Cold Link Africa January / February 2020 | Page 34

FEATURE
development and economic growth in
the African economies. However, not
all countries will benefit to the same
extent, and the gain of welfare benefits
also implicates relevant costs and
commitments.
South Africa’s
highest ad valorem
import duties are levied
on imports of whole
frozen chicken, prepared
or preserved pineapples,
and uncooked pasta
not containing eggs, to
name a few.
Most of the benefits of further trade
integration (i.e. welfare benefits from
lower import prices, production efficiency
and increase in outputs, higher value-
added jobs and exports, technological
specialisation, and so on) will materialise in
the long term, while most of the associated
costs of adjustment and integration (i.e. loss
in trade tariff revenue, local SMEs vanishing
in front of stronger competition, adjusting
unemployment, required investment in
infrastructure, political and regulatory
reforms) will be incurred in the short term.
Using the Global Trade Analysis Project
(GTAP) computable general equilibrium
(CGE) model, UNCTAD has estimated the
quantitative effects of the CFTA according
to two long-term scenarios: a full Free
Trade Agreement (FTA) and Special
Product Categorisation (SPC).
A full Free Trade Agreement (FTA)
eliminating all tariffs in the CFTA could
generate welfare gains of USD16.1-billion
(R236-billion), at the cost of USD4.1-
billion (R60.3-billion) in trade revenue
losses (representing 9.1% of current tariff
revenues). GDP and employment are
expected to grow by 0.97% and 1.17%
respectively. Intra-African trade growth
is estimated at 33% and the continent’s
trade deficit is expected to drop by 50.9%.
Because of lack of proper infrastructure, a small percentage of perishable products is
imported and exported within the African borders.
34
www.coldlinkafrica.co.za
INCORPORATING COLD CHAIN
Although there are a lot of challenges related to trading continentally, the World Bank is
optimistic that AfTCA is a good move.
Special Product Categorisation (SPC)
permanently exempts sensitive products
from liberalisation. In a scenario in which
the sector with the highest current
tariff revenue would be exempted
from liberalisation, UNCTAD simulations
estimate a welfare gain of USD10.7-
billion (R15.7-billion) in the long term.
Tariff revenue losses are expected at
USD3.2-billion (R4.7-billion), representing
7.2% of current tariff revenues. GDP and
employment growth are expected to
grow by 0.66% and 0.82% respectively.
Intra-African trade is expected to grow
by 24%, while, Africa’s trade deficit only
shrinks by 3.8%.
The agriculture sector is extremely
relevant for the African economies since
it employed about 53% of the continent’s
labour force in 2016. Governments are
worried about possible adverse impacts
of the CFTA on the agriculture sector’s
economic growth, which would massively
affect employment across the continent.
Even though the largest employment
growth rates are found in manufacturing
and services sectors, agriculture sub-
sectors are also expected to grow.
Despite the benefits projected,
Khorommbi says that it is too early to
“evaluate whether the agreement will
be feasible or if it offers the economic
prospects the African Union Commission
claims it will yield considering the current
transcontinental infrastructural position.
Worthy of note is that, at present, there is
a ‘basket’ of several multilateral, regional
and bilateral trade agreements in sub-
Saharan Africa, which have lowered
trade tariffs among countries and regions.
However, due to overlapping membership,
some of these agreements are not yielding
the envisioned economic and trade-
related-outcomes”.
There are several explanations for
this state of affairs says tralac: the
dependence of African economies on
commodity production and exports,
a lack of diversification resulting in
a mismatch between supply and
demand, tariffs and non-tariff barriers
(NTBs), inefficient transport infrastructure,
COLD LINK AFRICA •
January/February 2020