Regional exports (including cotton) were valued at US$16.3bn in 2019

Regional exports (including cotton) were valued at US$16.3bn in 2019

The newly implemented African Continental Free Trade Area (AfCFTA) is expected to have minimal positive impact in the short term for the continent's garment and textile manufacturers. 

The FTA, which came into force at the start of the year and brings together 1.3 billion people in a US$3.4 trillion economic bloc of 54 African countries, saw its formal launch delayed by six months due to the Covid-19 pandemic. 

Included within the signatories are key garment producing countries Kenya, Morocco, Madagascar, Mauritius, Egypt, Ethiopia, South Africa, Lesotho and Tunisia.

However, the pandemic also means that the FTA's commitments to dismantle trade barriers for intra-African exports and imports – widely regarded as excessive and a constraint on economic development – will take even longer to become reality. 

Many African countries have been closing their borders to people and some goods altogether, amidst a damaging second wave of the virus. However, optimism remains that the FTA can be an enabler for the sector, with the ultimate removal of tariff, quota and red-tape barriers encouraging intra-African near-sourcing of upstream textile and downstream clothing products.

Dr Edem Adzogenu, chairman of the African Cotton & Textile Industries Federation (ACTIF), told just-style: "I am very optimistic about the AfCFTA. We have seen what Covid-19 has done to our supply chains, and how development aid has dried up. 

"There is also a burgeoning population that needs jobs – the median age is 19.7 – and policies in each country have been siloed. An ecosystem needs to be created to scale up beyond the small markets we have and not be dependent on imports."

Trade deficit 

A key goal is reversing the current situation where a potential emerging market manufacturing region is dependent on imports to meet its textile and clothing needs. 

Regional imports were valued at US$35bn in 2019, according to UN agency the International Trade Centre (ITC) figures, while exports (including cotton) were US$16.3bn in 2019. 

"There is a big trade deficit and it's increasing, with [African] imports growing at 5%, and exports at 2% a year," says Navdeep Sodhi, partner at the Switzerland-based Gherzi Textil Organization. Intra-African trade is currently often informal and conducted through business to consumer (B2C) channels, he adds. 

"Following AfCFTA, we expect e-commerce to get a boost, as consumers would have access to digital portals across borders. Secondly, a potential increase in business-to-business (B2B) sales, such as yarn and fabrics being duty free. The outward processing trade (OPT) is not likely to be affected much," says Sodhi.

There is potential for major growth in demand that can be served by African manufacturers, with average consumption of garments and textiles in the continent 2 kg per year per capita, compared to the global average of 15 kg, according to Gherzi figures.

A challenge for the sector is to phase out tariffs, with 41 out of the 54 member states submitting reduction schedules to the AfCFTA secretariat. More developed economies have five years to phase out 90% of tariffs, and less developed economies have ten years.

"A challenge is the rules of origin, particularly for our industry, where there is no agreement on the full range of rules. It remains to be seen how this can be worked out," says Mohamed Kassem, vice chairman of ACTIF. 

"A lot of work needs to be done before we'll see a seamless flow of trade. That would include unifying standards, the rules of origin, and facilitating cross border trade, as well as having better trade routes in terms of ports and ground transportation. ACTIF is advocating a continental supply chain based on hubs – north, west and south – to start trading with each other and enjoy free trade access."

According to research by the United Nations Conference on Trade and Development (UNCTAD), rules of origin – the criteria that determine which products are thus eligible for preferential treatment within the FTA – could make or break the African Continental Free Trade Area (AfCFTA), and should be as simple, transparent, business friendly and predictable as possible.

It has also warned that if rules of origin are made too costly or complex to comply with, firms may instead forego these preferences and choose to trade with partners outside the AfCFTA.