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[Dehai-WN] (Reuters): Africa plan for $1 trillion trade bloc on track

From: Berhane Habtemariam <Berhane.Habtemariam_at_gmx.de_at_dehai.org>
Date: Fri, 18 May 2012 23:27:51 +0200

Africa plan for $1 trillion trade bloc on track

Fri May 18, 2012 6:26pm GMT

* Main challenge is harmonising rules of origin

* Economic competitiveness of member states an issue

By Duncan Miriri

NAIROBI, May 18 (Reuters) - Plans to create a 26-nation free trade area by
integrating three existing African trade blocs by July 2014 are on track and
the only major sticking point is likely to be harmonising rules of origin,
the three blocs said on Friday.

The East African Community (EAC), the Common Market for Eastern and Southern
Africa (COMESA), and the Southern African Development Community (SADC) aim
to create a free market of 525 million people with an output of $1 trillion
when they unite.

Although African economies are growing fast - second only to Asia - the
continent has attracted criticism over its slow pace of integration, a delay
that is seen as driving up the cost of doing business.

Sindiso Ngwenya, secretary general of COMESA, said tough negotiations on
rules aimed at making cross-border trade easy for firms and small traders
lie ahead.

"The major challenge for the tripartite FTA negotiations will be rules of
origin. Whereas COMESA and EAC have identical rules of origin, SADC has got
different rules of origin so we have to engage with them," Ngwenya said.

The World Bank said in a report in February that red tape and trade barriers
were costing Africa billions of dollars and depriving the region of new
sources of economic growth.

Ngwenya however said the process would move quickly because of the
experience gained in building the existing trade blocs.

"For us there is nothing new in this FTA (free trade area) because it is
something that is already there," Ngwenya said.

"The timetable agreed upon is not only realistic but also feasible. Some of
us can even argue that we could even move the process faster in terms of
launching that FTA."

Many of the countries in the three blocs are members of more than one trade
area. Zambia is a member of SADC and COMESA for example, while Kenya has
membership in EAC and COMESA.

"That is the beauty. We have now turned multiple membership that was termed
as waste and duplication into an opportunity," Ngwenya said.

He said that South Sudan, which attained independence from Sudan last year,
was expected to join the free trade area, taking the total number of states
to 27 or half of Africa.


Once the integration process was complete, Ngwenya said he expected to see
more multinational companies created. He cited the example of Bidco, a
Kenyan edible oils and soap manufacturer, which through COMESA, has
operations in 15 nations.

"They (firms like Bidco) have moved away from being national champions to
regional champions and ultimately, they will become multinational
companies," he said.

Richard Sezibera, EAC secretary general, said regional integration had led
to a doubling in trade among EAC states after its member states entered a
customs union in 2005.

Joao Samuel Caholo, deputy executive secretary at SADC, said the key issue
was to improve infrastructure and manufacturing.

He said trade among SADC nations grew 18 percent last year. However, without
South Africa, the region's most economically competitive state, the growth
rate was 4-6 percent, exposing a lack of competitiveness among the other

The European Union has pledged 400 million euros for projects in the blocs.

"The issue is not non-tariff barriers, the issue is the non-competitiveness
of our economies... As a region we want to tackle the issue of a lack of
competitiveness," Caholo said. (Editing by James Macharia and Andrew Osborn)

C Thomson Reuters 2012 All rights reserved


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