Free trade area may develop between South Africa and Nigeria

6/20/2013, 4:04 p.m. | Updated on 6/25/2013, 4:04 p.m.
JOHANNESBURG, Jun 17, 2013 (IPS) - If a free trade area (FTA) were to be negotiated between Africa’s two largest ...
Ajegunle, a low-lying slum in Lagos, Nigeria. Analysts say that the Nigerian market itself is huge and underserved. Sam Olukoya/IPS

JOHANNESBURG, Jun 17, 2013 (IPS) - If a free trade area (FTA) were to be negotiated between Africa’s two largest economies, South Africa and Nigeria, it would have a powerful effect on trade across the subcontinent and would challenge other countries to respond.

“In my view, it would bring substantial economic benefits to both sides in terms of exports, investment, competition enhancement and, ultimately, productivity,” Peter Draper, a senior research fellow at the South African Institute of International Affairs, told IPS.

The countries have already entered into an informal agreement of cooperation. In May, South African Trade and Industry Minister Rob Davies announced during a visit to this country by Nigerian President Goodluck Jonathan that South Africa pledged to help Africa’s most populous nation make the automotive sector the West African nation’s flagship industrial sector.

However, there are concerns that an FTA would give one-sided benefits to the South Africans, who have a developed manufacturing sector at the expense of the less-industrialized Nigeria.

“That is not to say South Africa is not favorably disposed, but rather to suggest that to the extent there is political will behind the idea it would be in favor of a limited trade arrangement and not a comprehensive one,” Draper said.

Johannesburg, South Africa,-based businessman Rutger-Jan van Spaandonk has the official licence to import Apple computers, phones, tablets and other products into both the South African and Nigerian markets. He told IPS that the proposed FTA would send a very positive signal, as the two governments seem to be getting closer and closer all the time.

“But in practice, the benefits may be limited. Many South African companies operate in Nigeria through non-South Africa entities, so it is not clear if they could be considered as beneficiaries of such an FTA.”

However, he did suggest that it would be a welcome move if it were to make it easier to trade between Nigeria and South Africa.

“I would welcome more transparency on what rules and regulations apply—in terms of import restrictions, product certification, visas and so on—and faster execution and processing. On both sides, probably.”

Jabu Mabuza, president of Business Unity South Africa, said that there is big potential for closer relations between the two countries, but said he would need more time to decide whether an FTA was the best approach.

“I personally welcome the coming together and reigniting of the relationship between our two nations. “To the extent we can have mutual socially and politically-rewarding relations, we should do all that it takes.”

However, Dianna Games, the chief executive of consultancy Africa@Work, told IPS that she believes there is enough current and future trade between both nations to look at the issue of an FTA. On the other hand, she is concerned about the lack of non-oil trade from Nigeria to South Africa.

“The manufacturing sector in that country is still at a fledgling stage, partly because of serious power shortages,” she explained.

“Although Nigeria is one of South Africa’s main suppliers of crude oil, there is almost no non-oil trade taking place.”