By Emmanuel Muma CTPD Researcher – Trade and Development
Intra Africa trade among African Union member countries has for a long time remained low about 18% of total exports from the continent. This is in comparison to 69% in Europe, 59% in Asia and 31% in North America. Manufactured goods make up a much greater proportion of intra-Africa trade than trade with the rest of the world which is mainly focused on raw materials. Key historic initiatives such as the Tripartite Free Trade Agreement (TFTA) and the Africa Continental Free Trade Area (AfCFTA) have been lauded as proving a fittingly relevant platform for driving a wide socio-economic transformation, but this is not without its downside.
Zambia’s decision to ratify the Tripartite Free Trade Area Agreement is a commendable step towards increased regional integration in Africa and ultimately continental integration.
As the Centre for Trade Policy and Development (CTPD) we urge Government to continue consultations with local industries, private sectors players, and civil society organizations to review and plan for the potential benefits and costs of the TFTA as well as AfCFTA-which is currently in force.
TFTA brings together twenty-eight countries with a population of over 700 million people and a combined Gross Domestic Product (GDP) of US$1.4 trillion while AfCFTA, connects 1.3 billion people across 55 countries with a combined gross domestic product (GDP) valued at US$3.4 trillion.
CTPD also thinks that the operationalization of the TFTA and AfCFTA will create opportunities for bigger export growth, value addition, sector-specific growth & diversification to take advantage of. Increase in trade that results from regional and continental economic integration. It will also give consumers and industrial buyers a wider selection of goods and services not available beforehand. Further, this is an opportunity for buyers to acquire goods and services more cheaply following the lowering of trade barriers such as tariffs. A group of nations can have significantly greater political weight than nations have individually. This also presents entrepreneurs with more options to cheaper sources of inputs and raw materials and consequently drive their costs down
Despite the envisaged benefits from the TFTA, as well as AfCFTA, Zambia is expected to face increased competition from other international products. This entails that in order to be competitive, the Zambian entrepreneurs and manufacturing sector will have to be positioned to be able to produce quality, competitive and affordable products. In-terms of exports, Zambia is currently a net exporter of semi-finished goods but a shift towards exporting high value-added products for instance can help the country gain more revenues from exchange within the TFTA and AfCFTA.
It is important for Government to continue addressing the current concerns about the low performance of Zambia’s industrial sector and the limited support towards supporting entrepreneur growth. As with any measure of this scale, TFTA including AfCFTA is not without downside risk for Zambian businesses and its economy. Perhaps the biggest problems rests on the fact that Zambian businesses are hobbled by inadequate financial, technology, skills and infrastructure support and may well suffer when exposed to the competition that a free-trade agreement such as TFTA & AfCFTA fosters.