One-stop border post will boost trading
Southern African trader is cautiously optimistic about a free trade area
As the marketing executive of Dairibord Zimbabwe, a stock exchange-listed exporter of food and beverages in Southern Africa, Tracy Mutaviri is looking forward to a bigger market share for her goods when the African Continental Free Trade Area (AfCFTA) becomes operational.
The economies of scale of serving a larger market will mean her company can trade its beverages and food products beyond its current markets: Botswana, Malawi, Mozambique, South Africa and Zambia. The company may even begin to look at countries in West and East Africa.
Ms. Mutaviri is excited about the opportunities that a big market presents, particularly the benefits of standardized procedures for export. She is currently concerned about tariff and nontariff challenges to her business.
“We have mostly been affected by nontariff barriers such as obtaining the necessary licences or permits for trading our goods. The process takes a long time, at times as long as three weeks, and this affects export competitiveness,” she told Africa Renewal.
Countries have their own individual standards, and exporters must meet each one, she says.
The African Union and the Economic Commission for Africa, two key players in the AfCFTA push, continue to assert that mechanisms will be in place to address these tariff and nontariff barriers.
Still, Ms. Mutaviri adds that cumbersome border documentation requirements and administrative and bureaucratic delays at ports of entry can mean delays of seven days or more. To expedite clearance, she suggests a one-stop border post to harmonise the export documentation process and expedite administrative procedures.
The World Trade Organisation (WTO) says that a one-stop border post would integrate different border agencies into one that would, among other benefits, reduce transit times for traders and transporters. It will lead to an effective use of available resources and assets at a lower cost, as well as improved competitiveness of goods due to reduced processing times – which, the WTO assumes, will translate into reduced costs.
Particularly cumbersome is the process of getting the necessary sanitary and phytosanitary documents. Sanitary and phytosanitary measures are plant- and pest-control requirements for exporting certain agro-based products such as tea.
Ms. Mutaviri says existing trade agreements, such as those of the Southern African Customs Union and the Economic Community of West African States, have not lowered trade barriers. In the absence of a trustworthy credit-rating agency and credit-insurance facilities, high credit risk across borders is a major hindrance to trade.
“Exporting from a United States dollar-based economy into markets with softer currencies has made our prices uncompetitive amidst high competition with players from the region and from outside the region,” she says.
While she embraces a free trade zone, Ms. Mutaviri fears that it may subject her company to increased competition from other African economies, given that Zimbabwe’s food processing sector’s regional competitiveness gap is currently estimated at just 38%.
“The AfCFTA, by its size, will also attract players from outside Africa and without a single currency. Countries will not compete on equal footing,” she insists.
Ms. Mutaviri notes that the industrialisation agenda being pursued by various African countries may make many governments reluctant to open their borders. She hopes that a free trade area will be implemented in a way that accommodates the different levels of industrialisation in different member states.
“The larger or stronger economies, if unchecked, will determine the way the reforms will be implemented, and lesser economies will be forced to adapt to the changes. Therefore, the AfCFTA governance structures must ensure fair representation from less developed economies,” she says.
Infrastructural barriers may also pose a big challenge, she adds. According to the African Development Bank Group, Africa’s infrastructure requires investments of about $93 billion per year over the next decade. Sourcing that amount will be a huge challenge, experts say, and without a solid infrastructure base, especially adequate transportation, it will be difficult to make free trade area a reality.
This article appears in the August-November 2018 issue of Africa Renewal, published by the United Nations.