Sunday, March 13, 2016

Landmark Endorsement to Bolster Intra-Africa Trade
March 12, 2016

In Egpyt more than 1 500 public and private business delegates and state leaders agreed on February 20-21 to mobilise massive investments for the implementation of Africa’s largest trading bloc which was created last year by 26 African countries with a total of 620 million consumers and a combined gross domestic product (GDP) nearing $1.2 trillion (R18 trillion).

The agreement crowned the Africa 2016 investment forum in the Egyptian Red Sea resort Sharm El Sheikh with the participation of business leaders together with government officials and heads of international organisations to discuss trade and investment as engines of progress.

African heads of state and government from Ethiopia, Equatorial Guinea, Gabon, Nigeria, Sudan and Togo took part in the forum.

No official figures relating to the amount of these investments have been released.

“They (the private business sector) are ready to invest. Africa is the continent of the future, this is clear. However, there are huge hurdles that have been ‘scaring’ the big business pundits,” an Egyptian diplomat commented on condition of anonymity.

Titanic Efforts

“African governments must make titanic efforts to ensure the right atmosphere needed to attract investors, adopt the necessary legislative measures to facilitate business activities; combat rampant corruption and eliminate bureaucratic obstacles, reform their financial systems to facilitate re-exporting capitals and benefits, not to mention democratic governance and preventing and ending so many armed conflicts””

Corruption comes first on the list of impediments to investment along with instability, the source said. Studies by the World Bank, the UN Development Programme and Transparency International confirm that Africa is still the most corrupt region in the world and that it has failed to solve the problem.

“Without all that there will be meetings and more meetings, but decisions will not find their way to implementation.

“The volume of trade between African countries does not exceed 10% of the continent’s foreign trade and will not increase unless tariff barriers are reformed and needed infrastructure is built, such as roads and ports to transport goods, among other,” said the diplomat who was a member of the Egyptian delegation of the Sharm El Sheikh Africa 2016 forum.

Along with the installation of giant power generation plants, a 7000km long Cairo-Cape Town railways line is among the large projects that attract private investors.

Development is no longer a dream

“Times have changed in Africa,” the Business for Africa Forum’s concept document said which was submitted to the meeting.

With interest in the continent growing exponentially, some of today’s newest business players are originating from non-traditional regions such as South America, eastern Europe, the Gulf, and Africa itself, it said.

“While well-established and new partners from Europe, North America and Asia continue to be valued, it is interesting to note that the private sector’s scope of attention is increasingly widening to include, especially among new-comers, consumer-market industries including food, IT, tourism, finance and retail.”

According to Business for Africa Forum, those who have been paying attention to Africa have seen these amassing figures, a GDP in excess of $2 trillion; a growing middle class of more than 313 million consumers and consumer spending breaking through the $1 trillion mark and projected to reach $1.4 trillion by 2020.

Also a labour force estimated at 382 million people and expected to grow to more than 500 million by 2020 and the youngest population in the world, which tomorrow will yield the lowest dependents to workers ratio in the world.

Regional integration and favourable trade agreements between African countries continue
to be critical to this process.

The landmark tripartite agreement between Comesa (Common Market for Eastern and Southern Africa, 19 countries), SADC (Southern African Development Community, 15 countries) and the EAC (East African Community, five countries), which was launched in Sharm El Sheikh last June creating the biggest trading block in Africa, with 26 out of the 54 AU member countries and a market of more than 620 million consumers, which is the equivalent of 50% of the African continent’s more than 1,2 billion inhabitants.

Africa has been registering some of the highest annual economic growth rates, between 2% and 11%, making an average of 7%. Egypt, which co-organised the forum has a privileged position between Europe, the Gulf, Asia and Africa. The country has at least 8% of global sea-borne trade between the East and the West passing through the Suez Canal This percentage is expected to grow with the new Suez Canal Regional Development Project.

Africa 2016 brought together high-level investment representatives interested in African business opportunities in the sectors of energy, Information and Communication Technology, financial services, trade, agribusiness, health care, and pharmaceuticals.

Continental Free Africa Trade

The Africa 2016 Forum has marked a step further towards the implementation of the goals adopted during the January 2012 AU Summit which focused on the theme of Boosting IntraAfrica Trade, as part of the heads of state and government decision to establish a continental free trade area.

The AU’s programme on boosting intraAfrican trade is mainly based on these key pillars:

•  Trade is widely accepted as an important engine of economic growth and development.

•  Africa’s trade is its high external orientation and relatively low level of intra-regional trade. Intra-African trade stands at around 13% compared to approximately 60%, 40%, 30% intra-regional trade that has been achieved by Europe, North America, and the Association of South East Asian Nations, (10 countries) respectively.

•  That African countries do not trade much with each other has meant that they have been unable to fully harness the synergies and complementarities of their economies.

•  Due to the fact that Africa does the bulk of its trade with the outside world and exports are heavily concentrated on primary commodities, the continent has been particularly vulnerable to external macroeconomic shocks and protectionist trade policies.

•  Boosting intra-African trade and deepening regional market integration constitute a necessary response to the challenges facing Africa in the multilateral trading system and the global economy.

•  The Action Plan for Boosting Intra-Africa Trade specifically aims at deepening Africa’s market integration.

To effectively achieve this, the plan is divided into seven clusters, namely trade facilitation, trade policy, productive capacities, trade related infrastructure, trade finance, trade information and factor market integration.

The African leaders, in their 2012 summit in Addis Ababa, decided to establish a Continental Free Trade Area (CFTA) by an indicative date set for next year.

The CFTA will bring together 54 African countries with a combined population of more than 1.2 billion people and a combined gross domestic product of more than $3.4 trillion.

Baher Kamal and Fareed Mahdy

Baher Kamal and Fareed Mahdy are IPS correspondents

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