The following presentation was made at the second annual GCCA African Cold Chain Conference held on 2 – 4 August 2023 , in Cape Town .
INCORPORATING COLD CHAIN
ASSOCIATIONS
AfCFTA ’ s potential impact on the HVAC & R sector
Compiled by Eamonn Ryan , derived directly from a presentation by Chris Hatton , head of policy analysis at the Center for Risk Analysis ( CRA ).
The following presentation was made at the second annual GCCA African Cold Chain Conference held on 2 – 4 August 2023 , in Cape Town .
All images : Cold Link Africa
Chris Hatton , head of policy analysis at the CRA .
Hatton emphasised that his presentation often left audiences “ stony faced ” at the depth of risks and challenges with cross-Africa trade , but noted that commensurate with the high risk , came the opportunity for high rewards for early movers .
Hatton , an expert in trade and economic policy , addressed the audience on the significance of the AfCFTA in the HVAC & R sector . Hatton is a member of the Advisory Council of the Initiative for African Trade and Prosperity , as well as a senior fellow at African Liberty and member of the executive board of the Global Trade and Innovation Policy Alliance . The following is his presentation :
The African Continental Free Trade Area ( AfCFTA ) has been hailed as a transformative agreement that has the potential to revolutionise trade and economic growth on the African continent . AfCFTA aims to lower barriers to trade , reduce tariffs , and facilitate the flow of goods , services , and materials , ultimately leading to increased economic growth , job creation , and an improvement in living standards for the people of Africa .
Hatton emphasised the transformative potential of the AfCFTA , stating that it could be the most significant change Africa experiences in the next 50 years . Currently , Africa only accounts for 2 % of global trade , with 17 % of African exports being intracontinental compared to 59 % for Asia and 68 % for Europe . Exporting within Africa is often more expensive than exporting to Europe , which calls for a change .
Connecting 1.3 billion people and with a combined GDP estimated at USD3.4-trillion , the agreement holds the potential to boost regional income by 7 % or USD450-billion , lifting 30 million people out of extreme poverty by 2035 . The trading under AfCFTA officially began on 1 January 2021 , although implementation is being carried out in stages , and several policy barriers still need to be addressed .
The HVAC & R sector stands to benefit significantly from the AfCFTA . It is estimated that Africa ' s exports could increase by USD560-billion , with a particular focus on manufacturing . Furthermore , intra-continental exports are expected to rise by 81 %, and intercontinental trade by 19 %. If successfully implemented over the next 20-30 years , AfCFTA could generate a combined consumer and business spending of USD6.7-trillion by 2040 .
Hatton highlighted some of the key objectives of the AfCFTA , including the reduction of trade costs and the facilitation of border operations . By streamlining licensing , documentation and operations at ports and railways , AfCFTA aims to make trade more efficient . Additionally , the agreement aims to position Africa to take advantage of the current global environment , where there is a shift in supply chains and investment due to a ‘ risk off ’ sentiment . Hatton posed the question of whether – as global supply chains look for better returns on investment – Africa could potentially attract these investments and benefit from the relocation of value chains away from countries like China .
The agreement aims to eliminate 90 % of tariffs , the existence of which can have both positive and negative effects on trade . Tariffs can be beneficial if used effectively by governments to support small businesses , but they also discourage the flow of goods and services between countries , making it more difficult and costly for goods to move .
Non-tariff barriers are also a significant issue that AfCFTA aims to address . These barriers include delays at border posts and ports , which add costs to business operations . The Free Trade Area aims to create a single market with the free movement of goods and services , simplifying customs procedures and cutting red tape . This will help reduce costs and promote trade within Africa .
COLD LINK AFRICA • January / February 2024 7