Africa free trade area, from Cairo to Cape Town

African leaders signed Wednesday a 26-nation free trade pact to create a common market that would span half the continent from Cairo to Cape Town.

The Tripartite Free Trade Area (TFTA) deal, which must still be fine-tuned and ratified, caps five years of talks to set up a framework for preferential tariffs to ease the movement of goods in an area home to 625 million people.

Analysts say it could have an enormous impact on African economies, which account for only about two percent of global trade despite strong growth.

But hurdles remain, with the timeline for bringing down trade barriers yet to be worked out and the deal needing ratification in national parliaments within two years.

World Bank President Jim Yong Kim said that with the launch of the TFTA “Africa has made it clear that it is open for business.”

The deal will integrate three existing trade blocs — the East African Community, the Southern African Development Community and the Common Market for Eastern and Southern Africa (COMESA) — whose countries have a combined gross domestic product of more than $1 trillion (885 billion euros).

“The geographical area covers the Cape (of Good Hope) to Cairo… The agreement paves the way for a continental free trade area that will combine the three biggest regional communities,” Ethiopian Prime Minister Hailemariam Desalegn said.

“The establishment of TFTA will bolster intra-regional trade by creating a wider market” that would “increase investment flow… and enhance regional infrastructure development,” a final statement said.

Negotiators were optimistic the deal would be ratified by parliaments, and would help not just developed economies but also smaller ones.

“On the ground it means jobs being created… or else there could be an Africa spring far worse than the Arab Spring,” COMESA Secretary General Sindiso Ngwenya, who led the negotiations among the three blocs, told AFP.

Negotiators drafted the deal this week in Sharm el-Sheikh, and said it addresses such concerns as management of trade disputes and protection for small manufacturers once the TFTA comes into force.

The TFTA has been widely welcomed by world business leaders, with experts pointing out that only 12 percent of Africa’s trade is between countries on the continent.

In 2013, the UN Conference on Trade and Development said Africa must focus on creating more space for the private sector to play an active role if it is to boost intra-continental trade.

Analysts say although the continent’s growth in the past 15 years outstripped global GDP expansion by nearly three percentage points, falling commodity prices, power shortages, political instability and corruption are still holding back its economies.

Officials said companies would benefit from an improved and harmonised trade regime, which would reduce costs by eliminating overlapping trade rules.
“What we have realised is that having one trade regime is better than the costly multiple trade regimes,” said .

“The ultimate goal is to expeditiously establish a single free trade area… then establish a single customs union and then merge” the three blocs.

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