eBusiness Weekly
Note from the ZNCC
The African Continental Free Trade Area (AfCFTA) was among the insightful deliberations during the 2023 ZNCC Annual Congress, which was held from June 28 to 30 in Victoria Falls.
A lot of rhetoric talk has been taking place on the Free Trade Area (FTA) and it was about time that all stakeholders involved move from just talking to making it a reality for Zimbabwe.
In retrospective, the session moderator, Ojijo Odhiambo (UNDP Zimbabwe economics advisor) mentioned that there are things that we know and things we don’t know and also things that we know we don’t know.
According to Odhiambo, one of the things we surely know is that the AfCFTA is a reality and trade has been taking place under the AfCFTA Agreement since January 2021. The main question, therefore, was, “why is Zimbabwe not trading under the AfCFTA arrangement?”.
The session on AfCFTA was meant to discuss on what Zimbabwe was supposed to do to ensure that the country benefits from the trade that has been created by the ratification and implementation of the AfCFTA. The UNDP Zimbabwe was partnering with ZNCC on the AfCFTA discussion at the 2023 ZNCC
Annual Congress to facilitate continued dialogue on this critical topic.
The UNDP economics advisor also gave a glimpse of the possible impediments to Zimbabwe’s effective trading under the AfCFTA, including: capacity to trade (skills, product development, innovation, etc); information asymmetry surrounding the agreement and implementation, trade facilitation issues and access to trade finance. Addressing such bottlenecks is fundamental for effective participation in international trade.
In his presentation, Batanai Chikwene (programmes manager, Africa Trade Policy Centre) emphasised on the need to leverage on the AfCFTA to aid in the delivery of the National Development Strategy I (NDS1) and to allocate funds from the National Budget to ensure full implementation of Zimbabwe’s strategy. Accordingly, the AfCFTA agreement is not self-executing and its implementation at national and continental level requires resources of all kinds.
For it to work for Zimbabwe, action is greater than just talking about it. In doing so, Zimbabwe as a country can learn a great deal from countries like Ghana and Cote D’Ivoire.
The role of the Parliament of Zimbabwe is to align the existing National Laws (particularly trade laws) to the AfCFTA agreement. For the Ministry of Foreign Affairs and International Trade, the National Tariff Handbook needs to be updated frequently to include AfCFTA Tariff Regime, which is under gradual tariff reduction and also to be accessible digitally.
Trade associations like ZNCC and the Confederation of Zimbabwe Industries (CZI) have to be proactive with regards to issues surrounding the AfCFTA and engage the authorities positively. The engagement has to be needs and issues based while domesticating the conversations.
Further, business member organisations (BMOs) should look to capacitate their members under their business development mandate towards international competitiveness. Also, SMEs participation in the AfCFTA should be promoted.
The Government of Zimbabwe was urged to actively pursue industrial policies and the development of regional value chains and enhancing the capacity of the private sector to tape into global value chains as espoused in NDS1. Also, enhancing the efficiency of the capital markets will facilitate and allow capital to move where it works best.
According to Chikwene, the need for policy coherence especially on fiscal, monetary and national trade policies cannot be overemphasised.
In taking a proactive approach rather than waiting for Government to act, the private sector was encouraged to join the Guided Trade Initiative, which facilitates the matchmaking of businesses and products for export and import between interested state parties.
The Initiative allows a trader to test the operational, institutional, legal and trade policy environment under the AfCFTA. More than 20 countries have already joined the initiative and Zimbabwe is yet to join.
There are other initiatives like the African Trade Observatory market intelligence dashboard, Non-Tariff Barriers Reporting, Monitoring & Elimination Mechanism, Pan-African Instant Payment and Settlement System, Intra-African Trade Fair, AfCFTA Adjustment Fund, AfCFTA Business Forum, AfCFTA e-Tarrif Book, and Africa Trade Exchange (ATEX), which the private sector can fully tape into for enhanced participation in the African Continental Free Trade Area (AfCFTA).
With some words of emphasis, Odhiambo indicated that Chikwene’s submission on the need to domesticate the AfCFTA should be taken with the utmost consideration it deserves and it was crucial that Zimbabwe joins the list of countries that have started implementing the Agreement to ensure that it becomes a reality.
The Ambassador of the Republic of Rwanda to Zimbabwe, James Musoni, was among the panellists and he reported that the AfCFTA is a good opportunity for Africa to pull resources together and creating a huge market of 1.3 billion people.
In his words, the Ambassador highlighted that there are quite a vast of investment opportunities that have been created by the AfCFTA, but the greatest challenge many African countries face is the colonial legacy. The legacy goes down to the design of infrastructure and the export and import baskets and the AfCFTA is coming in an attempt to reverse such setups.
For the AfCFTA to work for Zimbabwe and the continent at large, a change of mind-set is required at first and capacitating the citizenry to find solutions for itself and among self.
The second phase will greatly involve considerable work on the facilitative infrastructure including solving logistical issues and transport modes as well as the payment systems.
