Delegates from Africa countries meeting in Addis Ababa, Ethiopia, are proposing the establishment of continental free trade area.
According to the director of the African Union Commission’s Department of Trade and Industry, Mrs Treasure Maphanga, the new trading bloc is expected to take shape in five years.
Intra-Africa trade has been touted as the panacea to tackle high poverty on the continent by easing the movement of goods, labour and capital to create wealth.
The creation of a Continental Free Trade Area is expected to result in increased business opportunities, foreign direct investment flows and tax revenues.
“We have been advocating and reaching out to the citizens on the continent and other international stakeholders about the importance of Africa coming together as one free trade area by 2017 and also looking at the potential and opportunities of trading amongst each other,” Ms Maphanga said at an Africa Industrialisation Day conference on December 5 in Addis Ababa.
The aim is to double intra-African trade in the next decade. One critical area expected to make a difference is in the industry in terms of the ability to transform and diversify African economies.
“We are well aware that currently Africa as a region has a very low level of intra-African trade, which is estimated at about 12 per cent as of 2011,” Ms Maphanga said in an interview. Forty six per cent of intra-Africa trade is made up of manufactured products.
According to a joint statement by the African Union (AU), United Nations Economic Commission for Africa (Uneca), United Nations Industrial Development Organisation (Unido), seen by the Sunday Nation, African leaders have demonstrated their determination to work together to dismantle trade restrictions, a process that would pave the way for a continental free trade area in five years.
The number of active Preferential Trade Agreements (PTA) between African countries has already risen since 2000 to 24 in 2012.
The statement notes that except for Eastern Africa, where the common market was put in place in 2010 and has since been at the forefront of enhancing economic integration, regional and sub-regional trade facilitation initiatives have had little success.
“This is why we support the creation of a continental free trade area by 2017 as a first and ambitious target towards setting up an African Common Market,” the joint statement read in part.
With industrialisation, a free trade area would enable countries like Kenya to develop more products to be sold in other African markets without being subjected to undue restrictions or barriers, according to ministry of Industrialisation Assistant Director of Industries George Makateto.
Currently, some of the challenges impeding trade expansion on the continent include obsolete infrastructure, fragmented economic space, low production capacities, limited investment financing and high transaction costs.
But experts argue that Africa’s integration will remain a pipe dream if it does not harmonise policies and monetary regulation, new cross border security frameworks and the elimination of non-tariff barriers (NTBs) to trade.
Already, the East African Community has moved to eliminated about 36 NTBs that had hindered trade activities in the region. The block is set to adopt the monetary policy framework in 2013 to pave the way for establishing a single currency as the EAC moves towards political federation by 2015.
The removal of the 36 barriers to trade in the past year is set to boost the region’s move to attract investments from other economic blocs and countries to its expanded market.
According to Unido Director General Kandeh Yumkella, increasing intra-African trade, for example, through the establishment and strengthening of product value chains and development of infrastructure, would allow African countries to become more competitive.
“It would facilitate cross-border transfer of knowledge and technology, while attracting more foreign direct investment,” Mr Yumkella noted.