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SA and Nigeria stall Africa trade agreement due to legal issues

Jun 03 2018 06:07
Sizwe Sama Yende

The first Intra-African Trade Fair began in Cairo, Egypt, on Thursday, and it intends to open doors for trade among African countries following the landmark signing of the Continental Free Trade Agreement (CFTA) in Nairobi, Kenya, in March by 44 of the continent’s 55 countries.

Trade among African countries is estimated to be a paltry 15% to 18%, while countries in other regions such as the European Union and Asia have managed to increase intra-continent trade to more than 60%.

However, South Africa and Nigeria, two of the continent’s biggest economies, have not yet signed the CFTA due to legal and internal issues.

The two account for about one third of the $3.4 trillion (R43 trillion) combined gross domestic product across Africa.

African Export-Import Bank (Afreximbank), which collaborated with the African Union to organise the trade fair, believes the event will unlock trade to the value of $25 billion in the next five years in Africa.

Afreximbank wants this annual event to bring key players under one roof so they can share information and explore opportunities in other countries in sectors such as manufacturing, logistics, engineering, construction, tourism, entertainment, information and communication technology, heavy industries, finance, and agriculture. The aim is to create a digital repository and platform to link buyers and sellers.

The CFTA has the potential to create a single trading market that would be one of the largest free trade zones in the world since the World Trade Organisation was created in 1995. The CFTA creates a single market of 1.2 billion Africans and will potentially lead to economic growth, industrialisation and sustainable development.

Afreximbank president and chairperson Benedict Oramah said: “Because of colonial barriers, people do not have information, and this fair will open up that platform.

“We did a study with the UN and found interesting things. Kenya was importing a certain kind of leather product it was using to manufacture shoes. The same product was exported by Burundi at a lower rate, but because Kenya didn’t know this, it was buying it from New Zealand. People buy things at a much higher cost because they don’t know about the alternatives. Because of colonial barriers that we’ve created, people don’t have information. The trade fair will make it possible to know what is going on within Africa.”

According to Africa Growth Initiative research analyst Mariama Sow, Africa’s intra-regional trade lay well below that in other regions.

Sow said that, in 2016, intra-African exports made up 18% of total exports compared with 59% and 69% for intra-Asia and intra-Europe exports, respectively.

“The figures for imports are similar. There have been slight improvements in the past 10 years, though, as the share of African countries’ exports within the continent have slightly increased. The share of imports, on the other hand, has remained stagnant, despite the increase in total import volume,” Sow said.

“While Africa has increased its aggregate trade volume, the share of intra-Africa trade remains stagnant. With the reduction in tariffs, the CFTA has the potential to increase the share of intra-Africa trade,” she added.

Egypt, for example, exports $4 billion worth of goods to countries in Africa.

Egyptian Trade and Industry Minister Tarek Kabil said the fact that the key economic role players – South Africa and Nigeria – had not signed did not mean that the CFTA would stall.

“The train has left the station. It is important that South Africa and Nigeria, as the first and third largest economies in Africa, are part of the CFTA. It’s important that the train moves with the 44 countries, and when people realise the importance, they will join,” Kabil said.

Former Nigerian president and chairperson of the Intra-Africa Trade Council, Olusegun Obasanjo, said that he was hopeful South Africa and Nigeria would soon be on board.

South Africa needs to go through a parliamentary process before it signs on, and President Cyril Ramaphosa has only signed the declaration. Nigeria’s process stalled because concerns have been raised that the agreement would undermine the purchase of local products.

Obasanjo said: “For South Africa and Nigeria, I know that the protocol has to be approved by their parliaments. If you do not carry [parliaments] along as well, you will have a problem. [Ramaphosa] was in Kigali on March 21 for the signing of the CFTA and was able to see what was going on … he was able to sign the declaration, but not the protocol. If my president [Muhammadu Buhari] was in Kigali, I believe that he would have signed the declaration.”

Obasanjo added that he believed Nigeria would be on board by next month.

* Sizwe sama Yende was at the Intra-African Trade Fair as a guest of African Export-Import Bank.

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