What Does the Ratification of the ratification of AfCFTA Mean to the Zambian Agricultural Sector?

By IAPRI Staff

Zambia submitted the instruments of its ratification of the African Continental Free Trade Area (AfCFTA) agreement to the African Union Commission on 5th February 2021. The Ratification of International Agreements in Zambia is governed by Act Number: No.34 of 2016. In exercising the provisions of this Act, the Zambian National Assembly invites expert witnesses to comment on international agreements being considered for ratification.

On 3rd February 2021, the Indaba Agricultural Policy Research Institute (IAPRI) appeared before the Committee on National Economy, Trade and Labour Matters to comment on the ratification of the AfCTA. IAPRI’s submission was focused on the agricultural sector.

IAPRI submitted that the main objective of the AfCFTA was to create a liberalized market and boost intra-African trade. The expected outcome of the trade agreement was the elimination of tariffs and non-tariff barriers. IAPRI stated that the AfCFTA presented several opportunities. With the AfCFTA ratification, Zambia will have the opportunity to trade in seed beyond COMESA and SADC thus strengthen the domestic and regional seed value chain. Zambia was already performing well with exports of seed in the region.

Another opportunity was in the grain crops area. Zambia is a surplus producer of maize and soybeans with potential to supply the region and the continent. With the AfCFTA, Zambia will be able to export these grains and thus incentivize production to meet the expanded market. This is likely to increase farmer incomes, grow small and medium agro-enterprises involved in grain trade and create local employment within the grain value chain. Yet another opportunity was the Zambia and the Democratic Republic of Congo (DRC) Simplified Trade Regime (STR). IAPRI presented that the AfCFTA will enhance the STR and urged the country to consider expanding this initiative with other neighbouring countries.

IAPRI informed the Committee that the AfCFTA had some challenges. One of the major challenges impeding Zambian agricultural trade are unstable trade policies. A prominent symptom of unstable trade policies in Zambia is the unscheduled (ad hoc) nature in which government imposes export/import bans in the country. For example, in 2017, the government imposed an export ban on soy beans without prior communication to stakeholders as well as cancelling existing exports permits at the time. An assessment by the Soya Policy Action Group [SOPAG] (2017) revealed that Zambia as a country lost about ZMW 1 billion in export revenue due to the ban. Similarly, in the 2020/2021 agricultural marketing season, Zambia had the potential to export 710,000 metric tons of maize, which would have earned the country at least USD 185 million according to a study by IAPRI in 2020.

The informal/illicit trade in food commodities is substantial is also a challenge. Untaxed, informal flows of food produce (mainly of maize) are especially prominent between Zambia and the DRC, Tanzania and Malawi due to porous and unregulated borders. It is estimated that informal/illicit exports are actually higher in volume than formal exports undertaken by Zambia’s private sector. Illegal trade of this kind has affected established businesses operating in Zambia: an example is US-based Cargill, which recently exited the Zambian market in part because smuggled products were undermining its business. If not addressed, informal trade had potential to undermine the expected gains from AfCFTA, the Committee learned.

IAPRI reported further that, Zambia’s tax regime has affected the competitiveness of Zambian products, particularly edible oils, in the region. For example, the Value Added Tax (VAT) on edible oil produced in Zambia makes Zambian edible oil less competitive against products from countries like Tanzania and Kenya, where such products are VAT exempt. As a result, Zambian market is flooded with edible oil from East Africa, and sometimes the East Asia, while Zambia edible oil has failed to penetrate regional markets because it is less competitive in terms of prices.

IAPRI stressed that allocations to the agricultural sector in the budget have been generally trending downwards since 2017. This was likely having very negative effects on the sector productivity and growth as resources for such investing in productivity and growth programmes are limited. Thus, Zambia is unable to produce competitively and in turn affecting the country’s trade competitiveness.

To get the best from the AfCFTA in terms of agriculture IAPRI made the following recommendations:

  1. Ensure predictable and transparent trade policies that sends the right signal for private sector investment in agricultural production and trade. The private sector needs a stable trade policy environment to help them plan their investments and exports, hence helping the country to maximize trade benefits from AfCFTA, as the country will be able to export more.
  2. Promote the export of processed agricultural products, rather than raw materials. This will help increase revenue as well as create employment along the agricultural value chain.
  3. Revise the tax regime to enhance competitiveness of Zambian products in the continent.
  4. The Zambian government must consider expanding the (Simplified Trade Regime) STR with neighboring countries beyond the DRC.
  5. The Ministries of Agriculture and Ministry of Coratificationmmerce, Trade and Industry should coordinate agricultural trade policies to ensure Zambian products have comparative advantage and are competitive across the continent.
  6. Increase budgetary allocation to agriculture, particularly in productivity and growth-enhancing programmes such as extension, research and development and rural infrastructure, among others

IAPRI was represented by the Outreach Director, Mr Ballard A.M. Zulu, the Research Fellow, Dr Brian Mulenga, the Research Associate, Mr Auckland Kuteya, the Communications Specialist Mrs Christabel Chabwela and the Librarian Mr Cardinal Hachikona. The meeting was chaired by the Honourable Situmbeko Musokotwane who was the Chairperson for the Committee.

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