JOHANNESBURG, 10 DECEMBER 2020 – The Steel and Engineering Industries Federation of Southern Africa (SEIFSA) welcomes the confirmation yesterday that trading under the African Continental Free Trade Area (AfCFTA) agreement will commence from 1 January 2021. The Federation considers this development to be good news for the continent because it is likely to boost inter-African trade.
The AfCFTA journey has been a long one since the signing of the Treaty in 1991 and the establishment of the African Economic Community in March 2018 in Kigali, Rwanda, which was followed by the signing of the Agreement by 44 countries. As of today, 54 countries have so far signed the agreement, with the exception of Eritrea. Of these countries, 34 have ratified the legal instrument on the AfCFTA. SEIFSA expects that more will come on board over the course of its implementation.
SEIFSA Chief Economist Chifipa Mhango said most African economies have grown at rates of 5% on average over the last 10 years, but they remain impoverished in terms of the World Bank classification, with the majority of their populations living below the poverty line. He said it was important for these countries to have an integrated approach to dealing with challenges, if they are to grow economically.
“Africa has a wealth of minerals deposits and a vast fertile land for agricultural production. However, the continent’s trade composition is dominated by exports of unbeneficiated raw materials. For this situation to change, Africa needs to develop its own path towards industrialisation and promote trade among its own countries,” he said.
Mr Mhango said the South African Metals and Engineering (M&E) sector enjoyed a positive trade balance on the continent, with the latest figures suggesting a net trade balance of R22-billion in the first quarter of 2020 (pre-COVID-19 lockdown). The most dominant products were plastic and rubber, iron and steel, machinery, vehicle parts and accessories. He said it was important that the M&E sector takes advantage of the AfCFTA through the adoption of an intensive, market-intelligence approach to identifying market opportunities across the continent.
He said the fact that Africa still lagged behind in terms of infrastructural development means that the trade agreement will open more doors for African-made products, thus limiting competition from other destinations.
Mr Mhango noted that the AfCFTA would be the largest trade agreement as it promised to create a continental trade bloc of 1.3-billion people, with a combined GDP OF $3,4-trillion. Key to the success of AfCFTA would be the development of Africa’s industrial capacity to meet a new growing demand for its goods and services.
“This AfCFTA agreement thus offers tremendous economic growth potential for the continent at large and is likely to drive intra-African trade, promote further industrialisation and contribute to job creation and regional value chain identification,” Mr Mhango concluded.