Greater collaboration between sub-Saharan Africa’s trade giants – South Africa and Nigeria – is critical if the ambitious African Continental Free Trade Agreement (AfCFTA) is to achieve its goal of seeing Africa become a formidable player on the world trade stage. Yet both countries – whose bilateral relationship has been marked by competition and diplomatic squabbles over the last decade – have yet to sign the agreement despite the fact that they likely have the most to gain. The South African government has indicated that it will sign up as soon as procedures have been finalised.
Minister of Trade and Industry, Dr Rob Davies, said that South Africa could not sign an incomplete agreement that did not have tariff schedules in place. But, as Peter Fabricius, consultant at the Institute for Security Studies (ISS) points out, South Africa can only benefit from increasing its export base to the rest of Africa. Last year the country’s exports to its continental neighbours amounted to US$23.5 billion. Imports only amounted to US$8.6 billion. He believes greater market access and the preferential tariffs will increase SA’s exports.
“Players like Nigeria and South Africa need to crack down on two of the continent’s other big export markets – India and China – by fine-tuning the rules of origin and ensuring non-African producers can’t beat the zero tariffs system by exporting large quantities of almost-finished goods into Africa and simply adding “a button or two” and claiming it was manufactured locally.”
Davies said South Africa would participate in the upcoming AfCFTA negotiations to ensure the rules of origin prevented outside competitors from taking unfair advantage. Fabricius said the smaller economies on the continent might however not benefit as much from the AfCFTA and might in fact prefer to continue importing from China and India as they did not have strong manufacturing bases and the finished goods could thus be procured more cheaply from competitors outside of the continent.
He pointed out however that the AfCFTA was intended to stimulate local production through value chains on the continent. “This would basically see raw materials produced in certain member states where they could be progressively turned into finished goods by one or more other member states.” He said that both South Africa and Nigeria had the capability to support broad-based industrial development in Africa.
Quote: $23.5bn The value of SA's exports to its continental neighbours last year.
