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African leaders make pact on trade bloc

Jun 12 2011 16:38 Sapa-AFP

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Johannesburg - African leaders on Sunday signed an agreement to launch talks on the continent’s biggest free-trade bloc, a $875bn  market seeking to boost the region’s economies.

The so-called “grand” free trade area would cross 26 countries, stretching from Cape Town to Cairo, with a combined population of 700 million people.

“We meet fully conscious of the collective responsibility we bear towards Africa’s founding fathers to create a single continental market of real economic value,” said President President Jacob Zuma during the opening.

The proposed free trade area (FTA) would join three existing, and sometimes overlapping, blocs to maximise Africa’s budding economic prospects. The International Monetary Fund expects Africa to grow faster than the global average in the coming years.

Six of the world’s 10 fastest-growing economies were on the continent last year. But each of the current trade blocs has different rules, with some countries belonging to more than one grouping, complicating efforts to streamline trade.

The new FTA would bring together the continent’s most developed economies of South Africa and Egypt and some of its most energetic, such as Angola and Ethiopia.

“This tripartite is blazing a path to be followed by other regions in Africa in realising the dream of a united Africa,” said Sindiso Ngwenya, general secretary of the Common Market for Eastern and Southern Africa (Comesa).

Ngwenya said the combined gross domestic product (GDP) of the 26 countries was expected to reach one trillion dollars in the next two years.

“There are a number of areas where, by building on the work already done by member and partner states, working regionally, we can expect quick wins,” he said.

Hurdles to overcome

But the pact faces immense hurdles: tariff barriers, poor infrastructure, weak supply chains, and economies often largely reliant on natural resources rather than manufactured products.

The three existing free trade areas - of which the five-member East African Community (EAC) is the most advanced - have failed to meet intra-trade targets despite removing the bulk of trade tariffs.

And the bloc includes countries hit by conflicts, coups and political turmoil, such as Libya, Madagascar, Sudan and Zimbabwe.

New World Bank research says trade within southern African accounts for just 10% of the total in the region - compared to 60% in Europe and 40% in North America.

Southern African Development Community (SADC) exports increased from 20% to more than 30% of combined GDP over the past decade, but regional trade made up a mere 3% of the increase.

As the 19-member Comesa join the other two blocs, the aim is to work towards combining small domestic markets into a larger, more effective force, said Swaziland’s King Mswati III, the COMESA chair.

“The integration of various regional blocs would no doubt improve trade within the African economies. This cannot be achieved overnight, it could only be done in phases, as there is a lot of work that still needs to be done,” said Mswati.

Donors have also been pressing Africa to lift trade barriers, seeing increased business on the continent as a way to alleviate poverty, a theme that US Secretary of State Hillary Clinton raised during trade talks on Friday in Zambia.

“Ultimately, it is up to the leaders of this region to decide if you want economic integration,” she said.

“It does mean you will have to take on entrenched interests and respond to concerns about new competition” while making clear to their peoples how they will benefit from expanded regional trade, she said. 

sadc  |  africa  |  trade  |  free trade area
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