It was hailed as a “historic” agreement: a free-trade deal to create Africa’s biggest trade bloc, knocking down barriers and uniting 26 countries with a combined population of nearly 600 million and a combined economy of $875-billion.
The deal was announced in Johannesburg last weekend at a summit of three regional organizations, representing the countries of southern and eastern Africa. They are aiming to negotiate the details of the “grand free trade area” within the next three years.
There’s no question that a free-trade agreement could have huge benefits for Africa. The continent is plagued by fragmented economies, bureaucratic barriers to trade, corruption at border posts, and a failure to exploit the natural advantages of geography. Only about 10 per cent of Africa’s trade is within Africa -- an absurdly small number. (By comparison, 60 per cent of European trade and 40 per cent of North American trade is produced by internal trade within their regions.)
The lack of intra-African trade is even more ridiculous when you consider the rapid growth in many African economies, fuelled by the commodities boom and the expansion of domestic markets and middle-class consumers.
Six of the world’s 10 fastest-growing economies are in Africa. This growth could be turbo-charged if African countries can take advantage of potential markets next door. South African car manufacturers, for example, believe they could triple their sales within a decade if the free-trade agreement goes ahead.
So the announcement of a free-trade bloc is potentially great news for Africa. Yet many experts are skeptical of the announcement, and with good reason.
A similar plan for a free-trade agreement was announced in 2008 by the same regional organizations. Little has been done since then. African organizations have a tendency to announce grand schemes and then neglect the practical steps that would be needed to put the schemes into place.
The best intentions of the political leaders are not enough. There are huge obstacles on the ground. Africa has too many countries -- the continent already has 53 countries, soon to be 54 with the independence of South Sudan next month -- and too many borders. Roads and railway networks are poor. The borders are often controlled by corrupt officials who have little incentive to streamline the system. Trade is still hampered by political conflicts and wars in many African countries.
Free trade within Africa is a dream that has been imagined for decades. But it will take more than rhetoric to achieve it. The question now is whether the political leaders will begin taking the hard decisions to ease the barriers and help create the potential powerhouse that Africa could be.