NAIROBI (Reuters) – Plans to create a 26-nation free trade area by integrating three existing African trade blocs by July 2014 are on track and the only major sticking point is likely to be harmonising rules of origin, the three blocs said on Friday. The East African Community (EAC), the Common Market for Eastern and Southern Africa (COMESA), and the Southern African Development Community (SADC) aim to create a free market of 525 million people with an output of $1 trillion when they unite.
Although African economies are growing fast – second only to Asia – the continent has attracted criticism over its slow pace of integration, a delay that is seen as driving up the cost of doing business.
Sindiso Ngwenya, secretary general of COMESA, said tough negotiations on rules aimed at making cross-border trade easy for firms and small traders lie ahead.
“The major challenge for the tripartite FTA negotiations will be rules of origin. Whereas COMESA and EAC have identical rules of origin, SADC has got different rules of origin so we have to engage with them,” Ngwenya said.
The World Bank said in a report in February that red tape and trade barriers were costing Africa billions of dollars and depriving the region of new sources of economic growth.
Ngwenya however said the process would move quickly because of the experience gained in building the existing trade blocs.
“For us there is nothing new in this FTA (free trade area) because it is something that is already there,” Ngwenya said.
“The timetable agreed upon is not only realistic but also feasible. Some of us can even argue that we could even move the process faster in terms of launching that FTA.”
Many of the countries in the three blocs are members of more than one trade area. Zambia is a member of SADC and COMESA for example, while Kenya has membership in EAC and COMESA.
“That is the beauty. We have now turned multiple membership that was termed as waste and duplication into an opportunity,” Ngwenya said.
He said that South Sudan, which attained independence from Sudan last year, was expected to join the free trade area, taking the total number of states to 27 or half of Africa.
AFRICAN MULTINATIONALS
Once the integration process was complete, Ngwenya said he expected to see more multinational companies created. He cited the example of Bidco, a Kenyan edible oils and soap manufacturer, which through COMESA, has operations in 15 nations.
“They (firms like Bidco) have moved away from being national champions to regional champions and ultimately, they will become multinational companies,” he said.
Richard Sezibera, EAC secretary general, said regional integration had led to a doubling in trade among EAC states after its member states entered a customs union in 2005.
Joao Samuel Caholo, deputy executive secretary at SADC, said the key issue was to improve infrastructure and manufacturing.
He said trade among SADC nations grew 18 percent last year. However, without South Africa, the region’s most economically competitive state, the growth rate was 4-6 percent, exposing a lack of competitiveness among the other members.
The European Union has pledged 400 million euros for projects in the blocs.
“The issue is not non-tariff barriers, the issue is the non-competitiveness of our economies… As a region we want to tackle the issue of a lack of competitiveness,” Caholo said.