26 October 2008
Nairobi — Egypt now says it plans to re-direct all its export trade from Europe and America to Southern Africa, a strategy that will pit the North African country against South Africa -- the dominant trading power in sub Saharan Africa.
Last week, the meeting of heads of state of the three main economic groupings on the continent met in Kampala and committed itself to creating a Free Trade Area for the three trading blocs.
The merger of the three regional economic communities brings together 26 countries with a combined population of 527 million people, a combined gross domestic product of $624 billion.
"Egypt is going to re-direct trade to African countries in this free trade area. Egypt is a diversified economy; therefore, we shall ably compete with South Africa," said Muhammed Osmani, Egyptian Minister of Economic Development, in an exclusive interview with The EastAfrican in Kampala.
Mr Osmani said export trade accounts for 75 per cent of its GDP.
Egypt's new strategy is bound to elicit a reaction from South Africa.
"As long as there are no underhand methods, competition is healthy," Mpahlwa Mandisi, the South African Minister for Trade and Industry, said in a separate interview with this newspaper.Although neither officials would openly admit that the two countries are set to enter into stiff competition, observers say that a "silent battle" for dominance is in the offing.
"They feared losing economic influence in Africa because of the inevitable competition. However, after Namibia and Zimbabwe (both members of SADC) accepted joining us (EAC and Comesa), South Africa gave in," the official said.
EAC Deputy Secretary General, Julius Onen said the fears were exaggerated.
We have agreed to dismantle all the trade restrictions. It is a win-win situation. Our biggest challenge (EAC) is to create an attractive market for investment," he added.
But even as EAC, Comesa and SADC merge into a Free Trade Area, the leaders of different partner states have expressed misgivings on how their national interests would be accommodated.
Tanzania's President Jakaya Kikwete, who doubles as the chairperson of the African Union, appealed that the proposal for the free movement of business persons within the region be critically studied before full implementation.
Tanzania has for a long time now had very rigid immigration laws.
Rwandan President Paul Kagame made a case for compensation mechanisms to counter anticipated losses, especially by small countries.
It is inevitable that integration will seemingly produce losers and winners initially. Thus successful integration processes must incorporate compensation mechanisms to provide the least prepared member states with time to execute mitigating strategies against initial shocks," he said.
Host President Yoweri Museveni re-affirmed his position that ultimately a political union would resolve all the differences that have undermined Africa's stability.
"The greatest source of weakness has been disunity and a low level of political and economic integration. Political integration creates an army that guarantees the future of these people [Africans]," he said.
Statistics indicate that intra-Comesa trade increased by 30 per cent from 2006 to $8 billion in 2007.
EAC intra-trade has registered a significant increase since the commencement of the Customs Union. Trade grew by 42 per cent between 2004 and 2007. Exports from South Africa took a 70 per cent share of total intra-SADC exports in the period 2000-2006.
The three regional economic blocs have recently been concerned by overlapping memberships. Of the 26 countries that constitute the combined membership of Comesa, EAC and SADC, 17 are either in a Customs Union or participating in negotiating an alternative Customs Union to the one they belong to.
For example, the EAC is already a Customs Union but it shares four members with Comesa and one with SADC, while five of the SADC member states are members of the Southern Africa Customs Union.
Reported by Charles Kazooba & Julius Barigaba
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