ASSOCIATIONS
In addition to facilitating trade in goods and services , AfCFTA also addresses other important aspects of economic growth such as the movement of persons and labour , competition , investment , and intellectual property . Encouraging skilled individuals to come and invest in African countries is crucial for upskilling the local workforce and achieving inclusive growth .
He reviewed the five key instruments of the AfCFTA :
• Rules of origin
• Tariff concessions
• The elimination of non-tariff barriers through an online mechanism
• The Pan African Payment and Settlement system
• The African Trade Observatory – a portal for trade within Africa
There has been a trickle of improvement under AfCFTA . Kenya , for example , has seen increased trade activities , including the export of coffee beans to various African nations . However , it is important to acknowledge that the process of fully implementing AfCFTA will take time due to the complex nature of the challenges it aims to address across the 55 countries .
One of the key obstacles that must be overcome is the need for policy reforms to ensure the smooth flow of trade . Reforms must be implemented promptly , and the involvement of the private sector can bring much-needed expertise and accountability . Hatton described the pace of reform as ‘ glacial , and that ’ s being kind ’.
Governments have a responsibility to implement necessary reforms . For instance , fuel subsidies need to be reformed to prevent the excessive burden of fuel taxes on businesses . Complex export procedures and limited export requirements currently create uncertainty and hinder trade . High tariffs on imports further restrict the growth of the HVAC & R sector .
Crucially for the cold chain , there is a lack of trade support infrastructure , such as cold storage facilities . This scarcity limits the sector ' s ability to meet the growing demands of consumers . Lack of access to finance is another significant challenge faced by businesses in the HVAC & R sector . Increased financing opportunities would enable them to expand their productive capacity and cater to larger scale demands .
Complex border procedures and limited market knowledge of products add to the difficulties faced by businesses in the HVAC & R sector . Furthermore , the sector struggles with low production capacity and the absence of reliable and affordable electricity . These challenges hinder the ability of businesses to compete effectively in the market .
The cost of logistics in Africa – which currently can load the cost of exports by 75 % – can be significantly reduced by improving transportation networks and enhancing safety and security measures . For example , investing in rail transportation can lower costs and provide a safer alternative to road transport . The condition of road networks in Africa has deteriorated over the years , leading to increased costs for businesses . Improving road infrastructure is crucial to reducing operational costs in the HVAC & R sector .
One of the top risks currently faced by businesses in South Africa is critical infrastructure blackouts , which can disrupt HVAC & R operations .
Hatton listed one of the main concerns as being the issue of subsidies . While governments may want to stimulate local businesses through subsidies , it is crucial to ensure transparency and accountability in the allocation of these subsidies . Businesses that receive subsidies should be held responsible for job creation and adherence to transformation standards . Furthermore , localisation efforts , such as South Africa ' s pursuit of localisation , can inadvertently create higher trade barriers through tariffs on imported goods , negatively impacting consumers . Protectionism is also a global issue , as more advanced economies like the US and China turn inward to stimulate local manufacturing growth .
Thoroughly useless border posts were highlighted as a primary risk .
Part of the audience at the Cape Town GCCA conference .
Alongside subsidies and localisation , vested interests and lobbying pose potential risks . Transparency and accountability are essential in regulating the influence of vested interests on trade policies . Likewise , corruption can undermine the effectiveness of the AfCFTA , particularly at border posts . Efforts must be made to combat corruption and ensure that ports operate at a high level .
As global value chains and supply chains shift , Africa and South Africa can position themselves to take advantage of reshoring and ensure mutually beneficial trade relationships . However , trade policies must be carefully crafted on a case-by-case basis to maximise these opportunities .
He concluded that AfCFTA has the potential to drive inclusive economic growth and development in Africa . He re-emphasised that business should not rely on the pace at which governments move but make their own plans regardless of government , leveraging strengths in the private sector , and embracing innovation . Africa and South Africa can establish themselves as key players in the global economy . CLA
8 www . coldlinkafrica . co . za COLD LINK AFRICA • January / February 2024