Wednesday, June 17, senior officials from 26 countries in eastern and southern Africa met in Egypt and pledged to create the continent’s largest free trade zone, which will reach from South Africa to the northeastern region in Egypt.
The ambitious plan, known as the “Tripartite Free Trade Area,” marks a new era in intracontinental trade and would remove some long-standing tariffs and customs barriers between those countries that were imposed by Arab and European imperialists. Additionally, it will link together three existing regional trade groups of African nations.
“What we are doing today represents a very important step in the history of the regional integration of Africa,” said Egyptian President Abdel Fattah el-Sisi at the meeting in Egypt.
The three existing zones consist of the East African Community, the Southern African Development Community and an overlapping Common Market for Eastern and Southern Africa. The agreement still needs to be solidified by each of the contributing countries, as it initiated talks for a much larger goal of creating a Pan-African trade zone that encompasses the continent. Its fruition will fulfill a vision that began when many African nations severed ties with their colonizers more than half a century ago.
The merging of the three regional organizations helps establish a new labor and consumer market of 625 million people living across 26 countries, making it easier to move goods and conduct business. The agreement links three trade zones in the fast-growing but fragile regions, with a combined gross domestic product of $1.2 trillion.
“There’s been talk about the continental free trade agreement for many, many years, but it’s been more like a shibboleth that shows you’re committed to regional integration on the continent,” said Christopher Wood, an expert on economic diplomacy at the South African Institute of International Affairs. “It seems like that’s changing now. The African Union has established negotiating principles and some outcomes and a rough timeline that seems like the continental free trade agreement is going to move from a vision to an actual plan.”
According to the Brookings Institution, the zone will cover 58 percent of Africa’s overall economy and over $1 trillion in GDP. Eventually, sub-Saharan Africa figures to play a much larger role in world trade as long as the region sustains the same pace of GDP growth seen throughout the past decade. It is anticipated that its share of the world economy could substantially rise, more than doubling during this time.
The new trading zone will more closely link the powerful economies of eastern and southern African countries, including South Africa, Egypt and Kenya, by 2017, as a way to create long-term growth, investment and jobs.
Also, because Africa’s rural areas lack adequate airports, railways or roads and few of its nations have diversified economies, intra-African trade is difficult and expensive, with or without trade barriers. Freer trade in the three existing blocs “has resulted in major revisions in the projections of the GDP of the grand free area,” said Calestous Juma, a Kenyan professor at Harvard Kennedy School.
Analysts anticipate closer economic and political ties between dozens of nations in the years ahead.
“These ambitions have been around for a long time, but without the requisite political will to make them a reality, progress will remain slow,” predicted Ronak Gopaldas, a country risk analyst at Rand Merchant Bank in Johannesburg.
The U.N. says only 12 percent of Africa’s total trade actually occurs within the continent and that most of its trading involves mineral and oil exports from countries along its seacoast.