New trade agreements to unlock African markets and new tariff for East Africa

HORTGRO spoke to Wolfe Braude, Agbiz Fruitdesk Manager

South African deciduous fruit may have access to new markets in the coming years, thanks to two new trade agreements. In the meantime, however, a new tariff for fruit has been introduced in East Africa.

Trade with other African countries has historically been difficult due to logistics, governance, and complex border control requirements. However, these countries hold significant potential for South African exporters.

If the two massive African trade agreements currently nearing completion can address challenges and barriers to trade, South African companies could benefit from a larger playing field. These trade agreements are the African Continental Free Trade Agreement (AfCFTA) and the Tripartite Free Trade Agreement (TFTA). Though in their final stages, neither of these agreements are functional yet. It is expected that duty-free trade will only begin in 2023 or early 2024.

The AfCFTA covers the entire African continent (although Eritrea hasn’t signed on) and has fifty-four signatory states making it the largest in the world. The TFTA comprises three existing trade blocs – the East African Community (EAC), SADC and the Common Market for Eastern and Southern Africa (COMESA) with a total of nearly thirty signatory states.

Thanks to the trade agreement, Protocol and Trade, of the Southern African Development Community (SADC), South Africa has largely been able to export fruit duty-free to other SADC member states. This agreement has encouraged trade and has meant that South Africa has consistently maintained a large positive trade balance with SADC.

In 2020, 23% of South Africa’s world exports were to the rest of Africa, but of that, only 3% of South Africa’s world exports were to African countries that are not members of SADC.  Imports from Africa to South Africa predominantly consist of crude petroleum oil, accounting for 37% of South Africa’s overall African imports. This illustrates that the SADC trade agreement has facilitated trade, and the trade balance has been in SA’s favour.

Nigeria and Kenia spend around $6 billion and $2 billion on agriculture imports per year, respectively. However, South African exports make up only 2% of this. The bulk of these imports is staple products like wheat, dairy products, sugar, palm oil and maize rather than higher value horticulture.

The African government has shown a determination to enter this market. This will hopefully translate into an opportunity for agricultural exports. “To make this a reality Government will have to provide effective, comprehensive trade facilitation support for fruit exporters, in order to convince them to diversify away from traditional markets,” says Wolfe Braude, fruit desk manager at Agbiz.

The Department of Agriculture, Land Reform and Rural Development has identified Morocco, Algeria, Libya, Ghana, Guinea, Kenya and Burkina Faso as potential new markets under AfCFTA. While sufficient states have ratified the AfCFTA to make it operational once all outstanding issues are resolved, the TFTA still requires three additional ratifications, with Lesotho being one of them.

In the meantime, unfortunately, South African fruit exporters will now face higher tariffs in East Africa due to the implementation of a new 4^th tariff band of 35% by the East African Community. “However, once the AfCFTA and TFTA come into effect, fruit exporters will be allowed to trade at the lower tariffs which will apply under these agreements, as these negotiated Free Trade Area tariffs will overrule the unilaterally imposed EAC 35% band,” explains Braude.