The argument by the Organisation for Economic Cooperation and Development (OECD) that tightening South Africa’s wealth tax regime would rebalance ... generational inequality has a fundamental flaw: it targets a “flighty” base, says an expert from the African Tax Institute.
“I’ve just come from Ghana, where four weeks ago we agreed on rules of origin for cheese, fruit juices and edible oils. We now have agreement on just over 88% of products. Our immediate target is 90%,” says Patel.
By February next year, the continent’s trade ministers will place a package before their heads of states, seeking support, endorsement, and approval on rules of origin. “Once they’ve approved that, we can start trading. That’s where we are,” says Patel.
Although the African Continent Free Trade Area (AfCFTA) agreement came into force on 1 January 2021, “we’ve not practically started what you can call ‘real’ trade under the AfCFTA”, the South African trade minister says.
“The reason for that is we’ve now gone into an implementation phase. That means we’re sorting out most of the legal mechanics. There’s one big elephant in the room: rules of origin, what constitutes minimum African content to qualify for the preferences provided by the free trade area,” he says.
When rules of origin are in place, countries make offers. “Those offers are in place. We are looking at each other’s offers,” says Patel.
“Rules of origin are one of the most complex things,” says Patel, who adds that “it took Europe … [time] to develop the infrastructure, the understanding, the trust, and the knowledge base of the separate economies to agree on common rules of origin.”
An enabler of investment
Wamkele Mene, the general secretary of the AfCFTA Secretariat, says: “Early next year, we will have a special summit on the AfCFTA. There are over 7,500 products that are categorised.”
Mene shares a similar view to Patel that rules of origin are a complex area in the AfCFTA.
“Different countries have different rules of origin. We have achieved convergence on 87.6% rules of origin. Thousands and thousands of products going forward will be subject to the same local content requirements for trade across the continent. That’s critical for industrial development. It’s critical for investment,” Mene says.
Singularity and coherence in rules of origin would ensure that a global manufacturer of vehicles seeking to establish an assembly plant in East Africa, for example, with complementary value chain components produced in West Africa, would not encounter hurdles because of a fragmented rules of origin framework.
Mene says: “If you have different rules of origin, you are discouraging investment. If you don’t have rules of origin that are consistent, you are discouraging investment.”
[…] Everybody realises that we can no longer be in this condition where there is one country in Asia whose [contribution to] global GDP is 6% and African countries’ [collective] contribution to global trading is less than 3%.
“We are now at a stage where we are agreeing on the rules of origin for textiles and clothing, and the automobile sector. These are politically sensitive areas, but we will conclude in the next two to three months,” says the AfCFTA Secretariat general secretary.
The model of European integration is an important lesson for Africa. “Once you agree on removing barriers to investment, trade. Having a common framework, you then have to domesticate the agreement,” says Mene.
Political will for AfCFTA
Domesticating the agreement means crafting a national legal framework that accommodates the responsibilities and obligations placed on signatories to the AfCFTA. Furthermore, domestication involves smoothing areas of legal contradiction and removing legislative barriers that might exist and serve to hinder the realisation of the AfCFTA.
A total of 39 countries have ratified the agreement. Only one country – Eritrea – has not signed the AfCFTA agreement. “Even the countries that have not ratified the agreement, I have visited some of them and spoken directly to the[ir] heads of states,” says Mene.
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“It’s not because they don’t think it’s in their national interest [to ratify]. It is just that it can take some countries up to one year to conclude the ratification process,” Mene says.
“The commitment is there. The political will is there. In fact, […] with Covid-19, it is even more intense – the political will – for us as Africans to get ourselves out of this position that we’ve been in for the last 65-70 years,” says Mene.
“[…] everybody realises that we can no longer be in this condition where there is one country in Asia whose [contribution to] global GDP is 6% and African countries’ [collective] contribution to global trading is less than 3%,” Mene says.
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