JOHANNESBURG - On Sunday, South Africa signed the African Conti- nental Free Trade Area agreement. In March South Africa signed the Kigali protocol, indicating our commitment to sign the trade agreement with 44 other African countries, but did not sign the agreement as there were still some aspects that had to be clarified.

These constitutional and internal aspects have been cleared now and President Cyril Ramaphosa signed the agreement on Sunday in Mauritania.

Africa, with 54 countries, is the world’s second largest and second most populous continent.

It accounts for about 20percent of the earth’s land area and with about 1200 million people in 2016, it accounts for 16percent of the human population.

The average population with a median age of 19.7 years in 2012 is the youngest of all continents compared with the worldwide median age of 30.4 years.

Although the continent has an abundant number of consumers as well as natural resources, it remains the poorest and least developed continent.

According to International Monetary Fund calculations the nominal per capita gross domestic product was $1820 (R24935) in 2017 compared to the $6690 of Asia, $9330 of South America, $27330 of Europe, $45560 of North America and the world average of $10830.

Many reasons are given for this poor performance of the African continent, like corruption, a high level of illiteracy, internal and external conflict, lack of access to foreign capital due to underdeveloped financial systems, red tape, tariffs and trade restrictions between countries and infrastructure that was developed to facilitate foreign trade with other continents rather than with countries on the African continent.

It is calculated that the African continent holds 98percent of the world’s chromium, 90percent of both its platinum and cobalt, 70percent of its tantalite, 64percent of its manganese, 50percent of its gold and a third of its uranium.

These commodities are, however, exported to the rest of the world, and very little beneficiation is done within the continent. The largest consumer of commodities these days has become the main trading partner of the continent in recent years. It is also a major investor in the continent.

International trade of African countries was and still is focused on countries in North America, Europe or Asia.

We are exporting the raw materials to the industrialised countries of the world and then import the finished products from these countries at much higher prices.

It still remains a question as to whether Africa has the capability of processing the raw materials into finished products.

The physical infrastructure is often lacking, but also the access to the necessary skills and technology is inhibiting the ability to take the raw material through the beneficiation process to the finished product and to the end consumer.

In the agricultural sector Africa is often confronted with the problem that we are dependent on small-scale farming that is unable to compete with the large, efficient production by big and mostly subsidised farmers of the industrialised countries of North America and Europe.

As Africa is dependent on agricultural imports from these countries in times of adverse weather, these imports are often treated as necessities and benefit from low or no import tariffs.

Are these preferential treatments also available to import from other African countries?

In the case of the manufacturing sector, raw materials like iron ore are exported to China, where it is processed into steel or other metal products.

These products are then exported to the country where the iron ore is mined, at often subsidised prices, against which the local producer of the same finished or semi-finished product cannot compete. (Even the US finds it difficult to compete against these cheap imports and therefore the imposition of tariffs on all sorts of imports from China and Europe.)

Whether African countries will ever be able to compete against the established manufacturing sectors of China, Europe or North America remains to be seen - especially given the absence of the necessary technology, skills and physical capacities.

Trade between countries of the African continent is often inhibited by tariff barriers between them as well as unnecessary red tape at border posts.

If the new trade agreement can assist in cutting the red tape at border posts and the lowering of tariffs between countries, it can benefit all countries on the continent. In some cases these barriers limited trade between African neighbours, while benefiting the old colonial suppliers of products and services.

Some South African companies were inhibited to open new facilities or shops in neighbouring countries because of the border delays of not only hours, but days.

Can the new trade agreement facilitate the trade between these African countries by cutting these delays to the minimum?

In the case of the services industry, it is assumed that African countries have in many cases the solutions to specific problems faced by the local client.

These problems and solutions can also apply to other countries on the continent.

If the new agreement can facilitate the expansion of these services across borders, it can help improve the living conditions and living standards of both or several countries.

Notwithstanding all the problems faced by the African continent, it remains important that countries of the African continent do whatever is feasible, to improve and facilitate trade and the ability to sell service sector products between themselves.

Underlying to all these solutions is, however, the need to have a trained and skilled population that can apply these skills to solve the specific problems of the continent.

Ulrich Joubert is an award-winning independent economist.

The views expressed here are not necessarily those of Independent Media.

- BUSINESS REPORT