THE minister of Trade and Industry, Tefo Mapesela, says while the idea of being part of the African Continental Free Trade Area (CFTA) can be an appealing and noble one, a lot still needs to be clarified before Lesotho can commit to the agreement as it could hurt the country’s revenue generation capacity.
Mr Mapesela’s remarks come in the wake of Lesotho’s decision to join nine other countries including continental economic powerhouses Nigeria and South Africa who refrained from signing the CFTA at the recent meeting of the African Union member states in Rwanda.
Forty four African countries signed the landmark deal which is aimed at facilitating inter-Africa trade.
By opening up African markets, the free trade area will be the largest in the world after the World Trade Organisation was formed. Trade between African countries is said to account for only 10% of all commerce on the continent.
The launch of the free trade area comes after 40 years of hard work by African countries trying to grapple with modalities of forming such a trade area. It is hoped the deal will come into force within six months, and increase prosperity for a market of 1.2 billion Africans.
However, in a recent interview with the Business Journal, Mr Mapesela said with the protocols of the CFTA agreement were not clear on the fate of bilateral agreements and Lesotho did not want to risk losing on the benefits of some of the blocs and bilateral agreements it was currently part of.
The CFTA seeks to remove barriers to trade like tariffs and import quotas, allowing the free flow of goods and services between its members. This could have negative implications for smaller trading blocs within Africa such as the South African Customs Union (SACU).
Of the five SACU members only Swaziland signed while South Africa, Botswana Namibia and Lesotho opted against signing the CFTA deal.
Other African countries that did not sign are Nigeria, Zambia, Burundi, Eritrea, Benin, Sierra Leone and Guinea Bissau.
“For instance, we are not sure what is going to happen to the revenue that we are currently receiving from SACU,” Mr Mapesela said, adding, “So we do not want to jeopardise the existing agreements that we are part of”.
He further indicated that Lesotho will also have to first sensitise its private sector about the continental bloc, with a view to forging a strategy to build its capacity to ensure that it fully participates in CFTA.
“We do not want to end up in a situation where we become a dumping site for other countries’ goods while we are not able to export anything to these countries,” Mr Mapesela said.
He said will have to identify which products to liberalise and what to protect before signing.
Another factor, which Mr Mapesela said had influenced the country’s decision not to sign is the fact that Lesotho’s standards infrastructure was not up to scratch and this would affect the country’s capacity to export its products.
Lesotho has signed the Kigali Declaration on Free Movement of persons, which enable visitors in the country for up to 90 days.
President Mahamadou Issoufou of Niger, who has been dubbed the “champion of the free trade deal” across the continent was the first to sign on behalf of his country, followed by President Paul Kagame of Rwanda.
President Kagame is the current Chairperson of the African Union.
Meanwhile, economic commentator Lehlohonolo Chefa from Policy Analysis and Research Institute of Lesotho (PARIL), believes this is a good move taken by Lesotho.
“The ultimate goal is to ensure that Africa transform its trade from supplying raw materials to the rest of the world and importing finished goods made from the very same raw materials exported from the continent. However, there is one major challenge in the approach taken by AU in implementing CFTA. The decision to set end of 2017 as the time to launch it was ill-advised.
“The negotiations on the CFTA only started in 2015. Normally negotiations are a very important component of a trade agreement. Countries had to conduct impact assessment which they did not do. Stakeholders at national level have to be consulted prior to signing of these irreversible agreements,” he said.
Mr Chefa indicated that the importance of consulting stakeholders is that governments do not trade but people and businesses are to be beneficiaries of these trade agreements.
“Lesotho and those countries that have not signed the CFTA because they want to do consultations have taken an appropriate route. The next task is for Lesotho to identify what to liberalise and what to protect before signing.
“Free Trade Area will abolish tariffs with the rest of the continent. Which would affect government revenue as we depend heavily on SACU revenue. But it doesn’t mean that SACU will collapse as a result of this as there is more to SACU than just tariffs from the rest of the continent.”