A borderless Africa: Continental free trade zone eyed
By Laszlo Trankovits and Carola Frentzen Jan 29, 2012, 22:58 GMT
Addis Ababa/Cape Town - The dream of an African-wide free trade zone is decades old. But, even though such a future is part of the focus of Sunday's African Union (AU) summit in Addis Ababa, hurdles remain.
'If the action plan and the road map can be implemented as planned, then I expect that inter-African trade could double within a decade,' said Erastus Mwencha, AU deputy chairman.
The year 2017 is the goal for implementation of a free trade union much like the one enjoyed by the European Union, where trade flows freely across open borders.
'An open common market from Cairo to Cape Town,' said Tanzanian President Jakaya Kikwete recently, laying out a future vision for the mooted Continental Free Trade Area (CFTA).
The first step is to merge some of the eight overlapping trade zones that stretch across parts of Africa. The initial focus is on three of them: the East African Community; Southern African Development Community; and the Common Market for Eastern and Southern Africa.
But no amount of talks can disguise the fact that any attempt to bring the continent's markets together means building on a very small base. The African Development Bank estimates that, despite multiple conferences, agreements and unions, inter-African trade only made up 12 per cent of the market in 2010.
Even the regional economic giant, South Africa, is drawn to other markets. More than 85 per cent of its trade is directed away from the continent.
That means some kind of economic community would be a major step in fighting poverty and boosting development.
'The AU summit will, on one hand, discuss an action plan which should help boost inter-African trade,' said Stephen Karingi, director of the regional, integration, infrastructure and trade division of the UN Economic Commission for Africa.
'On the other hand, it will be the starting signal for the creation of a continental free trade zone.'
Another goal will be to find a way to help African nations export more goods, instead of raw materials.
That's important, because even though African growth has been strong in the last few years, more than two thirds of that has been reliant on the export of goods such as oil, uranium, titanium, copper and gold.
There have also been signs of increased demands for imports into African countries, but serious problems remain before the continent can enjoy a significant economic boom.
One problem is a serious lack of production capacity. Imports fill the shelves of most African retailers. There is little industrial or machine production. The proportion of industrial production as a part of gross domestic product has sunk from 15 per cent to 10 per cent over the last 20 years, reported the Africa Commission in 2010.
That change came as the same figure shifted from 23.5 per cent to 30 per cent in Asia.
'But there are pushes for reform in economic policy, to create the right environment for the development of a private sector and a boost in investment,' said Mwencha. 'Both are key for developing products, both for the African and the global markets.'
Poor transportation networks are another problem. Just about everything necessary for a good trade network - warehouses, lorries, trains and roads - is lacking.
'And where there are streets, traders often lose much to much time at border stations,' said the UN commission's Karingi. The result is that countries such as Nigeria, Mozambique and Zimbabwe, which should be able to feed themselves, end up importing foodstuffs or becoming dependent on international aid.
Infrastructure projects are underway to address these problems. There is talk of a Trans-West African Coastal Highway that would stretch from Mauritania to Nigeria. Similarly, some are focused on the Northern Corridor, which would give landlocked countries such as Burundi, Rwanda and Uganda access to the Kenyan port of Mombasa.
In the end, optimists point out, Africa has everything Asia has: Cheap labour, plentiful raw materials, good land and potential markets. Now it also has a plan. The question will be whether that is enough to overcome political opposition, lack of investment, poor infrastructure and a lack of education.
Kikwete, the Tanzanian president, argues: 'We can accomplish anything if there is the political will.'