In a move likely to boost intra-African trade, the Steel and Engineering Industries Federation of Southern Africa (Seifsa) has welcomed the December 9 confirmation that trading under the African Continental Free Trade Area (AfCFTA) agreement will commence from January 1, 2021.
The AfCFTA journey has been a long one since the signing of the treaty in 1991 and the establishment of the African Economic Community in Kigali, Rwanda, in March 2018. This was followed by the signing of the agreement by 44 countries.
As of December 10, 54 countries have signed the agreement (expect for Eritrea), and of these, 34 have ratified the legal instrument on the AfCFTA.
Seifsa expects more States to come on board over the course of its implementation.
Seifsa chief economist Chifipa Mhango says most African economies have grown at rates of 5% on average over the last ten years, but remain impoverished in terms of the World Bank classification, with the majority of their populations living below the poverty line. As such, he says it is important for these countries to have an integrated approach to dealing with challenges, if they are to grow economically.
“Africa has a wealth of mineral deposits and a vast fertile land for agricultural production. However, the continent’s trade composition is dominated by exports of unbeneficiated raw materials. For this situation to change, Africa needs to develop its own path towards industrialisation and promote trade among its own countries,” says Mhango.
Further, he says the South African metals and engineering (M&E) sector enjoys a positive trade balance on the continent, with the latest figures suggesting a net trade balance of R22-billion in the first quarter of the year (pre-Covid-19 lockdown). The most dominant products were plastic and rubber, iron and steel, machinery, vehicle parts and accessories.
He says it is important that the M&E sector takes advantage of the AfCFTA through the adoption of an intensive, market-intelligence approach to identifying market opportunities across the continent.
Mhango adds that, because Africa still lags behind in terms of infrastructural development, the trade agreement will open more doors for African-made products, thus limiting competition from other destinations.
AfCFTA will be the largest trade agreement, he states, as it promised to create a continental trade bloc of 1.3-billion people, with a combined gross domestic product of $3.4-trillion. Key to the success of AfCFTA is the development of Africa’s industrial capacity to meet a new growing demand for its goods and services.
“This AfCFTA agreement thus offers tremendous economic growth potential for the continent at large and is likely to drive intra-African trade, promote further industrialisation and contribute to job creation and regional value chain identification,” concludes Mhango.