South Africa kicks off huge trade deal
South Africa will start trading under the Agreement Establishing the African Continental Free Trade Area (AfCFTA) from Wednesday, 31 January 2024, significantly boosting trade across the continent.
South Africa is joining the expanded AfCFTA Guided Trade Initiative (GTI), which gives countries an opportunity to test commercially possible trade under AfCFTA.
According to the United Nations Conference on Trade and Development (UNCTAD), intra-Africa trade should increase by 33% due to AfCFTA.
In terms of numbers, AfCFTA creates the world’s largest free trade area by number of countries, with 54 signatories across the continent.
Speaking at the launch event today, President Cyril Ramaphosa said that the implementation of AfCFTA will accelerate the development of regional and local value chains, which will offer investors access to a population of 1.7 billion people with a fast-growing continental GDP.
The President said that intra-Africa exports currently only stand at 16% of the continent’s total exports – far less than the 55% in Asia, 49% in North America and 63% in the European Union.
At the launch today, the first shipment of ‘made-in-South Africa’ products to AfCFTA State Parties participating in the GTI, including Ghana, Egypt, Rwanda, and Tunisia, will be made.
“Trade under the AfCFTA should see the prices of South African manufactured goods being more competitive in the African market, which bodes well for the growth of the local manufacturing sector and, by extension, local employment,” Meluleki Nzimande, a partner in Webber Wentzel’s Competition, Trade & Investment team, said.
Draft government gazettes published last week show that South African businesses will be able to take advantage of trade under liberalised preferences.
As is the case with other free trade agreements, there will be a phase-down approach for most goods, allowing the tariffs to be gradually reduced. The length of the phase-down period depends on whether the state party is deemed as a ‘non-least or least developed country’.
“South Africa plays a critical role as a mature player in several prioritised value chains under the AfCFTA, in particular, automotive,” said Yael Shafrir, Associate Director, Webber Wentzel Competition, Trade & Investment.
“This move is likely to change the dynamic of African and international trade, particularly as international players seek to identify new African hubs for their regional value chains to access a broader and growing market.”
As South Africa has now officially joined AfCFTA, there will be a new era of economic growth and cooperation across the continent, Webber Wentzel said.
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