The involvement and participation of South Africa in the African Continental Free Trade Agreement (AfCFTA) is expected to significantly boost the nation’s economy and cement its dominant position as the African Union’s largest exporter. South Africa started trading under AfCFTA on 31 January 2024, enabling the nation’s companies to export certain products duty-free or with reduced charges to twelve other African countries.
In a report on Africa’s export competitiveness, the Institute for Competitiveness said the AfCFTA represents a significant milestone in the continent’s efforts to enhance trade, foster economic growth, and reduce poverty. The agreement was officially launched in May 2019 and saw its operational phase commence on 1 January 2021. It is the world’s largest free trade agreement, behind the World Trade Organization, and its implementation occurs over two phases. For decades, African countries have traded with states outside of the continent far more than with each other. This is partly due to the similarities between the exports of many countries, resulting in hefty import tariffs being applied to protect local industry. The AfCTFA aims to resolve these challenges by eliminating tariffs on intra-Africa trade and enhancing local infrastructure.
Research from the International Monetary Fund (IMF) indicates that the AfCTFA can result in an intra-African trade surge, possibly leading to a real per capita income rise of over 10% for most nations. Such changes can also deepen Africa’s integration into global value chains.
Africa will grow at new rate due to the path being chartered by AfCFTA and South Africa will be the key to unlocking that path. When we are talking about enhancing trade, fostering economic growth, and reducing poverty we as a country alongside our neighbours hope to facilitate job creation through trade to bring in foreign income. This helps to alleviate poverty and give citizens self-worth. Foreign investors from across the world are then attracted to invest their earnings and wealth in our industries and infrastructure. Infrastructure in particular is important in terms of constructing roads, railways, canals in the harbours and bridges. South Africa’s State-Owned Enterprise Transnet will have a significant role in generating jobs in that regard. With the removal of tariffs (taxes on imports) the free movement of goods, services and peoples will be enabled.
This is how the term “free trade” arises. Inter-Africa trade is a necessity to connect both land locked African nations with coastal regions. South Africa could make millions if not billions alongside the southern African region through being a key exporter. The Southern African Development Community (SADC) and the AU as a whole could become a formidable integrated economy on the world stage.
The expected boost from South Africa’s participation in the AfCTFA will come when the country’s economic fortunes appear to be turning around. After a decade of stagnant growth, the formation of the Government of National Unity (GNU) has reinvigorated confidence in the economy. This, coupled with over 150 days of no load-shedding, has the potential to significantly boost the local economy. Recently, the Deputy Governor of the Reserve Bank, Rashad Cassim, revealed how much of an effect these two factors can have on the South African economy. He explained that an end to load-shedding would lead to an upward revision to economic growth forecasts and bring down inflation. “There’s a growth side, and there’s an inflation side; there may be a double whammy, there may be a good story here,” Bloomberg reported him as saying.
South Africa has arrived at a fork in the road that will change its trajectory. With the GNU under President Cyril Ramaphosa having taken the more steadfast way as opposed to the ricketier path of hesitation. The rickety path the country was travelling on for the last five years. The new found confidence and hope the GNU has created in the country’s economy will enable it to reach new heights. If the president can take advantage of it and lead the nation towards those heights. The fact that there has been a decrease in load-shedding shows that the GNU could accomplish a lot through cooperation and listening between the coalition partners. The opportunities that AfCFTA could afford to a major economic hub like South Africa in terms of attracting investors should not be missed. This is an opportunity when money can pour in for needed infrastructure.
The COVID-19 pandemic has been another limiting factor for African trade. The continent is still recovering from the pandemic’s impact, and many parts of it are still grappling with the economic damage wrought by COVID-19. At the same time, Africa is still suffering the effect of having to shoulder a disproportionate disease burden that exceeds those existing on any continent on the globe. Despite the disease burden, the continent still imports most of its healthcare needs, and its trade deficit continues to increase. Rectifying this situation and providing for a more significant portion of its healthcare needs would greatly assist the continent in becoming ‘healthier ‘at a lower cost, saving precious foreign currency and promoting competitive growth through intra-Africa and global trade. The panel said three conditions must be present for trade to improve welfare levels and fulfil the mission of using intra-African and global trade to reduce poverty in participating nations and increase employment.
The arrival and spread of Covid on the scene as well as the impact of other diseases on the continent should be a wake-up call to the African leadership that it can no longer be business as usual with the continued status quo. The countries in question Ghana, the Democratic Republic of the Congo (DRC), Zimbabwe, Malawi, Niger and Chad need to put their money where their mouths are and divert aid money to invest in proper universal health care for their citizens. South Africa needs to take charge at the helm and facilitate medical training of doctors abroad as well as research into these diseases. Constructing medical infrastructure as well as trade infrastructure goes hand in hand to grow an integrated economy that looks after all its citizens.
The need to repair the damage wrought by the onslaught of covid on the continent and place AfCFTA on track requires responsible leadership in politics, business, health, trade, industry etc. The path to an integrated Africa with South Africa as a formidable facilitator and hub will be long and hard. It is up to Ramaphosa and his colleagues to pave the way as well as businesses, civil society and ordinary people at the grassroots.
Article written by:
Yacoob Cassim
Journalist at Radio Al Ansaar
