logo logo

Afro-trade bloc will draw FDI and reduce costs, SADC boss

East African Business Week, Uganda

Afro-trade bloc will draw FDI and reduce costs, SADC boss

Written by EABW Correspondent

2 November 2008

KAMPALA, UGANDA - The proposed merger of the EAC, SADC and COMESA will help reduce the cost of doing business for companies within the 26 countries and boost foreign direct investment (FDI) to levels never seen before.

Mr. Sindiso Ngwenya, the secretary general of the Common Market for Eastern and Southern Africa (COMESA) said last week that the proposed free trade area and subsequently customs union would create a single market of more than 525 million people.

A customs union would eventually give way to an Africa-wide economic community. The EAC already has a functioning customs union and COMESA plans to launch the same by December.

The 15-member SADC plan a customs union in 2010 and of the 15, 12 members launched a free trade zone in August.

A week ago, leaders from COMESA, the East African Community (EAC) and the Southern African Development Community (SADC) agreed in principle to create a unified free trade zone. “We are a rich continent and we need to exploit resources for the development of our people,” Ngwenya said at a press conference after the presidents and representatives from the 26 members had endorsed the merger. The merger is intended to eliminate complications from the existing structure of overlapping and conflicting blocs. Africa has 30 regional trade arrangements, and on average each country belongs to about four groups.

Merging the three main trade groups would also boost inter-African trade, an underexploited source of growth for Africa.

Africa has seen impressive growth rates since the mid-1990s and there is hope for the continent, whose potential is boundless. A communiqué issued at the end of the summit said a timetable for integration would be determined in twelve months.

They also agreed to harmonise infrastructure projects.

Ngwenya dismissed pessimism that the move mail fail, saying there was great political will and support for it.

He said that the pessimism was being spread by bureaucrats interested in protecting their small empires, but added that they would fail as long as the political will dictates.

Ngwenya noted that the integration of Africa was mooted as early as the 1950s, as African countries struggled for independence, but got derailed by the people who took up arms to fight legitimate leaders.

“After many years, we have not gone far. In fact we seemed to have even retrogressed,” he said.

Ngwenya urged Africans to stop ‘begging because it costs them more than they get’.

“If aid were to develop African, this continent would be far advanced.”

He said those who promise aid take back a big chunk of what they bring to Africa. In addition, they dictate terms of how African countries should run their affairs.

Responding to queries from journalists, Ngwenya dismissed fears that the insecurity in some of the countries would derail trade in the integrated area.

He said the existing regional blocs already have mechanisms to ensure security, citing the Standby Brigade the EAC.

Observers say political instability will hamper integration in countries like Zimbabwe, DR Congo and others. But an FTA could help smooth over some longstanding disputes like that between Eritrea and Ethiopia.

There is hope that bigger markets and economies of scale will boost production and demand from Egypt to South Africa.

But the FTA would initially benefit developed industrial sectors like Kenya, Egypt and South Africa. And small businesses will likely lose out initially to more efficient producers from the bigger economies.