Business
Will free trade in Africa fuel growth or introduce regional imbalances?
It is not guaranteed that an African free trade area will further regional integration or deepen the existing imbalances between countries.
For the past year and a half the African tripartite free trade area (FTA) has dominated the economic agenda in South and East Africa.
The timeline of 3 years is probably a bit unrealistic and quite ambitious, seeing that the negotiating mandate is driven by member states of the different regional economic communities (RECs) indicated above. There has been slow progress made on economic integration in SADC and COMESA, where member states have not implemented agreements on tariff liberalization.
Officially the tripartite FTA is the panacea for overlapping membership of different RECs and an important step in the implementation of the 1991 Abuja Treaty that calls for an African Monetary Union by 2023. But a single currency bloc, or even a customs union, could be the last thing on the mind of South Africa, which is dead set on making the tripartite FTA a reality.
“South Africa has the industrial base, but they face the problem of getting their goods and people into the continent, especially into the large markets of East Africa, where its footprint is limited,” comments Paul Kruger, researcher at the Trade Law Center of Southern Africa (TRALAC).
Economists point out that big countries like South Africa and Egypt stand to benefit most from the tripartite FTA. “In the short term the bulk of the countries will not benefit in terms of increased trade between member states, our research has shown. The dominant role players will benefit because they are better positioned,” says TRALAC researcher Taku Fundira
“In Southern Africa only South Africa and Mozambique will benefit. In the case of South Africa, this is because of the advanced state of its economy and its existing industrial base, which gives it an edge over other countries. Mozambique is still growing and is putting the right policies in place to attract investments. Both countries will benefit from liberalization in the agricultural sectors as they are large sugar producers.”
