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Home Business Business News

Malawi could gain from Africa free trade area

by Grace Phiri
26/06/2019
in Business News
3 min read
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Malawi could be one of the top four economies to gain from the African Continental Free Trade Agreement (AfCFTA) once it ratifies the agreement, a report by the International Monetary Fund (IMF) indicates.

The report, titled The African Continental Free Trade Agreement: Welfare Gains Estimates from a General Equilibrium Model, shows that by ratifying the agreement, Malawi’s gains from tariff eradication and non-tariff barriers (NTB) reduction could increase to 8.9 percent.

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Swaziland is tipped to be the top gainer at 15.2 percent trailed by Namibia at 12.4 percent and Botswana at 9.1 percent, according to the report.

IMF observed that intra-African trade agreements have, to a large extent, facilitated a gradual lowering of tariffs on goods, with tariffs coming down in the last two decades from over 20 percent in 1997 to 11.8 percent in 2016 while NTB remain high and prevalent, and represent a critical obstacle to trade.

“An economy that trades considerably with other African countries would be able to expand its market opportunities more easily than one that does not have extensive intra-African trade ties,” reads the report in part.

While observing that NTB reduction programme should include addressing barriers that hinder trade, including infrastructure gaps and an improvement in the business environment in Africa, IMF said to fully realise welfare benefits from the AfCFTA, member countries need to liberalise 100 percent of the tariff lines even if this is completed in a phased manner over the medium-term.

In an earlier interview, Malawi Confederation of Chambers of Commerce and Industry (MCCCI) chief executive officer Chancellor Kaferapanjira said local businesses are not yet ready for the AfCFTA due to lack of competitiveness.

He said the major source of competitiveness is electricity, which the industry does not have.

Last week, Ministry of Industry, Trade and Tourism director of trade Christina Zakeyo-Chatima said Malawi is not under pressure to ratify AfCFTA and will do so only when all stakeholders are convinced that it is in the best interest of Malawians.

“There are a number of issues that countries will have to discuss and negotiate before trading commences despite the pact entering into force on May 30 and the launch in July,” she said.

For example, Chatima said there are issues on rules of origin, initial tariff offers, the pan-African payment system, the adjustment facility, NTB monitoring system.

She said for countries such as Malawi, there is need for a longer transitional period for elimination of sensitive products than the proposed 15 years.

The AfCFTA is expected to be launched on July 7 in Niamey, Niger at an extra ordinary summit of the African Union (AU).

On March 21 2018, representatives of over 40 (out of 55) member countries of the AU, including Malawi, signed the AfCFTA agreement.

AfCFTA is expected to cover all 55 African countries, with an estimated combined current gross GDP of $2.5 trillion.

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