Key Issues

Africa set to agree on $3trn Trade bloc

Africa’s three years of talks are expected to culminate in the creation of an almost $3 trillion African trade bloc, with the exception of one of the continent’s biggest economies.

While the continent’s heads of state are gathering in the Rwandan capital, Kigali, for an extraordinary summit of the African Union to sign an agreement creating the free-trade zone of more than 50 countries, at least two presidents won’t agree to the deal.

Nigeria together with South Africa which makes up half of the continent’s gross domestic product, canceled their trip to Kigali, saying his government needs more time for input from local businesses before he can sign the pact.

Ugandan President Yoweri Museveni also called off his travels to neighboring Rwanda.

Even if some don’t sign the deal yet, negotiations will continue, Trudi Hartzenberg, an executive director for Stellenbosch-based Trade Law Centre said.

The challenges will be on issues such as import tariffs and the rules of origin, she said.

Three regional groups on the continent the Common Market for East and Southern Africa, the Eastern African Community and the Southern African Development Community signed an agreement in June 2015 to create a trade bloc covering 26 countries as a precursor to the continental grouping.

A week later, members of the African Union started talks for the establishment of the continent-wide free trade area.

Intra-Regional Trade

Intra-Africa trade stands at about 16 percent of the continent’s total, compared with 19 percent in Latin America and 51 percent in Asia, according to the African Union.

The agreement could increase this by half for Africa, the United Nations Economic Commission for Africa estimates.

The deal could improve the region’s credit profiles, even as poor infrastructure and non-tariff barriers will continue to restrict the trade sector’s development, Moody’s Investors Service said.

Countries with larger manufacturing bases and better infrastructure, such as South Africa and Kenya, are most likely to benefit from further integration, the company said.

South African Trade and Industry Minister Rob Davies said he’s is not aware of any nations that have substantive problems with the agreement.

We have long identified that a development-integration project on the African continent that creates a single regional market is something that will support diversification and industrialization, It’s a clear signal that goes in the opposite direction to some parts of the world.

Source: Voice of Nigeria