 percent of Africa’s informal cross-border traffickers, and according to a 2019 study by UN Women entitled Opportunities for Women Entrepreneurs in the Context of the AfCFTA, women traffickers in Africa often face corruption, insecurity and sexual harassment.
The AfCFTA agreement itself requires countries to protect the vulnerable, including female traffickers, and to address corruption.
African states with bilateral trade agreements with foreign countries or other regions such as the European Union will have to queue up to meet previous commitments while implementing the AfCFTA.
In February 2020, for example, the economic giant in East Africa, Kenya, began bilateral trade talks with the US, which apparently runs counter to the country’s commitment to Africa’s free trade area.
Optimistic forecasts of the benefits of free trade in Africa are in theory based on orthodox economic calculations – a linear demand-supply correlation that may not fully include the externalities, such as the availability of countries’ implementation capacity, the necessary infrastructure, coherence of policy and so on. on.
The World Economic Forum indicates that AfCFTA’s full and effective implementation will have the transformative consequences, which means that its benefits are not guaranteed at all.
The Secretary-General of AfCFTA, Wamkele Mene, acknowledges the enormous tasks ahead. “We need to roll up our sleeves and work,” he told Africa Renewal in an earlier interview.
Yet there is much to celebrate regarding the free trade agreement. The treaty consolidates a market of 1.2 billion people and a combined GDP of $ 2.5 billion. It would represent the largest trading bloc in the world by the number of participating countries if all AU countries ratified the agreement.
While about thirty countries have ratified the agreement so far, more countries are expected to join the wagon when free trade begins and its benefits become tangible.
It is estimated that trade within Africa could increase from the current 18 percent to 50 percent by 2030.
It will increase merchant earnings, strengthen Africa’s competitiveness in the world market, promote export diversification and add value to produce and transform natural resources.
As a result of the AfCFTA, Africa’s production is expected to double to $ 1 trillion, which would create 14 million jobs by 2025, writes Landry Signé for Brookings Institution, a think tank in Washington, DC.
A continent that is industrializing will catalyze the agricultural sector. In the coming year, Mr. Signé, will complement production on agricultural production and agricultural processing plants that supply food and energy to meet the growing demand in Africa and worldwide. ‘
He adds that Afrikaans youths who are engaged in the development of computer software and applications will take the opportunity to manufacture ‘leapfrog’ technologies to meet the increasing domestic demand. In other words, well-paying jobs will be created for the bulging youth population on the continent.
“In all sub-sectors and countries, Africa’s industrial revolution is coming,” he said. Signed optimistic.
Meanwhile, African traders are aiming for the end of the COVID-19 pandemic or at least its imminent one. They hope that the dental problems that arise will be addressed and that AfCFTA will be a shot in the arm for the development of Africa.
“It will be a dream for traders like me,” says Dagnew.