Biggest global trade zone may boost SA, Ramaphosa says

South African President Cyril Ramaphosa is hopeful an agreement that could see the continent become the world’s largest free-trade zone will boost the country’s sluggish economy. But the targeted start date is fast approaching and nations have yet to agree to any tariff concessions.

The African Continental Free Trade Area, will be a “game-changer” for South Africa, Ramaphosa said in his weekly letter to citizens Monday. Africa’s most-industrialised economy is “well-placed” to benefit due to its established manufacturing base, developed infrastructure and deep financial markets, he said.

First trade under AfCFTA is due to start July 1, but members haven’t settled on rules that determine the nationality of products, according to the Stellenbosch-based Tralac Trade Law Centre. Also, existing regional economic communities must still negotiate tariff liberalisation with their member states. AfCFTA’s precursor, the Tripartite Free Trade Area launched four years ago, has yet to come into effect.

“The target is ambitious to say the least,” said Ronak Gopaldas, a director at Signal Risk, an Africa-focused risk-management firm. “Ultimately, achieving this timeline will come down to one thing — political will. Getting countries to align continental objectives with domestic agendas will not be an easy task, especially in a context of rising global populism and nationalism and where protectionist approaches are being advocated by many countries.”

AfCFTA entered into force on May 30, and could cover a market of 1.2 billion people with a combined gross domestic product of $2.5 trillion, according to the African Union, which is leading the initiative. All but one of the 55 countries recognised by the body have signed the deal, Eritrea being the exception. Twenty-seven countries, including South Africa, have ratified the agreement, which should be fully implemented by 2030.

Intra-African exports comprised 16% of the continent’s shipments in 2017, with South Africa as the main exporter and importer, Tralac data show. The country accounted for 34% of intra-African exports and 17% of imports, it said.

South Africa averted a second recession in as many years after economic growth rebounded 3.1% in the second quarter, but the improvement may be short-lived amid stubbornly low business confidence and weak factory activity.

“The economies of the African continent are together growing at a rate far greater than our own, and we need to see the opportunity that such growth presents for our economy and for our people,” Ramaphosa wrote. “South Africa’s future lies in Africa. It is through our trade with the rest of the continent that we will grow our industries.”

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