Wednesday, 22 July 2015

Kenya 'homecoming' to cap Obama Africa charm offensive

African-Elephant-300x300AFTER an eight-year negotiation period, the Tripartite Free Trade Area (TFTA) was launched on June 10, bringing together 26 African states with the aim of stimulating intra-African trade by creating a common market.

These countries make up three major regional communities — the Southern African Development Community, the East African Community and the Common Market for Eastern and Southern Africa.

The free trade area is a long-term project with significant stumbling blocks, including ratification by all 26 participating countries and the implementation of the agreement without causing significant economic disruption for weaker economies. However, the principle of promoting intra-African trade is receiving a lot of attention, along with the development of infrastructure that enables such trade.

It is 50 years after the end of European rule in most parts of Africa, and more than a third of Africa’s trade remains with Western Europe — historical ties still have a large influence on these markets.

This is not surprising given shared languages and cultural connections between many countries. Kenya, Sudan, Uganda, Egypt, Lesotho, Botswana, SA, Namibia, Malawi, Zimbabwe, Zambia, Tanzania and Swaziland were all former British colonies and make up half of the countries in the TFTA, with most of the remainder having French, Portuguese or German languages and cultures in common.

The continent’s largest economy, Nigeria, is not included in TFTA.

Once the agreement is fully implemented, the way in which member states benefit will, in many ways, depend on their economic, political, trade and regulatory realities. It will also depend on the enablers of development such as infrastructure. Gathering data and information on these subjects in the continent is not always easy.

ACCORDING to the latest Bright Africa report, released earlier this month, bilateral intraregional trade between these markets is only a small percentage of gross domestic product (GDP). The tripartite agreement seeks to encourage this trade by giving African firms preferential access to exponentially larger markets.

Domestic consumption in the TFTA countries is fairly well diversified — far more so than manufacturing and exports, indicating an opportunity for African companies to start supplying African domestic demand. Domestic consumption is the most important factor driving overall GDP, and in most regions, this is fairly well spread across several sectors.

Many African countries and regions rely heavily on extractive industries for exports. Countries with more exposure to extractive industries have done well in the past decade as commodity prices have been at historically high levels, but as prices have fallen in recent times, the opposite side of this reliance has been exposed.Read More...

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