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Home / Africa’s continental free trade deal – What did Namibia sign up for?
Africa’s continental free trade deal – What did Namibia sign up for?
2018-07-27Staff Report 2 Quick facts: Create a single continental market for goods and services, with free movement of business persons and investments, which will pave way for accelerating and establishment of the Continental Customs Union and the African customs union. Enhance competitiveness at the industry and enterprise level through exploiting opportunities for scale production, continental market access and better reallocation of resources. Expand intra African trade through better harmonisation and coordination of trade liberalisation, facilitation regimes and instruments across Regional Economic Communities (RECs) and across Africa in general. Resolve the challenges of multiple and overlapping memberships and expedite the regional and continental integration processes. Desie Heita WINDHOEK – Namibia’s revolutionary decision to put pen to paper on the African Continental Free Trade Area (AfCTA), inked by President Hage Geingob at an AU meeting early this month, has sent tongues wagging. Moulded in the image of the European Union’s own free trade regime, AfCFTA has been hailed as an economic integration breakthrough by its proponents, while armchair critics and protagonists of the protectionism doctrine went haywire about it. Ink had barely dried on the agreement when Geingob, upon landing at Eros Airport in Windhoek from the AU meeting, expressed some misgivings AfCFTA. According to Nampa news agency Geingob, perhaps understandably, expressed concern with the 0.2 per cent levy on imports that Namibia has to pay to the AU as part of the AfCFTA, which would increase Namibia’s payment to the AU to N$53,9 million from N$26,9 million. “We also registered how we like to push things through, like the 0.2 per cent on imports. We told them we are a small open country. We just decide things, but when you look at the details, you can see there are mistakes,” the agency quoted Geingob. This, naturally, begs the question of what actually this thing that Namibia acquiesced to sign up for is, after initially dilly-dallying along with South Africa and Nigeria, the continent’s two biggest economies in the south and western regions? How safe is Namibia’ beef, pasta, fish and world-renowned lager beer, which are all major exports for the country’s economy, which is still comparatively in its infancy? To start with, Namibia’s beef and pasta are safe because they have been classified as sensitive items, under the Special Product Categorisation clause within the agreement that permanently exempts Namibia’s sensitive products from liberalisation, local renowned researcher and trade analyst Wallie Roux points out. “Will Namibia benefit from the AfCFTA? The answer for the short term is probably no,” opines Roux. In his assessment, the main reason why Namibia signed the agreement is because the country is part of the Southern African Customs Union (SACU) and the Southern African Development Community (SADC). As such, countries with a larger manufacturing base and enabling physical and industrial infrastructure like South Africa are in a better position to gain from the expected benefits of the AfCFTA. “Namibia’s benefits in this regard would most probably be indirectly, except for a few potential export markets for some of our products, like beer for instance,” he says. “However, Namibia’s logistics sector could benefit immensely due to the country’s strategic location and its already developed corridors to neighbouring countries,” says Roux. Namibia as part of SACU, negotiated the AfCFTA under the auspices of SADC, and Roux says in practical terms it was SACU who conducted the negotiations on behalf of SADC. “I do not have the final text with me, but suffice to say that SACU did not negotiate anything outside of the text of its own agreement, infant industry protection per se is not directly part of a trade regime between countries - meaning it is still hedged within the auspices of the SACU Agreement,” says Roux. Academics and economists with superior comprehension of the going-ons have pointed out that on paper AfCFTA presents an immense opportunity through which African countries would be trade among themselves in a market valued at nearly US$4 trillion (about N$50.6 trillion) without trade restrictions such as tariffs. Rwandan president Paul Kagame has waxed lyrical about how the agreement would bring “prosperity for all Africans, because we are prioritising the production of value-added goods and services that are made in Africa.” Hypothetically, from a statistical point of view, if Namibia sells goods that are valued at 0.2 percent that she is paying in levy to the AU as part of the agreement, finance minister Calle Schlettwein would be forced to buy for ministry finance officials scientific calculators with more than the standard 12 digits capacity. It is the only way they would be able to calculate the income of more than N$113 billions - which is nearly double our spending for this year, for which we have to borrow billions of dollar to make up for the massive short fall - from the trillions of dollars worth of trades with Africa. But the criticism is that the removal of tariffs would deprive governments of the much-needed revenues through which they fund their domestic development programmes. A UNCTAD research paper has estimated that in the first years of implementation of the AfCFTA African governments are likely to loose as much as N$53 billion each year as a result of removing tariffs on nearly 90 percent of all the goods they would be trading with one another. As part of SACU, all import duties to SACU member states are pooled and then administered by South Africa and distributed to member states according to the revenue sharing formula – a final revision of which is currently under debate among SACU member states, with some objections from some members such as Namibia. The effects of AfCFTA for Namibia and her siblings in the SACU family is likely to be a decrease of revenues during the first years of implementing the AfCFTA, opines Roux. “Potentially the SACU pool of import duties could shrink because of the removal of tariffs. However, taking into account that SACU’s offer in the SADC FTA has more than 90 percent of the tariff lines at zero duty (duty free), the removal of tariffs in AfCFTA per se would not have a major impact on the SACU pool in the short to medium term - main reason is that SACU per se is almost self-sufficient in its own demand,” Roux says. “Should trade between AfCFTA countries increase, which is one of the AfCFTA’s objectives, it could stimulate local economies within individual countries. This in effect would then increase government revenue through local taxes in the long run,” he says. However, one of the concerns has been that the trade agreement may flood the Namibian market with inferior products from countries where quality standards are not enforced. The fear of poor quality standards goods entering Namibia can also be countered by the fact that as part of SACU and all imports into SACU states are scrutinised through the same quality standards and its requirements like labelling. “This should not be a problem because it would be unwise for any country to lower its existing quality standards. Furthermore, to refer to the standards of beef for example, Namibia would not allow imports of beef from any country outside of SACU on grounds of veterinary standards. Namibia subscribes and adhere to the veterinary standards of the European Union and the United States of America,” says Roux. Now the challenge on Africa is whether or not the grand plans for the roll out of AfCFTA would ever come to fruition. And this is something that Geingob has himself alluded to the very moment he stepped out of the plane from the AU meeting in Mauritius. “We signed the continental trade agreement although we have some reservations because we have the SADC Free Trade Area. We have the Tripartite Free Trade Area, are we implementing it?” Geingob asked then according to Nampa. Roux points out that the AfCFTA is a key component of the African Union’s ambitious long-term development plan of Agenda 2063. “However, Africa is renowned for its ambitious plans, especially with reference to its trade agreement regimes. The only one that is really functional on this continent of ours, is the SACU agreement, with say COMESA, ECOWAS and SADC fighting for a far distant second and third place. Hence, signing and maybe ratifying, the agreement is one thing; implementing it to its fullest potential is the real challenge,” says Roux. So far 49 African countries, out of 55, have signed the trade agreement and it now needs to be formally ratified by 22 signatory countries before it comes into force. In Namibia, Geingob is now expected to take the agreement to Cabinet before trade minister Tjekero Tweya tables it in the National Assembly for its adoption and ratification. 2018-07-27Staff Report 2
