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How can Mauritius benefit from the African Continental Free Trade Area (AfCFTA)? (By Chido Pamela Mafongoya & Veedushi Mooloo)

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Through Chido Pamela Mafongoya and Veedushi Mooloo

Mauritius, being strategically located between Asia and Africa, boasts of having one of the most stable regulatory environments on the continent. The Mauritius Financial Center has built a reputation as a safe, reliable and competitive financial center, which has enabled it to position itself as the preferred jurisdiction for foreign direct investment (FDI) flows to the continent, since the country can serve both Francophones and Francophones. English speaking Africa.

Mauritius and other African countries have long been known for the ties they share, both politically and economically. Mauritius, first in Africa, has also made its way to Africa by being a member of two of the continent’s most important trading blocks, namely the Southern African Development Community SADC and the Common Market for Eastern Africa and Southern (COMESA). Thanks to these memberships, many foreign entrepreneurs have created their business in Mauritius to benefit from the commercial advantages offered.

In addition to SADC and COMESA, Mauritius is now part of the African Continental Free Trade Area (AFCFTA). Launched on January 1, 2021, the African Continental Free Trade Area (AfCFTA)is an exciting game changer for African trade. Currently, Africa represents only 2% of world trade and only 17% of African exports are intra-continental, against 59% for Asia and 68% for Europe.

AfCFTA is the largest free trade area in the world in terms of number of participating countries since the formation of the World Trade Organization, with all African countries being signatories except Eritrea. The main objective of the agreement is for members to remove tariffs on 90% of goods, allowing free access to products, goods and services across the continent. The general objectives of the AfCFTA can be summarized as follows:

  • Create a single market, deepening the economic integration of the continent.
  • Establish a liberalized market through multiple rounds of negotiations.
  • Help the movement of capital and people, facilitating investments.
  • Go towards the establishment of a future continental customs union.
  • Achieve sustainable and inclusive socio-economic development, gender equality and structural transformations within Member States.
  • Improve the competitiveness of Member States in Africa and on the global market.
  • Encourage industrial development through the diversification and development of regional value chains, agricultural development and food security.

Mauritius has been an offshore gateway to Africa over the years. It has long championed the development of economic bridges between itself and other African states, leveraging its position as Africa’s best place to do business, as recognized by the World Bank. Thanks to its global business sector, Mauritius has firmly established itself and established itself as a regional hub to facilitate investment on the continent. It is therefore undeniable that the AfCFTA will further add to the attractiveness of Africa as a place of commerce. The AfCFTA provides a platform for Mauritius to contribute significantly to the new African momentum by providing investors and business people with an ecosystem that not only allows them to do business with Africa more easily. , but also improve and safeguard their investments.

The AfCFTA also gives Mauritius an estimated market access of 1.3 billion people across Africa, with a combined gross domestic product (GDP) of $ 3.4 trillion that covers most of the service sectors, including including financial services, telecommunications, ICT, professional services, construction, and health. The AfCFTA will eventually achieve zero tariffs on most items traded, boasting of trading outside its borders.

The Mauritian economy is a mixed developing economy based on agriculture, exports, financial services and tourism. Since the 1980s, the government of Mauritius has sought to diversify the country’s economy beyond its dependence on just agriculture, in particular sugar production. In 2018, Mauritius’s intra-African exports represented 23% of Mauritius’ total exports and imports for 13% of total imports. Mauritius mainly exports textiles to the rest of Africa. Among the top 10 intra-African export products, five are clothing or fabrics representing 30% of Mauritius’s intra-African exports for 2018. The AfCFTA will allow the country to access an African textile market worth several billion dollars, so that the country will be on its way to becoming a major supplier of textiles to the African market. The government’s recent 2020-2021 budget announced a measure that can boost Mauritian exports of already existing supply capacity to the region. The plan to establish a Mauritius export warehouse in Tanzania and Mozambique will certainly support a number of industries focused on the domestic market. Some are already turning to Tanzania, which is a more obvious market than Mozambique. Mauritius has good potential to export a range of services within the context of the priority service lines defined by the AfCFTA, namely business services, financial services, tourism and travel.

Mauritius mainly imports manufactured goods, petroleum products, cars, packaged medicines from China, India and South Africa. AfCFTA calls for a reduction in intra-African tariffs, which means that there will be a decrease in the import expenditure of the aforementioned products from South Africa. As a result, there will be a reduction in prices, reducing the country’s negative trade balance.

The movement of goods and services between African countries will create employment opportunities for Mauritian citizens. It will offer entrepreneurs the opportunity to work together in a liberalized business environment. In addition, AfCFTA will strengthen the current commitment to deepen regional trade integration initiatives through regional bodies such as the African Union, COMESA and SADC. The geographic diversification induced by the AfCFTA is likely to open up new markets for Mauritius, thus touting its economy.

The AfCFTA offers Mauritius the opportunity to promote good governance both globally and across Africa, through the concept of “trade integrity” which is defined as legitimate, transparent and properly evaluated international trade transactions. as a means of ensuring the legitimacy of world trade. system. Business integrity will give investors more confidence to increase their investments in the country.

The AfCFTA will also help mitigate some of the effects resulting from COVID-19. The African Development Bank Group Supplement to the African Economic Outlook (OAS) 2020 estimates that Africa could experience GDP losses in 2020 between $ 145.5 billion (baseline) and $ 189.7 billion ( worst-case scenario), based on pre-COVID-19 GDP estimates. In addition, trade in medical supplies and food has been disrupted. It is fully recognized across the continent that the AfCFTA presents a short-term opportunity for countries to “build back better” and cushion the effects of the pandemic. In the longer term, the impact will increase the continent’s resilience to future shocks.

In conclusion, the diversification of exports, the acceleration of the growth of its trade, the competitive integration into the world economy, the increase in foreign direct investment, the increase in employment opportunities and income and Broadening economic inclusion are just some of the positive economic outcomes that the AfCFTA can bring to Mauritius. Mauritius, which has undergone a remarkable economic transformation from a low-income agricultural economy to a diverse upper-middle-income country that has attracted significant foreign investment, should ensure that it takes full advantage of the opportunities offered by the ZLECAf.

Authors: Chido Pamela Mafongoya and Veedushi Mooloo, Centurion Law Group

Short Link: https://wp.me/pcj2iU-3zrf

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