Major challenges remain for African free trade area

 

AMBITIOUS PLANS to create a continental free trade area in Africa, first suggested 21 years ago by regional leaders, were recently adopted by the African Union. The union says the free intra-African economic trading system should be operational by 2017.

On January 31st at the union’s 18th summit in Addis Ababa, Ethiopia, governments were told they needed to build infrastructure worth an estimated €46 billion over the next 10 years to facilitate the free trade zone across the continent.

While this target was acknowledged as challenging, Ethiopian prime minister Meles Zenawi was mandated to lead a seven-member heads of state committee, called the high-level African trade committee, to look into ways of raising the funds required.

The taxation of aid money in Africa, taxes from minerals and mining deals and revenues drawn from dealings with banks and multilateral bodies have all been suggested as ways to fund the continental trade boost.

“We are determined to address the issue of stability and lead to the prosperity of our continent,” African Union chairman Yayi Boni said. “We have to ensure growth rate is above the population growth in Africa.”

The development of trade between African states has increasingly become a priority for the African Union because of its member states’ inability to tackle widespread poverty, despite annual economic growth rates above 5 per cent in many member states over the past decade.

Although African economic growth slowed in 2009 due to the global recession, regional gross domestic product (GDP) was well above rates posted in countries in Europe and the US.

By 2010, the continent had bounced back with GDP doubling to 5.4 per cent that year, according to the World Bank.

Nevertheless, despite this success South African president Jacob Zuma has pointed out that less than 10 per cent of Africa’s trade is between its states and that boosting this area should be a priority as a way to further develop the continent.

To facilitate the free trade area, the African Union has outlined a three-step process for the seven major regional trading blocs in Africa to follow.

The first would be to finalise the tripartite agreement in the east African community, the common market for eastern and southern Africa, and the southern African development community (SADC) by 2014.

This would be followed by other similar trade treaties involving the economic community of west African states, the economic community of central African states, the Arab Maghreb union and the community of Sahel-Saharan states between 2012 and 2014.

The final step would be to consolidate all the regional trading entities between 2015 and 2016.

However, some analysts and African heads of state believe there are significant challenges to overcome before a genuine free trade zone across the continent can be achieved.

Trudi Hartzenberg, director of the Trade Law Centre for Southern Africa, told The Irish Times that achieving the free trade zone by 2017 was “incredibly optimistic” due to a number of factors, including the continued existence of failed states across the continent.

“Even if you take SADC, which is one of the more developed organisations, it is experiencing a crisis related to the development of its legal and institutional infrastructure – the effective suspension of the SADC tribunal leaves member states and private parties without a forum to seek redress on matters pertaining to the SADC treaty and protocols,” she said.

The situation to which Hartzenberg refers relates to the case of 78 white Zimbabwean farmers whose land was being confiscated by the Zimbabwean authorities.

The court ruled the farmers could keep their farms because Harare’s land reform scheme discriminated against them. Although Zimbabwe is a SADC member, the former government refused to recognise the tribunal’s ruling.

“There hasn’t been any trade cases brought to the tribunal,” Hartzenberg added, “but it has jurisdiction over this area too, and the outcome of the Zimbabwean farmers’ case raises serious questions about integration and the rule of law across different countries.

“Some countries don’t want to be subjected to these supra-natural institutions as they feel it infringes upon their sovereignty.”

Indeed, speaking on the topic of boosting intra-African trade at the African Union assembly, Nigerian president Goodluck Jonathan expressed similar concerns saying infrastructure policy, legal, socio-political and cross-border security frameworks needed to be adopted by the countries involved first.

Because of the economic growth being experienced in Africa, many governments are going through an optimistic phase.

The Irish Government has stepped up its efforts to tap into African trade. Fred Klinkenberg of Enterprise Ireland arrived in South Africa recently to set up the organisation’s new Johannesburg office, which is tasked with aiding Irish firms seeking to do business across the continent.

“We are taking the trade opportunities in Africa very seriously,” Mr Klinkenberg said. “We see South Africa as a hub and from here we will be branching out across the continent. We believe Africa is one of the fastest growing regions in terms of trade.”