The Steel and Engineering Industries Federation of South Africa (Seifsa) has welcomed the official start of the African Continental Free Trade Area (AfCFTA) at the end of May.
AfCFTA provides access to a continent-wide market of around 1.2-billion people, and is worth $2.5-trillion.
Seifsa chief economist Dr Michael Ade says the deal effectively makes Africa the world’s largest free trade zone by population since the 1995 creation of the World Trade Organisation.
Ade commended the 24 African countries that ratified the agreement by May 30, which brought the intra-continental trade agreement into force.
The operational phase of AfCFTA will be launched on July 7 at the African Union (AU) Summit, in Niger, where some outstanding issues, including the agreement’s rules of origin, are expected to be resolved.
Once the agreement is ratified by all 52 African countries, it will enable the creation of a single continental market for goods and services, with free and unfettered movement of businesspeople and investments.
AfCFTA enables duty cuts on 90% of goods and should see an improved proportion of trade between African nations.
Ade further encouraged companies in the metals and engineering sector to take advantage of the agreement to boost trade further north and east of the continent.
“Owing to challenges principally caused by poor logistics and infrastructure, most businesses had limited their trading opportunities to the southern part of the continent. The agreement provides a scope for more improved trade in line with the AU’s Agenda 2063 and this is good news,” he said.
Ade cautioned that rather than limiting themselves to producing a particular set of goods, local companies should conduct market research, move with the times and produce goods currently needed by other African countries.
He added that it was important for trade among Africans to be expanded, since uncertainties in international trade increased the premium on intra-African trade.
“The AfCFTA proves that Africa has learnt from the experience of East Asia and Latin America to build productive trading capacities through regional value chains.
“This will help build collectively the competitiveness of African products – including raw materials – internally and internationally. By trading with other African member States, South Africa will strengthen its position and improve gains from international trade,” Ade pointed out.
He urged African leaders to do away with remaining challenges that pose a threat to intra-African trade. He said nontariff barriers such as the plethora of documentation needed for cross-border trade transactions were perhaps “even bigger” impediments to intra-African trade.