BuaNews (Tshwane)
Bathandwa Mbola
19 August 2008
analysis
The Southern African Free Trade Area (FTA), launched on Sunday, will not only transform the trading environment in the region, but marks an important milestone in the road towards regional economic integration.
The agreement, the largest free trade zone agreement in a region which is home to about 250 million people, will create a larger market, releasing potential for trade, economic development and create employment.
On Sunday, during the 28th Southern African Development Community (SADC) Ordinary Summit in Johannesburg, 11 countries in the 14-nation SADC signed the document which will see all tariffs and non-tariff barriers on trade fall away.
Three SADC member states - Angola, the Democratic Republic of Congo (DRC) and Malawi - did not sign as they are still addressing challenges in the implementation of the Protocol on Trade.
The idea to drop trade tariffs between the countries first came about in 1996, when leaders signed the SADC Protocol on Trade. The Protocol aimed to further liberalise inter-regional trade, ensure efficient production among member states while improving the climate for domestic and cross border and foreign investments.
In implementing the first stages of the FTA, the process of deepening regional integration will take a big step forward. This includes the acceleration of economic growth, reduction of poverty and achieving sustainable economic development.
South African President Thabo Mbeki, on launching the initiative said that regional economic cooperation and integration presents an opportunity to pool the region's limited resources and build an economic base to address the challenges of economic growth and development.
The FTA will serve to facilitate the movement of goods through the harmonisation of customs procedures and classifications; increased customs cooperation and establishment of one-stop border posts which will cut the time spent at the countries' borders.
Moreover, the agreement will boost the struggling regional economic muscle and exempt 85 percent of trade from tariffs.
It is expected to create a regional market worth US$360 billion to the population and includes economies growing by up to 7 percent.
The FTA is a key milestone towards achieving the SADC goal of pursuing a common regional integration agenda premised on political, economic and trade interests, said Mr Mbeki.
"...We need to resuscitate that shared vision and commitment, the unity and cohesion that have characterised SADC from its inception, as we consider the next step that will be required further to advance our regional integration efforts in southern Africa," the President noted.
He said there were at least two reasons to reaffirm the importance of regional integration.
Firstly, regional economic cooperation and integration offers the opportunity to pool the region's limited resources and build an economic base to address the challenges of economic growth and development.
Secondly, regional economic integration can create the basis for regional markets and industries to overcome the limits of small national market, to achieve economies of scale, and enhance competitiveness as a platform to participate more effectively in the world economy," the president added.
Therefore, the SADC FTA will have far reaching implications for people, companies and economic process in all member states.
Considerable progress has been made by member states in attaining reasonable levels of economic growth in the region with economic growth remaining strong while inflation continued to decrease.
According to the SADC Secretariat, most countries have recorded positive growth for five consecutive years. Substantial economic growth has been registered in Angola with 19.8 percent, followed by Malawi, Mozambique and Tanzania.
However, the level attained in economic growth falls short of the regional target which was set at 7 percent for this year. Rea Gross Domestic Product increased on average by 5.9 percent in 2007, the same growth rate achieved in 2006.
At a recent meeting in Namibia, member states noted that poor infrastructure in the region is one of the reasons for the high cost of goods especially in landlocked countries.
While the poor state of roads is limiting the quick movement of goods, the meeting also stressed the need for a master plan to modernise the railway network in the region.
SADC Executive Secretary Tomas Salomao said the agreement will make the region an attractive area for doing business.
"The increase in intra-SADC trade requires a vibrant transport infrastructure while seamless network are needed to interconnect land locked countries as well as link them to the major ports," articulated Mr Salomao.
The South African Trade and Industry Minister, Mandisi Mpahlwa, also shares the same opinion.
In a press briefing recently, the minister explained to reporters that infrastructure development is also an essential element for creating conditions that would advance the integration agenda of SADC and would have to be prioritised.
"It is my strong belief that the private sector has a key role to play, especially in the area of regional infrastructure," the minister said at the time.
Moreover the new challenges emerging as a result of especially the energy and food price crisis risk reversing the gains made by the region.
Despite all the challenges, SADC, however, is determined in pursuing its economic integration agenda and has already taken a solid step forward.
In a communique which was adopted at the end of the 28th summit, SADC welcomed initiatives currently underway to mitigate against the negative consequences of the shortage and high prices of energy faced by the region.
The communique also noted the urgent need to improve regional infrastructure to facilitate efficient movement of goods and people in a more open regional economy.
SADC comprises Angola, Botswana, the DRC, Lesotho, Madagascar, Malawi, Mauritius, Mozambique, Namibia, South Africa, Swaziland, Tanzania, Zambia and Zimbabwe.
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