The third COMESA-EAC-SADC Summit yesterday signed a new trade pact creating a common market across half of the continent.
The new pact, the Tripartite Free Trade Area (TFTA) which must still be ratified, is a critical step in opening up opportunities for business and investment within the 26-member bloc of 625 million people.
Egyptian President Abdel Fattah al-Sisi, President Robert Mugabe of Zimbabwe, President Omar al-Bashir of Sudan and Kenyan Deputy President William Ruto were among the leaders who signed the pact at a summit in the Red Sea resort of Sharm el-Sheikh, Egypt.
Sisi said the launch represents a “very important step in the history” of the regional integration of Africa.
“We have told the world today… of our desire to adopt practices that will increase trade among ourselves. We will do whatever is possible to activate this agreement,” Sisi said.
Teddy Kaberuka, a Rwandan economic analyst, said the TFTA will benefit Rwanda and the wider region, especially because it will “attract more investors to the region.”
He described the deal as ‘historic’. “It creates a market of 600 million people with a combined GDP of US$1 trillion. With the TFTA, many challenges will be lifted, including non-tariff barriers, technical barriers to trade and dispute resolution, import and export fees, transit procedures, simplification of customs documents, rules of origin, and tariff liberation.”
Once states ratify the TFTA through their respective national parliaments (within two years), benefits will include growth in intra-regional trade, experts say.
The reduction or elimination of tariffs will reduce transaction costs and stimulate economic activity across the region, among others.
It will also go a long way in attracting foreign direct investment, once obstacles such as poor infrastructure are purged.
Traders from the EAC are expected to access a wider market following the adoption of a uniform value addition regime by the three economic blocs.
“The ultimate goal is to ensure easy movement of goods in these countries without duties,” Peter Kiguta, director general of the EAC was quoted by AFP as saying.
The desire to merge Common Market for Eastern and Southern Africa (COMESA), the East African Community (EAC), and the Southern Africa Development Cooperation (SADC), was first mooted in 2008.
As a result of elimination of overlapping trade regimes due to membership to multiple blocs, the business community will benefit from an improved and harmonised trade regime that reduces the cost of doing business.
Mounir Fakhry Abdel Nour, Egypt’s Minister of Trade and Industry, described the deal as a giant step in the integration agenda that will enable the achievement of the African dream of a continental Free Trade Area.
“By creating the TFTA we aim at enlarging the markets for the benefits of economies of scale, to use efficiently the natural resources, to profit from complementarities and strengthen our bargaining powers,” he said.
Need to be realistic
“What we have realised is that having one trade regime is better than the costly multiple trade regimes,” COMESA Secretary General Sindiso Ngwenya, who led the negotiations, said.
Meanwhile, Abdel Nour noted that the tripartite arrangement still has a long way before the agreement comes into force. There is need to finalise negotiations on the exchange on tariff offers, rules of origin, and trade remedies, and complete the ratification procedures.
“We, therefore, need to move fast so that the people of Africa can see the benefits of integration because Africa is waking up and the lion is going to roar.”
The 26 economies have a combined Gross Domestic Product (GDP) of USD 1.2 trillion and account for half of the membership of the African Union and 58 per cent of Africa’s GDP.
The TFTA, also known as the Grand Free Trade Area, will be the largest economic bloc on the continent and the launching pad for the establishment of the Continental Free Trade Area (CFTA) in 2017.
The decision to establish the COMESA–EAC–SADC tripartite was informed by overlapping membership of the states to the three regional economic communities Rwanda is a member of EAC and COMESA.
Ethiopian Prime Minister Haillemariam Desalegn took over as chairperson of the Tripartite Summit, a seat formerly held by President Mugabe of Zimbabwe.