Lusaka, June 20, 2019
Earlier this week Zambia participated in the US-Africa Business Summit in Mozambique at the Joaquim Chisano Conference Centre. The Summit brought together more than 1 000 United States and African private sector executives, international investors, senior government officials and multilateral stakeholders.
While the meeting discussed a number of issues, one of the key topics of discussion raised was the African Continental Free Trade Area (AfCFTA). In February the Consumer Unity and Trust Society (CUTS) applauded the decision by the Zambian Government to join in the creation of the world’s biggest free trade area. The positive sentiment was due to the fact that this agreement is expected to yield great benefits for the African continent. While this is indeed true, it is important to recognise that while we can expect much from the the AfCFTA, it will impact countries and the social groups within those countries differently.
At present Zambia is currently in the process of ratifying the AfCFTA. It will be joining a number of other countries across the continent who have done the same thing. However, as we discuss how we will seek to implement the AfCFTA it is important for us to look at a number of considerations. These should include: 1. ensuring that we position our domestic industry to leverage the export potential; 2. ensuring that consumers interests are thoughtfully considered and safeguarded; and 3. minimizing the negative impact that the AfCFTA may have on our economy.
The AfCFTA agreement will liberalise trade of both goods and services for all African countries which is expected to scale up production for producers not only in Zambia but for the entire continent. In order to position our domestic industry to leverage the export potential, we need to undertake an assessment of our domestic industry to understand which sectors will have the capacity to compete with external markets once we open our borders. As we do this we also need to take stock of which of our domestic producers will require protection to provide them with the time they may need to build their capacity so that they too have the capacity to compete with products produced in other countries.
Having said this, however, it is important to realise that protective measures, unless undertaken with careful consideration ultimately hurt the consumer. This is why we need to ensure that con-sumer interests are thoughtfully considered and safeguarded as we discuss the AFTCA. One of the most significant trade wars that is currently taking place in the world right now is the US-China trade war. While the intentions of the US to protect their domestic industry are understandable research by institutions including the IMF has indicated that it is US consumers that are being most negatively affected as US importers are almost entirely bearing the cost of tariffs and then passing them on to consumers.
When we protect an industry we prevent consumers’ access to more affordable goods from outside the country as imposing tariffs on imported goods ultimately increases the prices of those goods domestically. High prices of goods and services most severely impact the poor and given our high poverty rates, this should be an important consideration for us.
Further to this, it is important to also recognise that excessive protection this is not only a concern for Zambian consumers. It is now common knowledge that by signing the AfCFTA our domestic producers will have access to 1.2 billion consumers. However, if our exporting partners also excessively protect their domestic markets, even the access to those markets by our own domestic industry will be hindered and ultimately their consumers will be paying more for Zambian products. This will thereby reduce the competitiveness of our exports and our ability to benefit from those markets.
Lastly, as we prepare for the AfCFTA, it is important for us to ensure that we take measures to minimize the negative impact that the AfCFTA may have on our economy. One of the negative impacts of increased liberalization is job losses that take place when companies that do not have the capacity to compete with imports either reduce their production or close down. We therefore need to start thinking strategically about how we can ensure that workers who may potentially lose their jobs are protected. This is important for the poor and marginalised in our country who are employed in low-income jobs, and more so the case for women. Studies have shown that at times liberalisation more negatively affects women who tend to be more concentrated in the sectors that are most prone to job losses. As such, in light of the clear expected benefits of the CFTA, discussions regarding the CFTA need to be accompanied by conversations regarding how to protect those who may suffer these negative consequences.
There is no doubt that implementation of the AfCFTA will create opportunities for Zambia. In its implementation however we will need to make sure that we undertake measures to balance all interests to ensure that we capitalize on the emerging opportunities while mitigating some of the negative effects that may accompany it.
By Chenai Mukumba, Centre Coordinator (cm@cuts.org)
For further information please contact: Consumer Unity and Trust Society (CUTS), 298 Ngwerere Road, Roma, Lusaka at lusaka@cuts.org or 097 8055 293
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The Consumer Unity and Trust Society (CUTS) International, Lusaka was established in 2000 to function as a centre for action (policy) research, advocacy and networking on issues of trade and development, competition policy, investment regulation and consumer protection. The mission of the centre is to function as a resource, co-ordination, as well as networking centre, to promote South-South cooperation on trade and development by involving state and non-state actors (NSAs).
CUTS implements four different strategies in its work: Research, Policy advocacy, Capacity-building and Networking.