Time to identify value chains for market entry: AfCTA
Golden Sibanda in ACCRA, Ghana
AFRICAN governments, Zimbabwe included, must now identify value chains that offer opportunities for entry into the African Continental Free Trade Area (AfCTA) market from sectors the trading block has identified as having high import substitution potential through products produced and consumed on the continent.
Addressing the Zimbabwe-Ghana Business Forum in Accra, Ghana, organised by Zimbabwe’s trade promotion and development agency ZimTrade, AfCTA secretary general Wamkele Mene said this comes as meaningful trade is already happening among AfCTA-certified products across regional economic blocks.
Several Zimbabwean firms, among them beverages maker Schweppes Zimbabwe, seed producer Seed Co, Cairns Foods, spreads and snack canned foods manufacturer Associated Foods Zimbabwe, Arenel, and dairy processor Dairibord Zimbabwe are exploring market opportunities in Ghana using the highly subscribed business forum.
More than 200 private sector players in Ghana are attending the forum drawn from sectors such as fast-moving consumer goods (FMCGs), leather and leather products, building and construction, agriculture inputs and implements as well as higher education.
Mr Wamkele noted that although Zimbabwe and Ghana shared a long-standing strong bond of friendship and deep bilateral ties, the trade figures between the two countries had remained minuscule, but reckoned the AfCTA could change the trajectory.
Mr Wamkele said there was need to add value to the existing special relations between Zimbabwe and Ghana by forging greater collaboration and cooperation under the AfCTA agreement in order to bring mutual benefits.
He said the AfCFTA framework provided a great opportunity to advance the economic aims and aspirations of the two-state parties as well as integration with the rest of the continental economy.
Through the Zimbabwe-Ghana Business Forum, ZimTrade is looking to drive the integration of Zimbabwe into the gigantic continental trade block, which came into force in January 2021, while driving the Second Republic’s quest for export-led growth, as espoused in the National Development Strategy (NDS1).
“With trade in AfCFTA-certified products now taking place across Africa’s RECs, albeit on a small scale currently, and the substantial progress made in the AfCFTA negotiations, it is fair to say that we are, now at an even more critical stage of the AfCFTA process: the implementation stage.”
The AfCTA and Afreximbank have already launched a US$10 billion adjustment funding facility to help AfCFTA State Parties and their private sectors to address short-term disruptions from the
implementation of the AfCFTA agreement.
“To be successful, we need to tap into the vast manufacturing opportunities that persist in the various key sectors of our economies to place the continent on a path of long-term industrial development,” Mr Mene said.
He said African countries’ ability to produce high-quality manufactured goods should not be underestimated, with several of them demonstrating their capabilities and capacities as a result of the Covid-19 pandemic.
Today, a number of African countries, among them Zimbabwe which now produces medical oxygen in Mutare, have begun producing essential medical supplies.
“However, there is the pressing need to develop regional and continental value chains to further strengthen our industrial development and attain true economic integration,” Mr Mene said.
Within this context, he said, the key challenge for businesses and policy-makers was to identify and prioritise entry points into value chains, as well as tasks that can be undertaken competitively and how they might be shared within value chains in the continent.
“This is why we have launched the AfCFTA Private Sector Engagement Plan, identifying sectors and activities with high potentials for import-substitution continental value chains considering products both produced and consumed in Africa,” Mr Mene said.
The initial four priority sectors or value chains identified are agriculture and agro-processing, believed to have US$50 billion in imports into the continent annually, and has a high potential for job creation,
Among the key sectors are also pharmaceuticals, with US$11 billion of imports, mainly in finished goods such as antibiotics; transportation and logistics, which have US$6 billion in imports and are significant trade enablers across all value chains as well as automotive, estimated to have about US$30 billion in imports annually.
These types of value chains, Mr Mene said, had the advantage of boosting intra-Africa trade and accelerating economic growth.
“Interventions designed in these value-chains have the potential to add over US$11 billion annually in production and over US$5 billion annually in intra-Africa trade – more than double the current contribution of these value-chains to intra-Africa trade.
“Increase in production and trade could create over 700 000 jobs, 55 percent of which will be for women and youth,” he said.
The AfCTA secretary general noted there were several other sectors with high potential, but pointed out these would be addressed in later phases and included textiles, horticulture, financial services, telecommunications and digital services.
“With this plan, government officials can well target which sectors consist of opportunities for their country’s entry into the AfCFTA market, creating targeted trade capacity building programmes that can strengthen exporter readiness.
“Businesses are also in a better place to make sound decisions on where to invest to seize opportunities offered by the AfCFTA,” he said.
Commercially meaningful trading under the AfCFTA preferential terms, facilitated by the Guided Trade Initiative, has been made possible by the substantial progress made in the negotiations of the protocols and operational instruments of the AfCFTA.
Mr Mene said Phase I protocols of the Agreement, which aim to significantly reduce tariffs and non-tariff barriers to goods and advance the liberalisation of trade in services, have largely been completed.
Consequently, trading is currently possible for 88,3 percent of tradable goods – nearly 5000 products – as these have agreed rules of origin in place.
“This means that we have now defined for each of them what constitutes the minimum African content for a product to be traded among countries of the continent on the basis of preferences. Such a high threshold of consensus guarantees that the vast majority of products can be traded,” he said.
Negotiations are ongoing on the rules for more sensitive products such as clothing and textiles, automotive and sugar, which we expect to be finalised this year in order to achieve 100 percent of rules of origin coverage.
Furthermore, 46 Member States have submitted their tariff offers, that cover these goods with rules of origin in place, while 52 have so far submitted their specific commitments with respect to the protocol on trade in services.
Addressing the business forum, Zimbabwe’s Ambassador to Ghana Mr Kufa Edward Chinoza said Zimbabwe and Ghana had both signed and ratified the AfCFTA Agreement, which was a panacea to resolve some of the challenges faced when trading within the African continent.
“Despite good political relations between the two countries, trade volumes remain relatively very low. It is my fervent hope that with initiatives such as the AfCFTA Trade agreement and business linkages through forums such as this, we will see a change in the current trajectory,” he said.