26 EAC-COMESA-SADC zone members to produce for market of 630 million people

Africa’s largest free trade area comprising 26 countries has been endorsed and is now expected to take off in 2017 following the signing of the long-awaited agreement on June 10. It includes the East African Community (EAC), the Common Market for Eastern and Southern Africa (COMESA), and the Southern African Development Cooperation (SADC).

The signing, which followed negotiations of almost four years, took place in the Egyptian Red Sea resort of Sharm el Sheikh. It was signed by six heads of State, five vice presidents, two prime ministers and 13 plenipotentiaries. Amelia Kyambadde, the minister of trade, industry and cooperatives signed on behalf of Uganda.

The tripartite free trade area (TFTA), which has been hailed as an ‘historic’ moment for Africa, will cover countries stretching from Egypt on the Mediterranean Sea Coast in the north of the continent to South Africa’s Cape Coast in the south. It will however skip South Sudan, which does not yet belong to any of the three regional blocs. There is hope that the trade zone will offer significant opportunities for business and investment within the three blocs and will act as a magnet for attracting direct foreign investment in the region.

The business community in particular, would benefit from an improved and harmonized trade regime, which reduces the cost of doing business as a result of the elimination of overlapping trade regimes.

Jane Nalunga, the Uganda country director for the Southern and Eastern African Trade Negotiations Institute (SEATINI), told The Independent on June 15 that beside the TFTA offering a bigger market with bigger opportunities, trade within the wider region could be better than that with the outside market such as the EU.

“This is because you are trading with people you know,” she said.

The launching of the TFTA is the first phase of implementing a developmental regional integration strategy that places high priority on infrastructure development, industrialization and free movement of business persons.

Francis Mangeni, the director of trade at Comesa, told BBC’s Focus on Africa programme on June 10 that the TFTA would come in force in 2017 after each of the member countries has ratified it in their respective Parliaments. By merging the three regional trade blocs, the treaty seeks to establish a new labour and consumer market of 632 million people, which is 57% of Africa’s population with a total GDP of $1.3 trillion (58% of Africa’s GDP). Mangeni was optimistic that up to 6,000 products would be eligible to be traded within the zone, which is sometimes referred to as the “grand free trade area.”

Mangeni said “because people in the zone need jobs and income, the TFTA will allow both small and big countries to say to the world and investors that “come and invest here and you will have a large market.”

“You ultimately want a market; without a market, there would be no investment. In other words, an FTA is good for jobs and it is good for investment. This is the message and politicians will understand this.”

But reaching consensus on areas such as regulating which goods and services to trade freely, licensing businesses, finding common pricing systems and simplifying immigration laws could become sticking points in the next two years.

With more than half of the member countries having small economies that produce little or no goods for export, experts fear that the Sharm el Sheikh euphoria will dissipate as soon as the technocrats of the individual governments embark on dissecting the treaty. Martin Luther Munu, a programme officer at SEATINI, says one of the positives of the TFTA is that the less economically developed states would benefit from infrastructure projects being undertaken at continental level, market access which can be harnessed to stimulate domestic production as well as increased availability of commodities like food where there is shortage. But he quickly adds that non-tariff barriers are a serious challenge to trade in Africa.

Munu insists that entry to other African states will not be easy. For instance, he says he does not see states like Ethiopia and South Africa which currently require rigorous visa processes relaxing them.

Nalunga adds that as a country whose competitive advantage is agriculture, investing in modern agricultural facilities like silos, drying facilities would help if Uganda wants to produce and export into the TFTA.

“We welcome the bigger market but Uganda should avoid being a market for others. We need to strengthen ourselves first; otherwise opening up to countries like South Africa and Egypt whose production costs are quite low will affect our manufacturers.” “We are an agricultural country and we need to leverage our competitive and comparative advantage in the TFTA,” Nalunga said.

FTA: A free trade area is a single economic space that seeks to remove barriers to trade such as import duties and other charges and puts in place procedures that expedite the processing of standardized simplified documents such as a certificate of origin and a customs declaration before crossing borders.

Source: The Independent

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