African Continental Free Trade Agreement (AfCFTA) to Benefit Namibia
05 October 2020
Namibia is one of the Countries set to benefit from the AfCFTA, particularly offering opportunities for economic diversification and value chains development.
The AfCFTA is one of the flagship projects of the Africa’s Agenda 2063, a key programme and initiative that has been identified to accelerate Africa’s growth and development, aimed at boosting intra-African trade and the Continent’s trading position in the global marketplace. The Agreement to establish the AfCFTA was signed by 44 African Union (AU) member States in March 2018 during the 10th Extraordinary session of the African Union Summit held in Kigali, Rwanda. An extra 5 member States, including Namibia, signed the Agreement during the 31st Ordinary session of the AU Summit in July 2018 which took place in Nouakchott, Mauritania. The Agreement was entered into force on 30 May 2019; Namibia is one of the countries, that has already ratified agreement; and the AfCFTASecretariat was officially opened in Accra Ghana, on 17thAugust 2020.
At the recently held Africa Summit at Princeton University, in the United States, under the theme “The Future is African: Post-COVID Economic Recovery Reimagined” Ms. Eunice Ajambo, the Economist and Development Coordination Officer at UN Namibia presented on the AfCFTA as a source of economic stimulus in the COVID-19 context, and its contribution to the SDGs. She noted that the impetus for the AfCTA is founded on its potential to contribute to enhanced:
Economic Growth: The AfCFTA is expected to be the largestfree trade area since the formation of the World Trade Organisation (WTO). It will comprise an estimated market of 1.3billion people across 55 African countries. The combined GDP of the region is expected to increase by an estimated 1% to 3 % to US$3.4 trillion, from the estimated current US$2.6trillion, stimulating welfare gains, from trade.
Employment: The loss of jobs is one of the results of COVID-19 with economic downturns presenting uncertainty on the recovery of key sectors including tourism, retail and trade. At mid-point in 2020, estimates were that 34.3 million people would fall below the extreme poverty line in 2020, with 56% of this increase occurring in African countries, due to COVID-19. Yet, predictions are that employment is to increase by 1.2%, and with 30 million people being lifted out of extreme poverty by 2035 with an increase in incomes, as a result of implementationof the AfCFTA.
Fiscal Space: African countries were already struggling with fiscal space, even before the COVID-19 pandemic, including through lower tax revenue to GDP ratio (17 per cent) than other regions, alongside rising levels of indebtedness and high risk ofdebt distress. With the collapse in commodity prices due to COVID-19, the AfCFTA presents opportunities for new sources of revenue including through new sectors such as e-commerce.
Regulatory Framework: The implementation of the AfCFTAincludes the range of instruments and institutions, including the Protocol on Trade in Goods; the Protocol on Trade in Services;the Protocol on Dispute Settlement and he related Phase 2 negotiations on Intellectual Property Rights, Investment and Competition Policies. When established, these institutions willcontribute to strengthening economic governance and the regulatory environment, on the Continent.
Private Sector Development: A core tenet of the AfCFTA is its commitment to broadening markets across the Continent. Already 80% of the businesses on the Continent are SMEs. Moreover, informal businesses are a potential pipeline for formalization as SMEs, lessening fragmentation in the sector and generating economies of scale.
As an accelerator, the implementation of the AfCFTA would directly contribute to SDGs on: 1) No Poverty; 7) Affordable and Clean Energy; 8) Descent work; 9) Industry, Innovation and Infrastructure; 16) Peace, Justice and Strong Institutions, 17) Partnerships for the Global Goals, and with spillovers and hinged on the other SDGs.
The Summit underscored the importance of technology, including digitalization, e-commerce, cross-border digital trade,as a driver and enabler of the SDGs and the related Principles for Digital Governance, and called for strong integration of SGD 13 on Climate Action in the National AfCFTA Implementation Strategies, and related negotiations at the regional level.
Namibia is one of the Countries set to benefit from the AfCFTA, particularly offering opportunities for economic diversification and value chains development and expansion, as means to economic transformation. Analysis indicates that Namibia is set to see its GDP increase by between 4.1% (or US$ 1.85 bn) and 4.2% (or US$ 1.93 bn). The country’s exports are to increase between 2.8% (or US$ 640 mn) & 2.9% (or US$ 664 mn), with the implementation of the AfCFTA. Significant gains are to be expected in all main sectors, with strong potential to promote industrialization in sectors including textiles, wearing apparel, leather, milk and dairy products, wood and paper, metals, chemicals, vehicle and transport, electronics and other machinery.
Over 85% of the gains in Namibia’s exports to the rest of Africa would be in industrial products; nearly 10% in agriculture and food; less than 5% in energy & mining.
Namibia’s exports would increase significantly towards all African sub-regions, outside of SACU, including extension of value chains to countries such as Cameroon, Kenya, Rwanda, Senegal, Tunisia and Zimbabwe, offering opportunity to industrialize through regional integration and trade.