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SA hosts 26 heads of state for ‘Cape to Cairo’ free trade area

This weekend the 26 heads of state of the three main economic communities in Africa will be in town to thrash out the pathway to establishing a “Cape to Cairo” free trade area.

For South Africa this would effectively mean that trade concessions will expand beyond the Southern African Development Community (SADC), opening a trade pathway up the east coast of Africa ending in Egypt in the far north.

It will embrace about half of Africa’s countries, including Kenya, the Democratic Republic of Congo, Zimbabwe, Tanzania and Mozambique, but will exclude countries on the west coast belonging to the Economic Community of West African States. This bloc of 15 countries includes Nigeria – Africa’s second-biggest economy – Ghana, Burkina Faso, and Liberia.

While a customs union is not yet envisaged it implies that there will be no tariffs in the way of internal trade on the continent and a common external trade tariff will apply. This will be the next step in escalating liberalised trade flow.

The Stellenbosch-based Trade Law Centre’s Taku Fundira explained that under a lower-order free trade area agreement, individual countries within it could still levy different tariffs on goods and services on non-member countries – such as from Asia, the Americas and Europe.

Centre director Trudi Hartzenberg said the three regional economic blocks – the East African Community (EAC), the Common Market of Eastern and Southern Africa (Comesa) and SADC – had already agreed “to be liberalised”.

The meeting of heads of state, to be chaired by President Jacob Zuma in Johannesburg on Sunday, would likely be a diplomatic exercise, she said.

A follow-up meeting of ministers – the trade ministers from the 26 nations with a collective gross domestic product (GDP) of nearly $850 billion (R5.7 trillion) and a population of 590 million, or nearly 60 percent of the continent’s population – would flesh out the details of the agreement. This would probably happen next month, she noted.

Trade and Industry Minister Rob Davies has noted that the Tripartite Free Trade Area (FTA) deal had already been endorsed in principle in Kampala, Uganda three years ago. It would also build on the Abuja Treaty establishing the African Economic Community.

While a lot of technical work to forge a free trade area had already been done, Hartzenberg explained, there were sticky bits relating to rules of origin and dispute resolution mechanisms.

SADC countries – including South Africa – and Egypt, which is part of Comesa, in particular liked to use rules of origin to protect their markets, Hartzenberg noted.

She added that these rules that determined the “economic nationality” of a product were particularly complicated in SADC, where they were listed in terms of products “rather than product groups”.

Fundira pointed out that the establishment of one FTA in the three economic blocks would “eliminate the problem of countries having to choose allegiance to one or other group… overlapping membership would go”.

Davies described this as “the spaghetti bowl” of overlapping memberships of different regional integration groups “which raises the transaction costs of trade and hinders efforts to deep regional economic integration”.

He noted that of the 53 countries in Africa, 27 were members of two regional groups, 18 belonged to three.

Davies had emphasised that this weekend’s talks would focus not only on trade harmonisation but also on easing the movement of business people in the expanded region and beefing up integrated infrastructure projects.

The East Africa Community embraces Kenya, Uganda, Burundi, Rwanda and Tanzania with its capital in Arusha, Tanzania.

SADC, headquartered in Gaborone, Botswana, has 14 members. These are South Africa, Angola, Botswana, the Democratic Republic of Congo, Lesotho, Madagascar, Malawi, Mauritius, Mozambique, Namibia, Swaziland, Tanzania, Zambia and Zimbabwe.

Comesa is a free trade area of 19 states including Libya in the north and Zimbabwe and Zambia in the south.

It also includes Burundi, Comoros, the Democratic Republic of Congo, Djibouti, Egypt, Eritrea, Ethiopia, Kenya, Madagascar, Malawi, Mauritius, Rwanda, Seychelles, Sudan, Swaziland, and Uganda. - Donwald Pressly

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