Category : Trade Agreement
The Guide to exporting Africa under the African Continental Free Trade Area (AfCFTA) is part of the International Economics Consulting’s work with the United Nations Development Programme (UNDP) and Ministry of Investment, Trade and Industry (MITI) of Botswana. The guide comprises two major sections. The first section aims to demystify rules contained in the African Continental Free Trade Agreement Protocol on Trade in Goods in terms digestible by exporters, as well as pinpointing the untapped potential opportunities in the African continental market for the private sector in Botswana. The second section lays out the requirements and sources of information to the realization of the potential product exports to selected markets in the African Continental Free Trade Area.
Botswana trade with Africa
Covers a market of more than 1.2 billion people, including a growing middle class, and a combined gross domestic product (GDP) of more than USD 3.4 trillion, the AfCFTA represents a large market for Botswana exporters to tap into. The total value of trade in goods in AfCFTA countries was estimated at more than USD 1 trillion in 2019. The AfCFTA import basket in 2019 comprised mineral fuels (14%), mechanical appliances (11%), electrical machinery and equipment (8%), as well as a substantial amount of plastic articles, cereals, pharmaceutical products, iron and steel, and articles of iron and steel.
Currently, Botswana has only 14% of intra-regional trade within Africa, most of which are with SADC countries/ SADC region accounted for 99% of the country’s exports to the whole Africa. According to ITC Trademap data, Botswana has a negative trade balance with both the AfCFTA bloc (-USD 3.7 billion) and non-SADC African countries (-USD 4 million) in 2019, meaning that it imports more from than exports to the rest of the continent. In 2019, Botswana’s exports to AfCFTA have been dominated by trade in diamonds (46%), followed by electrical machinery (14%) and mechanical appliances and inorganic chemicals (5% each). The AfCFTA however represents untapped potential for Botswana exports besides precious stones. Export potential analysis shows that the export potential exists for, among others, mechanical machinery, electrical machinery, plastics, and meat.
The AfCFTA Protocol on Trade in Goods
The AfCFTA protocols are being negotiated in phases. Phase I covers trade in goods and trade in services. Phase II covers IPRs, investment, and competition policy, and Phase III covers E-Commerce. Phase I negotiations concluded the AfCFTA Agreement, Protocol on Trade in Goods, Protocol on Trade in Services, Protocol on Rules and Procedures on the Settlement of Disputes as well as their annexes and appendices. These legal instruments entered into force on 30 May 2020. Negotiations are still ongoing at the time of preparing this guide, with pending finalization for rules of origin, schedules of tariff concessions, and schedules of specific commitments on the five priority service sectors (business services; communications; finance; tourism, and transport), as well as a digital trade protocol.
Overall, the AfCFTA is expected to bring about conducive conditions to facilitate intra-African trade beyond the RECs of which Botswana is currently a member. The agreement calls for the elimination of 97% of all tariff lines under three categories (full liberalisation, sensitive list, and excluded list) over 10 years and 13 years for Developing Countries (DCs) and Least Developed Countries (LDCs) respectively. Provisions on Rules of Origin (RoO) allow for the cumulation of sufficient working or processing operations across all State Parties. As stated in Article 8, Annex 2 (Rules of Origin) to the Agreement, all State Parties shall be considered as a single territory to determine the originating status of goods
Recognising the importance of eliminating Non-Tariff Barriers (NTBs) in the creation of “a single market”, the AfCFTA has specifically dedicated Annex 5 to mandates the establishment of a mechanism for the identification, categorisation, and elimination of NTBs. A continental online mechanism for monitoring, reporting, and elimination of NTBs (at https://tradebarriers.africa) has also been put in place for anyone to log report any obstacle encountered when trading goods across intra-African borders, for example, excessive delays, ad hoc fees at the border, cumbersome document requirements, restrictive product standards, and regulations, etc.
With regard to Sanitary and Phyto-Sanitary (SPS) and Technical Barriers to Trade (TBT), Annex 6 (on TBT) and Annex 7 (on SPS) of the AfCFTA Agreement incorporate WTO law, meaning that the AfCFTA Member States that are non-WTO Members have adopted the WTO’s relevant agreements on TBT and SPS. The AfCFTA provisions are also aligned with the relevant WTO Agreements governing the rights and obligations of the Parties to trade remedy measures (i.e., anti-dumping, countervailing, and safeguards). Under Annex 9, the Agreement foresees a set of options to adopt safeguard measures under such situations: (a) global safeguards, (b) preferential safeguards, and (c) provisional safeguards.
The way forward
The guide was prepared to add momentum towards Botswana’s trade promotion initiatives by enhancing the business community’s understanding of trade opportunities through the AfCFTA agreement. While the guide has not been able to cover all possibly traded products, it provides a methodological approach in manageable steps so that trade public officials and private sectors can replicate in evaluating the trade potential and accessing reliable sources of information to strengthen their preparedness for exporting to the African continental market under the AfCFTA agreement.
The Guide can be downloaded from the UNDP’s website.