The African Continental Free Trade Agreement has had very little impact on continental trade patterns just shy of six years after its (30 May 2019) inception, and that status quo is likely to remain for as long as key decisions over tariff liberalisation and rules of origin remain outstanding.
This was the message of trade experts Prof Gerhard Erasmus and Trudi Hartzenberg of the Trade Law Centre at a recent trade workshop presented by Exporters Western Cape.
While the wheels are in motion to reduce tariffs to zero on 90% of tariff lines in the free trade area, most state parties in AfCFTA have not yet decided, amongst the remaining 10% of tariff lines, which will be sensitive (they will be liberalised but over a longer period that the 90% of tariff lines already committed) and which will be excluded from liberalisation (excluded products may constitute 3% of total tariff lines). For strategic sectors such as clothing and textile and the automotive industry, not all rules of origin have been agreed and, until these are agreed, many countries are not prepared to make full tariff offers.
South Africa is among the countries that must still submit their tariff offers for up to 7% of goods under tariff lines deemed sensitive to a country’s economy (Category B goods), as well as the 3% of tariff lines for which countries may retain import tariffs for strategic reasons such as national security, food security or fiscal revenue (Category C goods).
As is the case with the 90% of tariff lines for which zero tariffs will apply in AfCFTA (Category A goods) within 10 years, those in Category B will also have tariffs reduced over a longer period (13 years for South Africa and the other countries in the Southern African Customs Union).
Hartzenberg said the reason South Africa had not made a full tariff liberalisation offer to the AfCFTA secretariat was because the rules of origin for clothing and textile and automotive products had not been finalised.
“The reason is simple. Both tariffs and rules of origin can be used to protect a sector. For South Africa and a number of other countries, unless we know what the rules of origin are going to be, we will not make a tariff offer, because if the rules are very strict, then we would be happy to reduce the duty, because the rules of origin will still protect that sector. If the rules are flexible, however, we’ll exclude those goods from liberalisation.”
The AfCFTA’s council of ministers, its most important decision-making body, recently ordered member states to finalise negotiations for Category B and C products.
The rules of origin are expected to be finalised by October 2025. Once this is done, the we can expect the tariff offers to be finalised.
