Time for Zambia to be clear on its stance on AfCFTA

By David Whitehouse
Posted on Friday, 25 February 2022 15:19

Zambia's President Hakainde Hichilema
Zambia's President Hakainde Hichilema in Glasgow, Scotland, Britain November 1, 2021. Andy Buchanan/Pool via REUTERS

Signals from the Zambian government that it will delay committing to African free trade mask a dilemma over transition to a more diversified, value-added economy.

Minister of commerce Chipoka Mulenga this month said the country has requested more time before committing to the African Continental Free Trade Agreement (AfCFTA), citing a need to fully engage the private sector first. The accord as it stands favours countries which already have well-established value-adding activities, he says. Zambia has signed and ratified the agreement.

The minister’s assessment “aligns with our own view, which suggests that countries such as Côte d’Ivoire, Ethiopia and Kenya are best positioned to benefit the most” from AfCFTA in its current form, says Irmgard Erasmus, senior financial economist at Oxford Economics Africa in Cape Town. “Zambia effectively risks very little by opting to hold out” on implementation.

Countries with relatively low import trade barriers and diversified economies stand to benefit the most from free trade, while countries which depend on commodities, and/or have uncompetitive economies, may be disappointed even in the long term, Erasmus argues.

  • “Zambia – with its dependence on copper for export receipts – is currently not well-positioned to benefit substantially from AfCFTA unless the country makes rapid strides towards export base diversification,” she says.
  • Oxford Economics estimates that the long-term benefit to per head consumer spending will be limited to a gain of  around 3%.
  • Zambia will get cheaper imports, which in the long term means lower inflation and higher real earnings, Erasmus says.
  • But the country needs to accelerate exports in energy, manufacturing and agriculture if it is to gain more benefit, she adds.

DRC potential

The reluctance to press ahead is “not at the policy level, but is in terms of process,” says Daniel Njiwa, head of regional food trade at the Alliance for A Green Revolution in Africa (AGRA). Zambia is not alone in its caution, he says. “In practice, not much has happened yet from any country.”

Njiwa, now in Nairobi, spent eight years working in Zambia, including five years with the Common Market for Eastern and Southern Africa (COMESA) in Lusaka. AGRA, which seeks to improve the position of small businesses and farmers in supply chains, is active in 11 countries.

As a landlocked country, Zambia has to maximise its trading potential, Njiwa says. He sees “massive potential” for Zambia as an agricultural exporter. The previous “shaky” commitment to free trade under former president Edgar Lungu has become stronger under Hakainde Hichilema, he argues.  “I see a lot of political will.”

  • Zambia can become a “regional bread basket” with the Democratic Republic of Congo (DRC) representing a large market for grains, flour and basic household goods, Njiwa argues.
  • The private sector in Zambia is happy with the Hichilema administration, he says. But there needs to be a level of “predictability and consistency” in policy over a period of years.
  • That will help to attract needed investments in areas such as irrigation, infrastructure and cold chains, he says.

‘Wrong signal’

The DRC, which is in the process of joining the East African Community (EAC), has “huge potential” as an export market for Zambia and other countries in the region, says Kudzai Madzivanyika, senior manager for trade and policy at USAID Policy Link in Lusaka. But a range of challenges in infrastructure and regulatory systems need to be addressed before that potential is realised, and EAC membership in itself “does not change much,” she says.

Meanwhile, tariff schedules for AfCFTA are still being finalised and there are other countries which are still limiting imports despite an official commitment to free trade, Madzivanyika says. Zambia, she notes, is fully participating in all discussions about the agreement.

  • Still, the signal from Zambia of a delayed commitment “sends the wrong message to the private sector and investors,” she says. “They need to make their decision sooner.”

Bottom line

Countries dragging their feet on free trade risk creating a vicious circle in which others respond by doing the same.

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