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Davies says intra-African trade is key to SA growth

Creamer Media’s Engineering News, South Africa

Davies says intra-African trade is key to SA growth

By Jean McKenzie

7 Mar 2012

Strengthening bilateral trade and investment relations with African countries was a key trade and economic strategy for South Africa, Trade and Industry Minister Dr Rob Davies told the sixth Africa Economic Forum in Cape Town this week.

“We have realised for a long time that the African continent is inextricably linked to our own destiny.”

Davies said Africa had experienced an economic “growth spurt” driven by the mineral commodities boom, an increase in consumption, more infrastructure investments and improved economic governance in African countries, which included having weathered the international economic crisis.

“The real challenge is to turn that growth into a real developmental process. I think that the continent will not be able to continue indefinitely to have a commodities boom-driven growth. It will have to turn that commodities-driven growth into a serious effort to create value-added products,” he cautioned.

With many other countries, especially most of its top-ten trade partners (only two of which were in Africa), South Africa currently had a trade deficit. However, with its African trade partners South Africa was able to run a trade surplus and unlike its export trade with developed partners, which mostly comprised commodities, exports to the African continent had a high proportion of value-added products.

Davies said that an initial tool to promote further regional trade was the Southern African Development Community (SADC) Free Trade Agreement (FTA), which would be fully implemented during the current year, allowing for over 90% duty-free trade between SADC countries.

Extending the FTA to a tripartite agreement with the East African Community and the Common Market for Eastern and Southern Africa would compound these integration efforts ultimately incorporating 26 countries with a gross domestic product approaching $1-trillion and population of approximately 600-million. A tripartite FTA could then be built on and ultimately extended to the entire African continent.

However, the primary emphasisis would be that the SADC FTA should first be consolidated before continuing with deeper integration on the continent.

Key initiatives of the various trade Ministries were to encourage beneficiation of commodities in the SADC region, promote agroprocessing which would turn crops into food, development of the capacity for the production of pharmaceuticals, especially to treat diseases that affected the region.

While Davies acknowledged that barriers to inter-regional trade in Africa included issues such as regulatory problems, more pressing issues were evident. These included the need for increased infrastructure to allow to effective movement of goods between countries, and production of more appropriate goods and services that would be usable in the African market, many of which were not being produced in Africa at present. “If we can’t produce goods that are going to sell in each other’s markets we aren’t going to get the benefits of each other’s markets,” Davies said.