Business analysts have welcomed the concept of a Cape to Cairo free-trade zone, but have warned the idea could prove to be too ambitious and might not reflect the realities of the continent.
Twenty-six African countries have agreed to start formal negotiations to set about creating a tripartite free-trade area across three existing regional economic communities. The communities are the Southern African Development Community (SADC), of which South Africa is a member, the East African Community and the Common Market for East and Southern Africa.
The grouping has a population of nearly 600-million people and a combined GDP of close to $1-Âtrillion. The idea is to create a single economic bloc that will improve bargaining powers and promote more inter-African trade.
According to the World Bank, transactions among African countries account for just 10% of trade on the continent, compared with Western Europe, where regional trade is as high as 60%.
The World Bank says a major factor in this lack of trade is weak transport links, that are complicated by difficult border crossings. These have given Africa some of the Âhighest freight costs in the world, representing 13% of the value of African imports, compared with 9% for Asia, 7.5% for Latin America and 5% for Western countries.
In a bid to tackle these issues infrastructural and industrial development and market access will form the core part of the first stage of the tripartite free-trade area negotiations, which are expected to last three years.
‘Sustainable economic growth’
South African President Jacob Zuma, who hosted last weekend’s tripartite summit at the Sandton Convention Centre, said regional integration was vital to promoting sustainable economic growth on the continent.
“We need to align developmental strategies and programmes aimed at poverty alleviation, underdevelopment, food security and the like across national, regional and continental boundaries,” he told fellow heads of state and delegates.
“There is no single country that can prosper on its own. Our destinies are intertwined. The free-trade area will certainly help us accelerate regional integration efforts aimed at ensuring that African countries trade with one another on better terms.”
But although increased economies of scale and freer and easier movement of products sound good in theory, many believe they may be harder to implement in practice.
Peter Draper, senior research fellow at the economic diplomacy programme of the South African Institute of International Affairs, told the Mail & Guardian: “You have 26 very different countries, with different cultures and politics that are all at different stages of economic development.
“Each one has its own approaches to trade policy and trade integrations and there are very varied agendas, which will make for a real spaghetti situation.”
Draper pointed out that although the East African Community had developed positively, with countries such as Rwanda exporting information technology services and positioning itself as a Great Lakes transport hub and Tanzania exporting agricultural produce to Kenya and Burundi, things had not evolved so well in the SADC region.
The regional free-trade agreement
Angola, Malawi and the Democratic Republic of Congo (DRC), although active members of SADC, had either not joined or not implemented the regional free-trade agreement (affording lower trade tariffs for members) and there was no reason why they would sign up to the proposed larger zone.
Other observers suggested that a united Africa was a political and not an economic concept and it was wrong to confuse the two.
Also urging caution was Terence McNamee, deputy director of the Johannesburg-based Brenthurst Foundation, an Oppenheimer-funded think-tank, who pointed out the limited success of the one-stop border post initiative launched in 2009.
“What has happened is that in reality the same old sovereign state politics have interfered, which was what the one-stop border post scheme was supposed to stop,” he said, referring to personal fieldwork he had carried out at Kasumbalesa, on the border between Zambia and the DRC. “The whole idea of one-stop border posts was supposed to streamline customs systems to reduce crossing times and ultimately reduce costs,” he said, “but it’s been very difficult to wean governments off old practices.”
McNamee said it might be more prudent to pay closer attention to existing smaller schemes, such as the border post initiative, before trying to tackle a wider free-trade zone.
He said: “What Africa really needs is soft borders, but it has to reach the point politically where this is a positive thing and doesn’t just signify porous borders allowing illicit trade of goods and people.
“This free-trade zone is hugely ambitious but although it might look good on paper, putting it into practice is a different reality.” The rhetoric of an integrated African economic bloc is not new and the African Union has stated it wants to achieve a continental common market by 2028.
The proposed 26-country tripartite free-trade area — which excludes Nigeria and Ghana and their bloc, the Economic Community of West African States — was first agreed on in Uganda in 2008. The latest talks were a formality to launch official negotiations.
Among ministers and their delegations, who mingled with journalists before the official talks began, comparisons were made with other regional economic blocs such as the European Union (EU), the Association of Southeast Asian Nations and the Latin American Free Trade Association.
But Draper cautioned against merely following trading bloc models that were not applicable in Africa.
“The EU is institution-intensive, driven by shared security agendas among countries with diversified and developed economies, and that is not the picture in Africa,” he said.
“In Asia the dynamics are also fundamentally different. There you have networked supply chains, which are being driven by overseas multi-nationals. It is not as simple as making a direct comparison to these existing zones.”
Draper believed South Africa had a lot to gain from the tripartite free-trade area and doing more trade directly with its African neighbours, but he warned against “trade diversification” above “trade creation”.
“There are a lot of positives about the free trade area but it’s not going to be a straightforward process and it will take at least 10 years to set up, maybe longer,” he said.