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Pretoria - South Africa will derive the greatest benefit from the recently created Tripartite Free Trade Area (T-FTA) and most of the smaller member states will be worse off in the short term, said Taku Fundira, a researcher at Tralac, the Trade Law Centre for Southern Africa.
There are winners and losers in any agreement, said Fundira. Statistical analysis shows that there will however be more losers.
Last weekend the leaders of 26 African countries agreed that three of the largest trade blocs in Africa would establish a free trade area through broad-scale reduction of import tariffs between the countries over the next three years.
The three trade blocs are the Southern African Development Community (SADC), the Common Market for Eastern and Southern Africa (Comesa) and the East African Community (EAC).
Some of these have dual membership of the communities.
According to Fundira South Africa will derive considerable benefit from the agreement. Its gross domestic product (GDP) is expected to rise $1.3bn, or 0.22%, compared to Lesotho, Namibia and Swaziland which together would lose $84m.
Mozambique is expected to derive a $57m advantage from the free-trade zone because it is not yet part of any major free-trade region.
South African manufacturing will be the big beneficiary, followed by Egypt to a much smaller extent, said Fundira.
According to Trade & Industry Director-General Lionel October, the free trade zone would have an immediate effect on the South African automobile manufacturing industry because South Africa has a strong industrial base, with very few competitors within the zone.
On Monday both October and Trade & Industry Minister Rob Davies gave greater clarity about the coming discussions.
The effect of the free trade zone on South Africa’s economy will be seen as tariffs are reduced step by step, said Davies at a news conference in Cape Town.
The free-trade zone is largely to do with import tariff reductions to stimulate both trade in Africa and ultimately regional integration, he said.
But he considered expansion of infrastructure, especially transport infrastructure, an equally important element of the planned integration.
The free-trade zone will not lead to greater regional integration if other factors – like the transport infrastructure – fail to receive attention as well.
Apart from the challenges in terms of infrastructure, the member states have to agree on an overall plan of tariff reductions within three years, in itself a huge challenge.
According to Peggy Droski, who heads the South African Chamber of Commerce & Industry (SACCI), the time frame is unrealistic.
Each member country has to agreed to the tariff reduction plan, which will take time, said Droski.
The separate free-trade agreements between South Africa and Brazil and India themselves took more than three years to finalise.
The Chamber is very anxious to see increased trade in Africa, but countries have to look past their short-term interests to realise the greater value of integration.
- Sake24
For business news in Afrikaans, go to Sake24.com.
There are winners and losers in any agreement, said Fundira. Statistical analysis shows that there will however be more losers.
Last weekend the leaders of 26 African countries agreed that three of the largest trade blocs in Africa would establish a free trade area through broad-scale reduction of import tariffs between the countries over the next three years.
The three trade blocs are the Southern African Development Community (SADC), the Common Market for Eastern and Southern Africa (Comesa) and the East African Community (EAC).
Some of these have dual membership of the communities.
According to Fundira South Africa will derive considerable benefit from the agreement. Its gross domestic product (GDP) is expected to rise $1.3bn, or 0.22%, compared to Lesotho, Namibia and Swaziland which together would lose $84m.
Mozambique is expected to derive a $57m advantage from the free-trade zone because it is not yet part of any major free-trade region.
South African manufacturing will be the big beneficiary, followed by Egypt to a much smaller extent, said Fundira.
According to Trade & Industry Director-General Lionel October, the free trade zone would have an immediate effect on the South African automobile manufacturing industry because South Africa has a strong industrial base, with very few competitors within the zone.
On Monday both October and Trade & Industry Minister Rob Davies gave greater clarity about the coming discussions.
The effect of the free trade zone on South Africa’s economy will be seen as tariffs are reduced step by step, said Davies at a news conference in Cape Town.
The free-trade zone is largely to do with import tariff reductions to stimulate both trade in Africa and ultimately regional integration, he said.
But he considered expansion of infrastructure, especially transport infrastructure, an equally important element of the planned integration.
The free-trade zone will not lead to greater regional integration if other factors – like the transport infrastructure – fail to receive attention as well.
Apart from the challenges in terms of infrastructure, the member states have to agree on an overall plan of tariff reductions within three years, in itself a huge challenge.
According to Peggy Droski, who heads the South African Chamber of Commerce & Industry (SACCI), the time frame is unrealistic.
Each member country has to agreed to the tariff reduction plan, which will take time, said Droski.
The separate free-trade agreements between South Africa and Brazil and India themselves took more than three years to finalise.
The Chamber is very anxious to see increased trade in Africa, but countries have to look past their short-term interests to realise the greater value of integration.
- Sake24
For business news in Afrikaans, go to Sake24.com.
