Grand FTA to boost trade in Africa
One of the challenges that have hindered sustainable development in Africa is that the continent trades more with the outside world than within Africa.
This trade structure means that resources that are intended to develop Africa are shipped and traded elsewhere, improving the economies of other countries in Europe, Asia and the United States. The current trade imbalance is caused by various factors including poor infrastructure built during the colonial era to disallow any smooth movement of goods, services and people between African countries, as well as the imposing of non-tariff barriers between African countries.
Another major factor is the lack of a vibrant industrialised sector that weans Africa from being a source of cheap raw materials for other countries in the west. To address this situation and reform the trade structure in Africa and the world, the continent has intensified efforts to establish an integrated market covering more than half of the countries in Africa.
Commonly known as the Tripartite Free Trade Area (TFTA), the integrated market comprises 27 countries from the Common Market for Eastern and Southern Africa (comesa), the East African Community (EAC) and the Southern African Development Community (sadc).
When operational, the enlarged market is not only expected to dismantle the trade barriers among African countries, but also deepen integration through improved infrastructure development, investment flows and enhanced competition.
Botswana became the 22nd and latest country on January 30, to append its signature to an agreement to launch the “Grand” FTA that will create a combined population of some 700 million people covering half of the member states of the African Union (AU) and a Gross Domestic Product (GDP) of about US$1,4 trillion.
The establishment of the TFTA is a decisive step to achieve the African vision of establishing the African Economic Community including the launch a Continental FTA, which aims to promote the smooth movement of goods and services across borders, as well as allowing member countries to harmonise regional trade policies to promote equal competition.
The harmonisation of trade policies, and removal of non-tariff barriers and other trade barriers such as huge export and import fees would enable countries to increase their earnings, penetrate new markets and contribute towards their national development.
A single African market also has the capacity to help turn the migrant challenge into a human capital boon for Africa, by allowing workers to fill skills gaps across the continent, as well as increase tourism arrivals. Furthermore, the creation of a single market will strengthen the continent’s appeal as a global trading partner, thus reconstructing world affairs.
Speaking at the signing ceremony of the TFTA Agreement by Botswana, the comesa chair, Sindiso Ngwenya said the Tripartite Arrangement will be anchored on three key pillars – market integration, industrial development and infrastructure development.
“Our political leaders realised that just opening up our markets will not increase the share of our region in global trade, nor can it contribute to poverty alleviation, hence they adopted a developmental approach to regional integration,” said Ngwenya, who is also the chair of the Tripartite Taskforce.
He said prioritising market integration, industrial development and infrastructure development is critical “in recognition of supply side constrains, poor connectivity and high cost of doing business in the region.”
sadc Deputy Executive Secretary for regional integration, Dr Thembinkosi Mhlongo concurred, adding that regional countries should take advantage of the Tripartite FTA and the Continental FTA to boost intra-regional trade in Africa.
“The Tripartite FTA should not be viewed in isolation but rather as an integral component of the larger Continental FTA,” he said.
“These two processes offer our business operators in sadc the platform for greater market access opportunities covering both trade in goods and services.” Botswana Investment, Trade and Industry Minister, Vincent Seretse said the country is committed to making sure that the enlarged market is a success. He urged other countries that are yet to sign the tripartite agreement to do so as a matter of urgency to ensure that “Africans create the Africa they want.”
A total of 22 countries have signed the Tripartite Agreement that was launched in June 2015. These are Angola, Burundi, Botswana, the Union of Comoros, Democratic Republic of Congo, Djibouti, Egypt, Kenya, Libya, Madagascar, Malawi, Mauritius, Namibia, Rwanda, Seychelles, Sudan, the United Republic of Tanzania, Uganda, South Africa, Swaziland, Zambia and Zimbabwe.
The remaining countries – Lesotho, Ethiopia, Eritrea, Mozambique and South Sudan – have requested more time to complete their internal processes before signing the document.
The Agreement requires 14 ratifications to enter into force. So far, only Egypt and Uganda have both signed and ratified the Agreement. The process of ratification advances the regional law from being a stated intention to actual application.
In the meantime, COMESA-EAC-SADC are involved in various negotiations to conclude all aspects of the arrangement. Negotiations for the TFTA have been conducted in three different phases — preparatory phase, phase one and phase two.
The preparatory phase mainly covers the exchange of all relevant information including tariffs including applied national tariffs as well as trade data and measures. Phase one of negotiations includes core FTA issues of tariff liberalization, customs procedures and simplification of customs documentation, transit procedures among other issues.
Facilitating movement of business persons within the region is being negotiated in parallel phases. The last stage of negotiations, which is phase two, deals with trade in services and trade related issues including intellectual property rights and trade development, cooperation in trade and development and competitiveness.
Once these negotiations are concluded Africa will be able to launch the “Grand” FTA — a move that will signify a bold statement that the continent is ready to reform and reconstruct global trade.