This can only be solved if the mind-set is changed. The current set-up requires one in Victoria Falls, Zimbabwe to convert to US dollars when trading with another just across the border in Livingstone, Zambia. When talking about the AfCFTA, it does not necessarily imply exporting, it is bigger than that and consideration on how to source raw materials must also be taken into consideration.
Rwanda is now looking beyond colonial borders and for an African, one does not require a VISA to visit Rwanda. While concluding his remarks, Musoni emphasised that Zimbabwe need to work very hard on resolving two main legacy issues: (1) property rights following the fast-track land reform programme and (2) macroeconomic management looking particularly at issues such as hyperinflation and currency volatility.
Odhiambo underlined the two legacy issues on the legal front and the monetary policy management as being critical in Zimbabwe’s participation in the AfCFTA especially with the Pan-African Payment and Settlement System (PAPSS) necessitating the need to use local currency for intra-Continental transactions.
Ambassador Musoni further mentioned that after solving infrastructure, logistics and payment systems, the next step is to identify products that a country like Zimbabwe has comparative advantage for export into the region.
Dr David Mupamhadzi, an economist at the African Development Bank (AfDB) Zimbabwe country office, made submissions with regards to the key private sector development focus areas for the bank which include the high-fives: Light Africa (supporting projects around renewable energy); Feed Africa (supporting projects around agro-value chains); Industrialise Africa (supporting retooling and industrial development); Integrate Africa (supporting the implementation of the AfCFTA and regional integration); and Reduce Poverty in Africa.
The AfDB also provides long-term (going to more than five years) financing directly to the private sector for projects that have a minimum outlay of US$10 million.
Any projects below that will be catered for by local financial institutions. Similar to the AfCFTA Business Forum initiative, the AfDB runs an Africa Investment Forum, which is a marketplace where the bank takes projects that are close to bankability or are viable to potential investors.
In 2022, 13 projects were brought to the marketplace from Zimbabwe and out of those, three projects received firm commitments from investors who are willing to invest in those projects. The 2023 Africa Investment Forum is scheduled to be held in Morocco in November. Accordingly, the deadline for submissions of projects to the AfDB Zimbabwe Country Office is by the end of July 2023.
With regards to the AfCFTA, the key issue is private sector value proposition in terms of complimenting regional partners.
There is a need to be innovative and efficient since in some cases, it is cheaper for a Zimbabwean company to export products from Kenyan location into Zambia than it is for the same company to export from Zimbabwe into Zambia. Improving the Ease of Doing Business is critical to enhance the private sector’s participation in international trade.
In his remarks, Alfred Marisa (the Deputy Director General, Postal and Telecommunications Regulatory Authority of Zimbabwe (POTRAZ)) pointed at Rwanda as a perfect example of how to take advantage of ICTs. For Zimbabwe, it takes a lot of preparedness to compete effectively within the continent and as a country, Zimbabwe is not yet there.
“Talking of preparedness, it is not really about whether Zimbabwe’s private sector is ready or not because the AfCFTA is here and the country is part of it. If the private sector as a player is to get injured, the player has to get injured while playing,” according to Chikwene.
According to Marisa, the NDS1 has identified the need to transition towards a digital economy and POTRAZ is playing a key role in that respect. Under the AfCFTA, the Digital Trade Protocol is coming on board and it is critical for Zimbabwe to be fully involved in the negotiations.
Digital trade is only possible if the digital infrastructure is available to facilitate for such and effectively participate. ICT is about trade facilitation especially within the Fourth Industrial Revolution (4IR).
Countries that have placed themselves for international competitiveness are the countries that have fully embraced the 4IR and technology waits for no one. The use of ancient technology is dragging Zimbabwe’s participation in the intra-continental trade initiative.
The reason why the AfCFTA has not gained any traction yet is to do with the lack of complementarity in terms of production among African countries.
Also, African countries, except maybe South Africa, do not manufacture goods like cell phones or health equipment nor produce services that matter for life. There is a need for countries to improve on reporting on the progress with regards to the implementation of the AfCFTA.
In line with the submissions by the Ambassador Musoni, Prof. Albert Makochekanwa submitted that Africans, particularly the elite, prefer to buy from Europe rather than within Africa. With regards to trade barriers, an example was given where transporting a container would cost US$3,500 from Durban to Lusaka but US$5,500 from Durban to Harare, the same journey by a truck use. The implementation of the AfCFTA should be provided for in the National Budget.
In summary, to make the AfCFTA work for Zimbabwe, all involved need to have a mind-set that changes the structure of trade and accompanies the management of the transformation. There are things that the private sector can do without the need for the Government, which include participation in the AfCFTA Business Forum and utilising the available digital tools.
Zimbabwe should expedite moving towards producing value-added products and participating in regional and global value chains as espoused in the NDS1.
The most interesting statistic about intra-African trade is that African countries trade more in value-added products than primary commodities ,which is a good base to build on.
The first pillar of the National AfCFTA Implementation Strategy tries to give guidelines of addressing the logistical issues. Compliance to standards need not be overemphasized. The academia is needed to analyse policy positions and advice the policymakers.
The article was prepared by the Zimbabwe National Chamber of Commerce (ZNCC) for Business Weekly
