Club of Mozambique - 14 January 2021
Mozambique is not in a position to ratify AfCFTA agreement
Mozambique is not in a position, in the short-to-medium term, to ratify the African Continental Free Trade Agreement (AfCFTA,), Celeste Banze, an economist at the Centre for Public Integrity (CIP) maintains.
Banze argues that the reforms of the county’s tax policy, in the context of the free trade area of the Southern African community (SADC), have not yet produced the desired effect.
An analysis which ‘Carta de Moçambqiue’ has seen reveals that the economist is also sceptical about the ratification of the free trade zone accession agreement in the medium term, because of the non-tariff barriers burdening public expenditure in the current context.
The AfCFTA is an African Union free trade treaty aimed at establishing a single market and an area of free movement of people and goods, with the gradual elimination of customs duties over a period of 10 years and the possibility of monetary union. The agreement came into force on the first of January 2021 in several African countries, but with the exception of others, including Mozambique, which has signed but not yet ratified it.
Even so, “in the case of Mozambique, in the short and medium term, it is necessary to take steps to prevent the country from being absorbed, granting advantages and taking losses due to non-tariff barriers and losses in tax revenue, given that the agreement requires the gradual reduction tariffs by up to 90%,” Banze says.
Banze recalls that, in the context of the implementation of the SADC free trade area, the Tax Authority of Mozambique (AT) in 2015 prepared a list of at least five actions to mitigate the negative impact of the regional market, but they have not yet had the desired effect.
“The actions raised have actually made some progress, and the AT’s efforts to implement them are recognised, but they have not yet had the expected impact. As an example, in 2020, a text published by the CIP on the introduction of the sealing of alcoholic beverages showed that (…), three years after it was introduced, it had not yet reached the expected goal of increasing the contribution of Consumption Tax by 20% to cushion the expected losses resulting from the lowering of customs duties by 10%. And the biggest obstacle is corruption. In this context, what means [does Mozambique have] to face up to a free trade zone of continental proportions?” the economist asks.
Banze concludes her analysis by stating that, although the AfCFTA is commendable at the continental level and will certainly bring numerous advantages, given the heterogeneity of countries the advantages will not all come at the same time. Mozambique still needs to consolidate its position in the commercial exchanges it carries out at the SADC level, then explore new markets.