AFRICA’S FREE TRADE AREA SIGNALS INTENT, NOW FOR THE HEAVY LIFTING

On Thursday 44 African countries put pen to paper to create a continental free trade area aimed at increasing trade within the continent.

As it is now trade within the continent stands at about 13 percent of total exports. It means that our countries trade more with the Europe, Asia and the Americas than we trade with ourselves.

It is a ridiculous logic that is a throwback to the colonial era when we were meant to provide raw materials to and serve as token markets to western industry. In addition the political permutations of Western Europe in the first half of the last century explain why in Uganda’s case for instance, we trade more with and through Kenya than the Democratic Republic of Congo...

More trade within the region is important, even critical. Trade within Africa is the least of regional groups in the world and explains a lot why we keep lagging behind everyone else.

It has been estimated that intra-Africa share of trade will more than double in relation to exports to wider world within a decade if we can take maximum advantage of the free trade area.

In East Africa we have been first hand witnesses to such progress. Trade within the Community has jumped to $5.5b last year compared to $1.5b in 2005.

This has far reaching benefits.

"With a consolidated market the dream of industrialisation will grow new legs. For starters it will sharpen comparative advantages around the continent, if the best producers of bananas are in Uganda why should everyone else bother? They will be better served going to another industry safe in the knowledge their source of matooke is unimpeded.

It is not an alien concept. The best matooke comes from southern Uganda, but bananas can be grown anywhere in Uganda. Because of lack of barriers between regions in Uganda, other areas of Uganda need not grow matooke as they can buy it from southern Uganda, they then can concentrate on the things they can do best.

So imagine an Africa with no punitive borders and the efficiencies that can be promoted?

Trade encourages specialisation and therefore increased productivity. It can be particularly helpful towards rural transformation as regional value chains in agro-business are established connecting farmers, traders and processors across the continent.

Evidence of this has already come to light in our back yard.

Last week it was announced that Ugandan farmers were selling 6 million bags of maize to their eastern neighbours. Ugandan farmers can produce maize much cheaper that their Kenyan counterparts for comparable quantities and quality so they are likely to dominate the market in coming years. The Kenyan farmers may have to start planting other crops if they are to survive. But one can expect they will lobby their leaders to maintain the status quo, which will only benefit them and not their own consumers.

But the signing in Kigali while a good step is only a statement of intent, there is a lot of hard work ahead, a lot of it effecting mind change away from the protection of parochial interests by the continent’s leaders and interest groups.

This mind shift is critical if we are to muster the collective resolve to do what it takes to first bring the free trade area in to being and secondly to maximise its potential and benefits to African citizens.

For starters the continent needs about $100b a year over the medium term to bring its infrastructure up to speed. To make this possible there has to be a lot of cross border investments in road, rail and water transport infrastructure.

Work also has to be done to remove non-tariff barriers, to synchronise regulations and create unified standards across a host of goods and services.

In addition respective governments need to commit to trade facilitation by improving connectivity, eliminating red tape and accelerating turnaround times in all processes.

"And last but not least there will be an urgent need to beef our institutional capacities to not only collect revenues but also ensure these are distributed equitably among respective societies...

As is already happening in the EAC there will be some major winners – mainly countries with extensive manufacturing bases and losers who will suffer some fiscal losses and death of some industries.

The signing in Kigali was a great event but we should be slow to bring out the champagne too soon, but rather roll up our sleeves and gird our loins  for the work ahead.