African leaders launch talks on 'Cape to Cairo' trade bloc

12th June 2011, Comments 0 comments

African leaders launch talks Sunday to create the continent's biggest free-trade bloc, a $875 billion (597 billion euros) market that would boost the region's economic profile.

The so-called "Grand" Free Trade Area would cross 26 countries, stretching from the Cape to Cairo, with a combined population of 700 million people.

"This is but one major step towards achieving economic freedom in our lifetime in the continent," South African President Jacob Zuma said on the eve of the summit, which 24 heads of state will attend.

"We must also continue building an African continent that is united, and which is free of poverty, disease, deprivation and conflict," he said.

The proposed free trade area (FTA) would join three existing, and sometimes overlapping, blocs.

But each has different rules, with some countries belonging to more than one grouping, further complicating efforts to streamline trade.

The idea to unite these blocs was endorsed at a 2008 summit. It would bring together the continent's most developed economies of South Africa and Egypt and some of its most energetic, such as Angola and Ethiopia.

"Establishing a Grand Free Trade Area... is expected to unleash the enormous economic growth and development potential of Africa," the five-member East African Community (EAC) said in a statement.

"Its establishment will mark a historical milestone in the integration of the continent."

But the pact faces immense hurdles: tariff barriers, poor infrastructure, weak supply chains, and economies often largely reliant on natural resources rather than manufactured products.

The three existing free trade areas -- of which the EAC is the most advanced -- have failed to meet intra-trade targets despite removing the bulk of trade tariffs.

And the bloc includes countries hit by conflicts, coups and political turmoil, such as Libya, Madagascar, Sudan and Zimbabwe.

New World Bank research says trade within southern African accounts for just 10 percent of the total in the region -- compared to 60 percent in Europe and 40 percent in North America.

Southern African Development Community (SADC) exports increased from 20 to more than 30 percent of combined GDP over the past decade, but regional trade made up a mere three percent of the increase.

Stumbling blocks include border crossings and non-tariff barriers such as import bans and permits that cut into competitiveness.

South African grocery chain giant Shoprite for example suffers losses of $500 a day for each truck delayed at border posts.

As the 19 members of the Common Market for Eastern and Southern Africa (COMESA) join the other two blocs on Sunday, the aim is to work towards combining small domestic markets into a larger, more effective force.

© 2011 AFP

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