African leaders have agreed to
create the continent's largest free-trade zone, covering 26 countries in
an area from Cape Town to Cairo.
The deal, signed in Egypt, is
intended to ease the movement of goods across member countries which
represent more than half the continent's GDP.
Since the end of colonial rule, governments have been discussing ways to boost intra-African trade.
The poor state of roads, railways and airlines have made it difficult.
Three
existing trade blocs - the Southern African Development Community
(Sadc); the East African Community (EAC) and the Common Market for
Eastern and Southern Africa (Comesa) - are to be united into a single
new zone.
Analysis: BBC Africa Business Report's Lerato Mbele:
With this agreement comes into fruition a century-old dream to link
the continent from the Cape to Cairo. Explorers and freedom fighters
alike all shared the vision to integrate African economies.
And on paper it looks like a progressive step for a continent that has seen average growth rates of 5% in recent years.
However,
it needs parliamentary endorsements from all member-nations and once
governments start reading the fine print, the mood may change.
Many
of them have small economies that produce few exportable goods. A
free-trade protocol would mean they would have to compete with larger
industries that could threaten their economies.
Africa's many
regional blocs have not really aided continental trade so far and the
African Development Bank has often said that the focus should rather be
on developing infrastructure.
Nevertheless if it is implemented in
a reasonable time-frame and there is sufficient political will to
follow through, then it marks a new beginning for local trade. Will Cape to Cairo free-trade zone work? The
pact - known as The Tripartite Free Trade Area (TFTA) - will then be
officially unveiled at the upcoming summit of the African Union this
weekend in South Africa.
BBC Africa Business Report's Lerato Mbele says the idea behind it is
to remove trade barriers on most goods, making them cheaper, and
stimulating $1tn (£648bn) worth of economic activity across the region
of more than 600 million people.
However, concluding the deal in
Egypt will merely be the first step and it will need to be approved by
each country's parliament, before the wheels are set in motion, she
says.
It is hoped that this will happen by 2017.
Analysts
says countries within a free-trade zone agree to reduce or do away with
certain trade barriers within that area, but still pursue their own
trade policies when it comes to outside countries.
Kenyan
academic Calestous Juma said the move was "extremely exciting" for the
continent as, once implemented, trade within Africa would increase to
30% from 12%.
"The comparison with Europe is 70% of their trade is within Europe," he told the BBC's Focus on Africa programme.
"By having larger markets, it signals the possibility of being able to manufacture products at a scale that is cost-effective.
"For
example, where you need large-scale investments like $200m to create a
pharmaceutical factory, you couldn't do that if you were only selling
the products in one country."
He said the consolidation of financing would be another benefit of the TFTA.
"As soon as banks notice that they can lend to larger investors, say
in manufacturing, that will lead to the liberalisation of the financing
sector, greater access to finance and more investors coming to Africa."
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