New African free trade deal set to boost exports from SA
Integration into a tripartite free trade area seen as a critical driver of regional integration on the continent
Twenty-six African countries are rapidly moving towards finalising a preferential trade agreement which will open up significant opportunities for South African exports.
The countries being integrated into a tripartite free trade area (TFTA) — seen as a critical driver of regional integration on the continent — have a combined population of 625-million people and a total GDP of $1.6-trillion. Once the tariff negotiations are finalised, the TFTA will offer exporters preferential or zero tariffs into the markets of member countries.
Department of Trade and Industry deputy director-general of international trade and economic development Xolelwa Mlumbi-Peter notes that this preferential access will provide better terms of trade than are currently enjoyed. "It means that we will be able to increase our exports and advance a developmental integration agenda and the development of regional value chains, as it would be cheaper, for example, for SA to import inputs from African countries."
Currently, intra-regional trade on the continent is very low.
Trade Law Chambers director Rian Geldenhuys said the progress made with the TFTA was "fantastic" and would offer huge opportunities for South African businesses if implemented, particularly as the Southern African Development Community (SADC) was largely dysfunctional in terms of the implementation tariff agreements.
At this stage, the TFTA agreement consists only of the legal framework with detailed negotiations on tariffs for the different products still to be finalised. Non-tariff barriers and infrastructural blockages will be addressed at a later stage.
The TFTA agreement which SA signed in Uganda last week is built on the three existing trading blocs — the Common Market for Eastern and Southern Africa (Comesa), SADC and the East African Community (EAC) — and also includes non-bloc countries such as Egypt. The tripartite agreement will be the building block for a continental free trade area (FTA) in Africa. The heads of state of the African Union have already launched the negotiations for a continental FTA.
The initiative to establish an FTA between Comesa, EAC and SADC dates back to a decision taken in June 2011 by the heads of state and the governments of the three regional economic communities. In June 2015, the TFTA was launched by the heads of state in Egypt, but SA did not sign the agreement at that stage as there was still outstanding work on some of the annexures, which have now been completed and adopted.
SA is the 19th country to sign the agreement, which will enter into force once 14 member countries have ratified it. Egypt recently became the first country to do so.
Mlumbi-Peter said the tariff negotiations between SADC and the EAC are very near to conclusion and should be completed by September. Trade and Industry Minister Rob Davies said the conclusion of the negotiations "will be another important step forward in the process since it will provide commercial benefits to our business people by enabling them to trade products between the South African Customs Union (SACU) and EAC countries at a reduced or zero tariff".
Bilateral tariff negotiations have also started with Egypt, which Mlumbi-Peter said was a critical market for SA and SACU. These would hopefully be concluded by the end of the year. She said care would be taken not to unravel the preferential trade agreements within SADC. The tripartite negotiations would be an add-on to the internal SADC, EAC and Comesa arrangements.
Tariff agreements would be implemented as soon as the negotiations are concluded and ratified.