By the Blouin News Business staff

Africa unveils mega “Cairo to the Cape” FTA

by in Africa.

'Then and Now: Reimagining Africa's Future' in Cape Town, South Africa on June 4, 2015. Anadolu Agency/Getty Images

“Then and Now: Reimagining Africa’s Future” in Cape Town, South Africa on June 4, 2015. Anadolu Agency/Getty Images

The African Union’s 25th summit kicked off on Sunday in South Africa, but the continent’s biggest news may come from Egypt on Wednesday, when the Tripartite Free Trade Area (TFTA) will be signed. Hailed as a “monumental step” by Egypt’s Minister of Industry and Trade, Mounir Fakhri Abdel Nour, the TFTA will link the East African Community, the Southern African Development Community, and the Common Market for Eastern and Southern Africa (COMESA) to create an open market spanning half of the continent — a modern-day economic version of Cecil Rhodes’ “Cairo to the Cape” vision of African unity.

The TFTA will cover 26 countries with a combined population of 625 million and a collective GDP of over $1 trillion. It will include states all along the spectrum of African development, from the larger and more industrialized economies of South Africa and Egypt to frontier economies with strong growth potential, like Ethiopia, Angola, and Mozambique. “What we have realized is that having one trade regime is better than the costly multiple trade regimes,” said the secretary general of COMESA, Sindiso Ngwenya, who is leading the negotiations between the three blocs.

Business leaders who gathered for the World Economic Forum on Africa in Cape Town last week welcomed the coming TFTA. Participants noted that currently just 12% of African countries’ total trade is with each other — compared to some 55% in Asia and 70% in Europe, according to AFP. However, intra-African trade is expected to grow substantially in the coming years under the TFTA.

While a landmark achievement in and of itself, the TFTA is just an intermediate step in a much more ambitious agenda. “The launching of the TFTA is the first phase of implementing a developmental regional integration strategy that places high priority on infrastructure development, industrialisation and free movement of business persons,” organizers said on the website of this final TFTA conference.

Furthermore, the TFTA is meant to set the stage for a proposed continental free trade agreement (CFTA). According to an African Union (A.U.) roadmap issued in 2011, the CFTA would launch in 2017 and a continental customs union would be formed by 2019. (However, there could be delays; the TFTA was supposed to roll out at the end of 2014 but was pushed back to work out tricky issues like managing trade disputes.) The A.U. estimates that the CFTA would increase trade within Africa by at least 25-30% in the following decade.

So eliminating trade barriers is helpful and necessary for developing more robust intra-African trade. But infrastructure investments are badly needed as well. Only about half of the $90 billion in the continent’s infrastructure needs are being financed, but overcoming those bottlenecks could add another 2% to Africa’s GDP growth, according to Gordon Brown, the former U.K. prime minister who chaired the global infrastructure initiative of last week’s Cape Town summit. The TFTA should help in this regard; officials hope the unified regulations throughout the new bloc will attract more external FDI.

It is also worth noting that while the TFTA’s geographic reach is extensive (including Libya and the Seychelles islands), there are some conspicuous missing pieces, principally South Sudan and Somalia. These and other conflict-torn parts of Africa like northeast Nigeria may make a CFTA hard to fully implement in the near future. But looking at the examples of Croatia and Serbia (hopefully) acceding to the E.U., the anticipated benefits from joining an established economic union can help spur countries to move beyond their violent pasts.