An all-Africa Trade Zone?

Harking to the bygone era of Cecil Rhodes and the more recent (now ex-) Gaddafi notions of a United States of Africa; the 18TH Summit of the African Union (AU) held this past week has decided to establish a continent wide free trade area by 2017. The trade block will be known as ‘The Continental Free Trade Area’ (CFTA).

The African heads of state reason that and enhanced intra-African trade and deepened market integration can contribute significantly to sustainable economic growth, employment generation, poverty reduction, inflow of foreign direct investment, industrial development and better integration of the continent into the global economy. These are all laudable goals, and no doubt much analysis is to follow in trying to quantify the notion of a ‘significant contribution’. It is also clear that ‘trade’ in and of itself will not be the primary driver of elements like employment, and as such needs to be seen as one element of a wider suite of policy regionalization measures.

The AU declaration sets out a 3-phase process to achieve the CFTA. These steps can be broadly described as follows:
Step 1
Finalise the tripartite agreement among the East African Community (EAC), the Common Market for Eastern and Southern Africa (COMESA), and the Southern African Development Community (SADC) by 2014. This follows the indicated date set by the tripartite parties.
Step 2
Encourage other trade blocs to follow the experience of the tripartite agreement and reach a parallel agreement between 2012 and 2014. This will apply to four other AU recognised regional communities (ECOWAS, CEN-SAD, ECCAS and UMA). They will expedite the completion of their FTAs by 2014 and to also ensure that those among their members who currently lie outside these FTAs join them.
Step 3
Consolidate the Tripartite FTA and other regional free trade areas into the CFTA initiative between 2015 and 2016.

In our view, a positive element in the initiative is that business will be involved. The architecture provides for the establishment of an ‘African Business Council’ for articulating the views of the private sector in the continental policy formulation processes. The Business Council will play an advisory role in the continental policy formulation processes and will communicate its views and positions through the African Union Commission. It will be composed of the representatives of regional umbrella associations such as Business Councils and Chambers of Commerce. In our view a key determinant of the value of this organ will be the extent to which it actually speaks for business, given that many bodies which look and name like business associations in African countries are actually funded by the government who also then appoint the executives. Business will have to take the responsibility of paying for their representative organizations if their voice is to be legitimate.

The integration will also be undeniably linked to developments in continental agriculture. Intra-African trade in agriculture faces higher rate of protection than non-agriculture sector. Almost all African countries and sub-regions impose higher tariffs on agriculture imports from other African countries. It is thus clear that the process for establishing the CFTA should pay close heed to African agricultural trade.

In our view 2017 is a highly ambitious date, which is unlikely to be met. In fairness the AU declaration does indicate that 2017 is an ‘indicative date’. The declaration thus sets the necessary tone of enthusiasm and tempers it with a possible escape route. In the meantime our respective close-to-home trade agreements are not functional in many ways and we would do well to focus on getting these working as their treaties envisage before embarking on the grander Rhodean adventure.