/ 10 June 2015

African leaders create ‘Cape to Cairo’ free-trade zone

A Palestinian firefighter walks amid the rubble of a house which witnesses said was hit by an Israeli air strike on Wednesday
A Palestinian firefighter walks amid the rubble of a house which witnesses said was hit by an Israeli air strike on Wednesday

African leaders on Wednesday signed a potentially historic, 26-nation free-trade pact to create a common market spanning half the continent, from Cairo to Cape Town.

The deal on the Tripartite Free Trade Area (TFTA) is the culmination of five years of negotiations to set up a framework for preferential tariffs easing the movement of goods in an area that is home to 625-million people.

Analysts say the pact could have an enormous impact on African economies, which despite growth still only account for about 2% of global trade.

The deal will integrate three existing trade blocs – the East African Community, the Southern African Development Community and the Common Market for Eastern and Southern Africa (Comesa) – whose countries have a combined gross domestic product (GDP) of more than $1-trillion (€885-billion).

The TFTA pact is to be unveiled officially on the weekend of June 14 and 15 at the summit of the African Union in Johannesburg.

The TFTA pact was launched at a summit in the Red Sea resort town of Sharm el-Sheikh.

‘Move the entire continent forward’
Members of the three blocs range from relatively developed economies such as South Africa and Egypt to countries such as Angola, Ethiopia and Mozambique, which are seen as having huge growth potential.

But hurdles remain, with the timeline for bringing down trade barriers yet to be worked out and the deal needing ratification in national parliaments within two years.

“What we are doing today represents a very important step in the history of regional integration of Africa,” Egyptian president Abdel Fattah al-Sisi said as he opened the summit.

World Bank president Jim Yong Kim told the summit that the TFTA would allow Africa “to make tremendous progress and move the entire continent forward”.

“Africa has made it clear that it is open for business,” he said.

“The geographical area covers Cape to Cairo … the agreement paves the way for a continental free trade area that will combine the three biggest regional communities,” said Ethiopian Prime Minister Hailemariam Desalegn.

Zimbabwe’s President Robert Mugabe said the deal would create a “borderless economy” that would rank 13th in the world in terms of GDP.

Boosting inter-Africa trade
Negotiators drafted the deal this week at Sharm el-Sheikh and said they had addressed concerns such as management of trade disputes and protection for small manufacturers once the TFTA comes into force.

Officials said the agreement envisions the eventual merger of the three blocs.

“The ultimate goal is to ensure easy movement of goods in these countries without duties,” said Peter Kiguta, director general of the East African Community.

World business leaders have welcomed the TFTA, with experts saying that only 12% of Africa’s trade is between countries on the continent. 

The United Nations Conference on Trade and Development said in 2013 that if Africa is to boost its intra-continental trade, it must focus on creating “more space for the private sector to play an active role”.

Analysts say that although the continent’s growth over the past 15 years outstripped global GDP expansion by nearly three percentage points, falling commodity prices, power shortages, political instability and corruption are holding back its economies.

“What we have realised is that having one trade regime is better than the costly multiple trade regimes,” said Comesa secretary general Sindiso Ngwenya, who led negotiations among the three blocs. – AFP