Does Africa need a Grand Free Trade Agreement?
Support for, and sceptics against, the Africa Grand Free Trade Agreement abound, yet it does seem that such an agreement is desirable, albeit in degrees.
Cognisance has to be taken of the effect that tariffs and import duties have on the economies of certain African countries and what could result if they were no longer imposed at previous levels or indeed eliminated.
“Many countries rely on that income, so there will always be winners and losers in such a scenario, depending on which end of the bargaining table you are sitting,” says Luke Doig, Senior Manager Economicsat Credit Guarantee Insurance Corporation. “Africa is not a Europe and the inter-country trade cannot becomparedagainst such a model.”
By and large, Africa is a net importer of commodities, and what could be seen as beneficial relaxation of tariff structures could ultimately be more beneficial to countries outside of the African continent. This,by its very nature, is sufficient justification to consider looking inwards to providing a solution.
“We have been underwriting commercial trade transactions into most of the countries in all of the three economic blocsbut it would be a huge ‘ask’ for those countries to seek more trade between themselves while reducing trade between long established European partners like France for example,” says Theo Reddi, General Manager Exportat Credit Guarantee. “Most of the countries making up the economic blocs are rated between 1B and 3C due to both economic as well as political risks, showing how diverse the basket of countries really is.”
South African exports to SADC in the 1st Quarter of 2011 amounted to R15.5 billion out of total exports of R155.6 billion, followed by Comesa at R13.3 billion and EAC at R2.1 billion.
“These exports were predominantly base metals, mineral products and food stuffs, but exports of machinery and mechanical appliances to all three regions totalled R5.45 billion in the 1st Quarter of 2011; R3.79 billion was chemical and allied industry products, while just over R2 billion was of plastics and rubber articles,” concludes Reddi.
