Botswana eyes AfCFTA breakthrough

Mbongeni Mguni | Monday February 6, 2023 06:00

AfCFTA, which came into operation last year, is an African Union trade deal that grants easier access to the continent’s 1.2 billion people who collectively represent a market valued at more than $2.6 trillion.

President Mokgweetsi Masisi signed onto the AfCFTA in 2019 making Botswana the 51st of 54 African nations to agree in principle to the continental trade deal. Since then Botswana has been hammering out the modalities of the deal both as a member of the Southern African Customs Union (SACU) and at the African Union level.

As at the end of January 44 of the 54 AfCFTA signatories had ratified the deal, leaving Botswana amongst a handful of holdouts who are still finalising the terms of the agreement.

BusinessWeek is informed that one of the issues holding Botswana back from ratifying, is the negotiations within SACU on the tariff offer to be made to the AU Secretariat for inclusion in the AfCFTA. Countries that are members of customs unions are required to approach the Secretariat under their unions for finalising their tariff offers and other terms of the AfCFTA, rather than as individuals.

While 89.7% of the lines of goods have been agreed upon at SACU, an agreement is still required on the tariff offer for 11 lines of goods, which will take the total above 90%, at which point the Secretariat can assess if the offers are acceptable.

Besides the tariffs, however, the primary stumbling block is around rules of origin, where other SACU members have persisted in pushing for a 40/60 ratio for the classification of input as 'local'. Rules of origin are legal provisions that are used to determine the nationality of a product in the context of international trade and the SACU dispute revolves around the automobile sector, textiles/apparel, and edible oils.

“We are having a problem, especially with automobiles and textiles/apparel because some were of the view that for us to properly industrialise, in order for a component to be considered to be a product of, say Botswana, the constituent elements making it up must be at least 40% locally grown materials and 60% would be acceptable if coming from outside,” Trade and Industry minister, Mmusi Kgafela recently told BusinessWeek in a wide-ranging interview. “But we thought in Botswana because we are such as small and fledgling economy, we proposed that let it be at 30/70 so that we can reduce the requirement of local content down to 30% to enable us to at least play a part and be involved in the industrialisation process.”

Rules of origin issues are particularly sensitive for Botswana, which saw its nascent automobile manufacturing sector in the early 2000s collapsed by complaints from South Africa on the local content of the vehicle assembly. Local manufacturers have accused South Africa of using the customs union to industrialise at the expense of other SACU members and prolong their under-development.

Kgafela said Botswana was not suggesting that the 30/70 ratio be kept 'forever' but be suggested as a start to allow smaller SACU members to kickstart their industries and fully participate in the AfCFTA.

“We would not want to keep it at that ratio forever but as time goes by, as we gain traction, then we would then graduate and increase the local content,” Kgafela said. “However, this did not settle well with others in SACU, especially South Africa who said if we do that we will never industrialise because we will have a lot of imports coming in from China for clothing or textiles and we will lose the grip on industrialisation. “That’s still a technical area but that’s the one causing us the back and forth.”

While SACU’s rules of engagement state that when ministers cannot agree, they should escalate the matter to heads of state level, Kgafela revealed that some agreement has been made on the outstanding items.

According to the minister, Afreximbank and the African Association of Automotive Manufacturers have produced a strategy that if agreed to by other SACU states, allays Botswana’s concerns around industrialisation and the automobile industry. Securing SACU’s agreement on the strategy would also provide Botswana with comfort on its position on other outstanding issues, Kgafela said.

“I think up until the automobile strategy came in, it was important for us to fully agree on the rules of origin in respect of the automobile industry, the textiles, clothing/apparel and edible oils, but now with the strategy, it may get us in a better position to relax a bit on that,” he said. “Other SACU members have actually ratified the AfCFTA. “We are the only ones in our customs union who have not ratified but it’s because we want the best out of it.

The minister added: “For the rest in the union to be able to also enjoy the benefits of AfCFTA, we have to have collectively put in an offer to the Secretariat of the AfCFTA. “For us to put in that offer, we have to have agreed on some concessions which will also benefit us as a country. “We are not prepared to go in blindly without knowing exactly what is in it for us.”

Meanwhile, pressure continues to mount on the region and Botswana to finalise their AfCFTA arrangements, as at least 200 delegates including senior government officials and ministers from across Africa are due in Gaborone from next week to finalise the AfCFTA.

Although details of what will be discussed at the meeting remain unclear, it is expected that besides ironing out SACU and Botswana’s outstanding issues, continental officials and ministers will attempt to finalise a policy on how anti-competitive behaviour is dealt with under the AfCFTA.