South Africa’s government has admitted that improving the efficiency of the struggling national ports will be key to the success of the African Continental Free Trade Area (AfCFTA) agreement as the country has commenced preferential trade under.
This comes as South Africa’s economy is being stifled by logistical bottlenecks as Transnet is struggling with weeks of backlogs caused by inadequate equipment at the ports and railway lines.
President Cyril Ramaphosa yesterday officiated the launch of the first shipment of manufactured products to Ghana via the Port of Durban under the AfCFTA’s Guided Trade Initiative (GTI).
The shipment was of grinding media from Grinding Media South Africa (GMSA), a Germinston-based company that manufactures forged grinding balls and high chrome grinding media products supplied to the platinum, gold, ferrochrome, base metals, power generation and cement industries.
Other products expected to be shipped to countries such as Kenya through preferential trade include appliances and electrical parts to accessories and paper boards.
Since its inception in October 2022, the GTI has been instrumental in facilitating trade in “Made-in-Africa” goods among State Parties across various regional economic communities on the continent.
Under the AfCFTA, South African-made vehicles could find new markets across Africa, benefiting from reduced tariffs and simplified trade regulations.
Ramaphosa said the government was working closely with industry to fix Transnet’s rail and port operations in the immediate term and to ensure greater investment in infrastructure.
“Not only will it benefit our country’s producers, but it will also see a huge increase in traffic through our ports, our airports and our land-based border posts. The products made in Gauteng, Limpopo, North West, Free State, Mpumalanga and the Northern Cape will flow through these ports to markets beyond our borders,” Ramaphosa said.
“That is why, as the South African government, we are focused on implementing our Freight Logistics Roadmap to improve the efficiency and competitiveness of the country’s rail lines and ports. We are working closely with industry to fix Transnet’s rail and port operations in the immediate term and to ensure greater investment in this infrastructure into the future.”
Financial services group EY Africa’s global, trade and excise partner Johnathan Fillis said AfCFTA did not only pave the way for South African companies to export duty free but it was also very appealing for large multinational companies to invest and manufacture in South Africa too.
“That’s because even if you are a large multinational, with well known global brands, as long as the origin of products is in South Africa you may also have free trade access to participating countries across the continent,” Fillis said.
“It sends a clear message to global companies: bring your production to South Africa and sell across Africa without duties. It’s a compelling case when you consider Africa is home to 1.6 billion people and has an economy worth $3.4 trillion (R63trl) .”
The AfCFTA is a high ambition trade agreement, which aims to eliminate barriers to trade in Africa and significantly boost intra-Africa trade, particularly trade in value-added production and trade across all services sectors of Africa’s economy.
Twelve countries, including South Africa, have finalised their legal modalities to enable trade to commence in thousands of product lines, ranging from food and beverages to steel products and equipment, taxis, pharmaceutical and personal care products, chemical products and household goods such as fridges and televisions.
Secretary-General of the AfCFTA Secretariat Wamkele Mene said participation in the GTI also brought to the forefront the need for South Africa to tackle pressing challenges, including overcoming infrastructural deficiencies, and further improving trade facilitation.
“The manner in which South Africa confronts and manages these issues can offer valuable lessons and serve as a blueprint for other African countries facing similar challenges,” Mene said.
“In this context, it is important to address key logistical challenges, particularly in the transportation sector. Encouraging greater participation from the private sector in transportation can help alleviate existing bottlenecks, increasing capacity, and thereby boosting the efficiency and volume of exports.”
Intra-Africa exports are reported to stand at around 16% of Africa’s total exports, compared to 55% in Asia, 49% in North America and 63% in the European Union.
However, the United Nations Conference on Trade and Development (Unctad) predicts that the AfCFTA could boost intra-Africa trade by up to 33%.
Meluleki Nzimande, partner in Webber Wentzel's competition, trade and investment team said AfCFTA heralded many trade benefits for South African manufacturers.
“Trade under the AfCFTA should see the prices of South African manufactured goods being more competitive in the African market, which bodes well for the growth of the local manufacturing sector and, by extension, local employment,” Nzimande said.