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African leaders launch talks on ‘Cape to Cairo’ trade bloc

Published on 12/06/2011

African leaders Sunday agreed to a framework to guide the next phase of negotiations on creating the continent's biggest free-trade bloc, in a communique issued after a day of talks.

The new bloc would integrate the Common Market for Eastern and Southern Africa (COMESA), the East African Community (EAC) and the Southern African Development Community (SADC), an idea first backed in 2008.

It would combine 26 countries home to 700 million people with a combined economy estimated at $875 billion (597 billion euros).

The bloc aims to enhance connectivity among the nations and reduce costs of doing business, while increasing investment flows to address capacity constraints.

“It is now well documented that regional integration is one of the four factors that have sustained Africa’s growth in the last decade, as well as the quick and robust recovery from the recent financial crisis,” said Eratus Mwencha, the deputy chairman of the AU Commission.

“We all know that trade can act as an engine of growth,” said Mwencha. “For the people of Africa, this will mean a paycheque in their pocket.”

The International Monetary Fund expects Africa to grow faster than the global average in the coming years. Six of the world’s 10 fastest-growing economies were on the continent last year.

Mwencha added that it was projected that Africa would double its GDP in the next ten years, a growth expected to be propelled by the growing middle class.

The mega-bloc 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.

It is expected to end the challenges presented by the current trade blocs which have different rules, with some countries belonging to more than one grouping, complicating efforts to streamline trade.

“This Tripartite is blazing a path to be followed by other regions in Africa in realising the dream of a united Africa,” said Sindiso Ngwenya, general secretary of the Common Market for Eastern and Southern Africa (COMESA)

“There are a number of areas where, by building on the work already done by member and partner states, working regionally, we can expect quick wins,” he said.

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 five-member East African Community (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.

As the 19-member COMESA join the other two blocs, the aim is to work towards combining small domestic markets into a larger, more effective force, said Swaziland’s King Mswati III, the COMESA chair.

“The integration of various regional blocs would no doubt improve trade within the African economies. This cannot be achieved overnight, it could only be done in phases, as there is a lot of work that still needs to be done,” said Mswati.

The tripartite bloc is expected to meet again in two years.