SA keen to sign agreement establishing AfCFTA
South Africa is keen to sign the agreement establishing the African Continental Free Trade Area (AfCFTA), Trade and Industry Minister Rob Davies said on Monday.
“South Africa wants to sign and will sign when this agreement is in a state that enables us to sign,” Minister Davies told a media briefing in Tshwane.
The Minister’s comments come following last Wednesday’s signing by 44 African countries of the agreement establishing the AfCFTA.
The agreement signed by countries, including Niger, Rwanda, Chad and Angola, was signed during the 10th Extraordinary Session of the Assembly of the African Union (AU) on the AfCFTA in Kigali, Rwanda.
South Africa did not sign the agreement but held off on signing until legal and other instruments associated with AfCFTA are processed and ratified by South African stakeholders and Parliament.
At the briefing, Minister Davies said there were a series of annexes and appendices which have not yet been “legally scrubbed”. He said South Africa has no problem with the overall content of the AfCFTA.
“The documents are like a circuit board that is yet to have the transistors in them. They don’t yet have the circuits linked up,” he said, adding that some of the outstanding matters relate to tariff schedules.
“South Africa has a relatively high bar before we can sign an international agreement. That high bar requires that we don’t sign things where there’s a reference to some appendix or annex that is not part of the agreement.”
The work on the annexes is likely to be done by the end of April, after which the documentation will be looked at by lawyers at the Departments of International Relations and Cooperation (Dirco) and Justice and Constitutional Development, among others.
In addition, South Africa wants to participate in the subsequent processes of the AfCFTA, which is aimed at creating a single continental market for goods and services, with free movement of businesses and investments.
The AfCFTA will make Africa the largest free trade area created in terms of the number of participating countries since the formation of the World Trade Organization, according to the African Union (AU).
“We will want to participate in the subsequent processes, which involve important discussion around institutional structure to drive this, the secretariat and how to address the tariff schedule process. The message we want to leave is that South Africa is very much part of this process. We are not holding back. We don’t have reservations or differences,” said the Minister.
Concerns and opportunities
South Africa is concerned that the country does not want to see the agreement becoming a conduit for products coming from outside of the region with low levels of value addition being traded under the terms of the agreement.
Instead, South Africa wants to make sure that the interregional trade it supports is the trade in products that support diversification and industrialisation on the African continent.
The AfCFTA, said Minister Davies, will boost intra-African trade and create a bigger market of 1.07 billion people with a combined nominal Gross Domestic Product of the African continent at US$3.3 trillion.
US tariffs on steel and aluminium products
Turning his attention to South Africa’s position regarding the Section 232 investigation by the US on steel and aluminium products, Minister Davies said South Africa is prepared to engage the US on quotas.
US President Donald Trump signed a proclamation to impose a 10% ad valorem tariff on imports of aluminium products and a 25% ad valorem tariff on steel imports, which took effect on Friday.
The proclamation makes provision for country-based exclusions from the duties, should the US and that country arrive at a satisfactory alternative means to address the perceived threat to national security.
South Africa made its case to the US that its exports of steel and aluminium are a very small proportion of the total imports of these products by the US. In the case of steel this is less than 1% of imports of steel by the US, while for aluminium it’s at 1.6%.
“We are a very small part of the US market. Our products [steel and aluminium] are also not a major part of our overall export basket,” said Minister Davies.
However, he said a number of companies could be significantly affected and that there is a risk of a “few thousand” jobs being lost as a result of the implementation of the tariff measures.
“On the basis of that, we requested that we be exempted. That letter was [sent] on 16 March,” he said.
How exemptions are decided by the US
Last week, Minister Davies held a teleconference on the issue with US Ambassador CJ Mahoney, the Deputy United States Trade Representative for Investment, Services, Labour, Environment, Africa, China and the Western Hemisphere.
Mahoney, who had not yet seen South Africa’s letter, said there are several criteria that the global super power looks at in terms of exemptions that are decided by the US President himself.
Among the criteria is whether or not South Africa is prepared to accept a quota, as well as what South Africa is doing to deal with the global glut of steel in its own market. The US also wants to be assured that if South Africa is given any kind of slack, that it would not be used as a gateway for the trans-shipment of products coming from other third countries.
“This morning, we met with the companies concerned and I can indicate that we are prepared to talk about a quota. Those companies will also be making their own representation,” Minister Davies said.
The Minister, however, would not divulge the names the companies involves.
“What I can say is that we are responding to this to try to ensure that we retain the productive capacity that we already have of companies that are involved in this trade and the jobs in particular that come from this trade,” he said.
A decision on the matter will be taken by the US before the end of April.