A $1.2 trillion free-trade area stretching across 26 African countries from Cape Town to Cairo is a stepping stone to uniting the poorest continent as one commercial bloc within the next two years, Africa’s top trade official said.
The Tripartite Free Trade Agreement (TFTA) was signed into effect in Cairo this week, amalgamating three of Africa’s main trading blocs: the Southern African Development Community (SADC), the East African Community (EAC) and the Common Market for Eastern and Southern Africa (COMESA).
As well as simplifying Africa’s alphabet soup of overlapping trade zones, the TFTA should boost woefully low levels of intra-regional trade, key to the continent’s economic well-being, African Union trade commissioner Fatima Haram Acyl said.
At the moment, trade between African nations accounts for around 10 percent of the 54-nation continent’s total commerce, a ratio that has been in gradual decline over the past decade and which compares unfavorably to 25 percent in southeast Asia.
Enforcing tariff cuts could take five years or more but Acyl said the success of Africa’s deepest free-trade zone - the EAC of Kenya, Tanzania, Uganda, Rwanda and Burundi - suggested the local share of total trade could double in a decade.
“Just removing the trade barriers should increase it to 22 percent,” Acyl, a Chadian, told Reuters at an African Union summit in Johannesburg. “East Africa has been able to do it.”
The TFTA does not include Nigeria, Africa’s biggest economy after revisions to its GDP calculations last year, but the inclusion of heavyweights South Africa, Egypt, Angola and Kenya mean it accounts for 60 percent of continental output.
Negotiations to broaden the new bloc to incorporate west Africa, where the major economies besides Nigeria are Ghana and Ivory Coast, open on June 15 and are expected to wrap up within two years, Acyl said.
That timeline depends on negotiators learning lessons from the pitfalls encountered during the seven years of TFTA talks, she added.
“It’s ambitious but we’re not building from zero,” she said.
Few question the economic power of freer trade but skeptics say improving Africa’s infrastructure - there is no tarred road leading from Egypt to sub-Saharan Africa, for instance - might make a bigger difference.
African trade also remains centered on the three countries that have an appreciable manufacturing base - South Africa, Kenya and Egypt - and it is hard to see the TFTA breaking down those structures.
There is even a possibility the TFTA will create another layer of confusion for businesses already contemplating a continent with eight regional trading zones.
However as a statement of political intent, analysts said it was a welcome, long-term force for good.
“Even a marginal increase in cross-border trade could make a difference for small isolated economies,” said Capital Economics analyst John Ashbourne. “And it will provide a real boost to AU efforts to build a continent-wide economic community.”