The African Continental Free Trade Area agreement is a flagship project of the African Union with the aim of creating a single continental market for goods and services, with free movement of business persons and investments, expanding intra-Africa trade across the regional economic communities and the continent in general and enhancing competitiveness while supporting economic transformation.
The agreement establishing AfCFTA was signed on 21 March 2018 and came into force on 30 May 2019. It is important to note that all existing trade agreements on the African continent such as SADC, COMESA and EAC, as examples, remain in place, allowing importers and exporters to choose under which agreement they wish to trade.
On 31 May 2023, South Africa committed to operationalise the AfCFTA agreement with effect from 31 January 2024 and the following countries have finalised the necessary domestic legislation for the implementation of their respective tariff reduction commitments and are therefore eligible to trade with South Africa under AfCFTA: Algeria, Cameroon, Egypt, Ghana, Kenya, Rwanda and Tunisia.
Negotiations relating to tariff lines and Rules of Origin with the remaining 46 member countries are still under way (of the 55 AU member states, only Eritrea is yet to sign the agreement).
As with all trade agreements, there are many benefits for member countries relating to not only the import and export of goods but to services as well. Access to new markets and products, easier trading conditions, new opportunities for foreign investment, more user-friendly systems for making foreign payments and, of course, reduced import duties on the negotiated tariff lines.
With South Africa currently only trading with seven of the 54 member states, the benefits of reduced import duties may seem minimal but, as mentioned, negotiations are continuing.
As it stands, 90% liberalisation has been agreed with only 3% of all tariff lines excluded. The remaining 7% may be designated as sensitive products.
So, what reduction in duties can importers expect when trading under the AfCFTA Agreement?
The unfortunate answer is that it may not be what was expected. First and foremost, it must be considered that, unlike the SADC agreement, where all duties are reduced to zero, AfCFTA allows, for the most part, only a reduction in the rates of duty.
Textiles and Textile Articles falling within Chapters 50 to 64 of the Harmonized Customs Tariff are, at this stage, excluded from any tariff concessions and similarly, there is no benefit for the automotive industry.
Reviewing the published Tariff Amendments relating to duties under the AfCFTA agreement, the average reduction in duty is between 2% and 5% with some commodities reduced to free from 10%. The minimal reduction in duties under the agreement should not, however, in any way detract from how important AfCFTA is to South Africa, as the duty structure for imports is only a small part of the agreement when implemented in its entirety. The benefits to be gained from being a member of this agreement will be far more significant than what one can see at present and new opportunities are there for those who want to trade on the African continent.
