WINDHOEK – Experts agree that revenue to be sacrificed in the reduction of trade tariffs by 90 percent, as prescribed by the implementation of the African Continental Free Trade Agreement (AfCFTA), is negligible due to the current low level of trade between Namibia and the rest of the continent.
AfCFTA officially came into force on May 30 and effectively establishes a single continental market for goods and services.
This translates into a single market of goods and services for 1.2 billion with an aggregate gross domestic product (GDP) of over US$2 trillion (over N$30 trillion).
UNCTAD, the trade body of the United Nations, predicts that reducing intra-African tariffs under AfCFTA “could bring US$3.6 billion (more than N$54 billion) in welfare gains to the continent through a boost in production and cheaper goods.”
In 2017, Namibia’s imports from within the Southern African Customs Union (Sacu) accounted for 90.4 percent of all African imports while imports from non-Sacu Southern African Development Community (Sadc) member states accounted for an additional 7.7 percent of all of Namibia’s imports from Africa.
Local economist Klaus Schade noted that imports from Sacu are duty free and most of the imports from Sadc as well.
“A number of agricultural products are regarded as sensitive and are excluded from the tariff reductions. That will be the same in the AfCFTA. Hence, 98.1 percent of Namibia’s imports from Africa would not have been affected by the AfCFTA arrangement. Therefore, the impact on custom duties collected by Namibia would have been negligible,” Schade explained.
He added that in order to establish the impact of the AfCFTA on Namibia’s revenue from the Sacu Common Revenue Pool, it would be necessary to have data on Sacu’s imports from African countries beyond Sadc, and not just trade data from one Sacu country.
“Again, South Africa’s trade with Africa is mainly confined to trade with Sacu and Sadc. It can therefore be assumed that any tariff reductions, once they come into effect, will not have a major impact on custom revenue,” said Schade.
Chief Executive Officer, Namibia Trade Forum, Ndiitah Nghipondoka-Robiati, concurs with Schade. “Our trade with the continent, if you remove Sacu and Sadc, is about two percent. So, there will not be much loss. I feel there will be more benefits in the long run for Namibian products and services as our economy is a lot more diversified than most on the continent,” said Nghipondoka-Robiati, who is clearly in favour of AfCFTA that will harmonise trading rules at both regional and continental levels.
Meanwhile, UNCTAD pointed out that one of the starker economic data points about Africa is just how little African countries trade with each other. Intra-Africa trade was a staggeringly low 14 percent in 2014. However, the UN Economic Commission for Africa thinks AfCFTA has the potential to raise intra-African trade by as much as 25 percent, or as much as US$70 billion, by 2040.
In addition, trade analysts estimate that if AfCFTA works as intended, Africa will have a combined consumer and business spending of US$6.7 trillion in 2030.
Furthermore, besides Africa’s lack of infrastructure to support the free trade agreement, another sticking point is the “rules of origin” issue that decides which products get the preferential tariffs depending on classification.
“Is a blouse made from Chinese silk, designed and stitched in China, but packaged in Kenya eligible to receive AfCFTA preferential tariff rates? What if it is made of imported Chinese silk, but stitched together in Kenya?” asked one analyst.