Export diversification, manufacturing key under AfCFTA regime, says report

The African Export-Import Bank (Afreximbank) has advocated the removal of trade barriers and promotion of technology-intensive manufactured goods as part of efforts to drive intra-African trade under the African Continental Free Trade Area Agreement (AfCFTA) regime.

According to a new trade report, titled ‘Boosting intra-African trade: Implications of the African Continental Free Trade Area Agreement’ unveiled by the bank, African economies are projected to grow by 4.1 per cent this year.

Launched by South African President, Cyril Ramaphosa, Amb. Albert M Muchanga, the Commissioner for Trade and Industry of the African Union Commission, and Dr Benedict Oramah, President of Afreximbank, during the bank’s anniversary celebrations, recently, the report states that the implementation of the African Continental Free Trade Area (AfCFTA) Agreement will create opportunities for intra-African market access and will significantly increase trade flows.

The report argued that tariff removal and cost reduction under the AfCFTA will reduce production costs and induce economies of scale, spurring higher domestic production and investment into different sectors of the economy, which will boost value addition in production and enhance export growth across sectors.

Though there are concerns about the tariff lines, the report advises that the AfCFTA arrangement needs to go beyond a 100 per cent tariff reduction in all goods, as non-tariff barriers are also major constraints on intra-African trade.

“Such non-tariff barriers include standards, custom procedures, technical barriers, licenses, prohibitions, distribution restrictions, procurement restrictions, competition measures and rules of origin.

“The removal of those barriers, which add costs to intermediate import for domestic production and investment, would spur domestic production and increase the value chain integration of export products”, said the report.

President of Afreximbank, Dr. Benedict Oramah, said: “Intra-African trade is only 15 per cent of Africa’s total trade, compared to Europe’s 67 per cent and we need a sustained strategic shift to industrialisation, increased intra-African trade, and de-commoditisation through increased value addition and export diversification.

The African Continental Free Trade Agreement and Afreximbank’s Fifth Strategic Plan both emphasise the need for this structural transformation of African economies.

“Afreximbank is committed to weaning the continent from overdependence on commodities and our programmes, notably the Africa Commodities Initiative, contribute to higher value addition by supporting processing and industrial capacities in various commodity sectors.”

Afreximbank’s Chief Economist, Dr. Hippolyte Fofack, said: “The AfCFTA must emphasise policies promoting export diversification for each member country.

In addition, efforts must be increased to motivate more technology-intensive manufactured goods. Given the current average technology and skill content in intra-African trade, the AfCFTA seems to be well positioned to help achieve and deliver more technology-intensive manufactured goods.”

The report notes that the African continent relies on the rest of the world for more than 80 per cent of its trade whereas its share of global trade remains at less than three per cent, in part, due to the small size of many African economies which limits their individual global bargaining strength.

It further notes that 16 of the 55 African countries are landlocked and rely on their coastal neighbours for extra-African trade and development, using ports and shipping lines.

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