South Africa develops cold feet on tripartite FTA as talks are put back

Saturday December 20 2014

Workers package sugar at Butali Sugar Mills in

Workers package sugar at Butali Sugar Mills in Kenya. The EAC is looking into new markets, especially in South Africa, Mozambique, DR Congo, Eritrea, Djibouti, Zambia and Angola, to bolster its exports. PHOTO | ISAAC WALE  NATION MEDIA GROUP

By JAMES ANYANZWA

Talks planned to take place in Egypt last week over the establishment of a tripartite free trade area failed to kick off after South Africa, a key member of the Southern African Development Community, pulled out citing inadequate consultations on contentious issues touching on tariff offers and rules of origin.

The meeting by the Tripartite Council of Ministers, which was to be held in Cairo from December 18-19, was meant to ratify the tripartite agreement and subsequently pave the way for the launch of the FTA by the 3rd Tripartite Summit of Heads of State and Government on December 20. But it did not happen.

A source privy to the ongoing negotiations told The EastAfrican that South Africa, which is also a member of the Southern African Customs Union (Sacu), seems to have developed cold feet on the merger of the three regional economic blocs — the East African Community, the Common Market for Eastern and Southern Africa and SADC — with fears that the move would open up its market to intense competition from its regional counterparts.

“What is emerging is that South Africa want this process to drag on because they fear losing their market,” said the source, adding that the competitiveness of South Africa’s products in the regional market could be under threat due to the country’s high cost of production.

“We had agreed that we sign the FTA agreement first and then look at ways of resolving the contentious issues of tariff offers and rules of origin, but they want us to deal with them before we sign the agreement.”

The EastAfrican has learnt that SADC had written to Comesa, the current chair of the Tripartite Trade Negotiation Forum (TTNF), asking for the adjournment of the Cairo meeting, arguing that they had not held enough consultations and that their chairman, Zimbabwean President Robert Mugabe, would not be available for the meeting.

Kenya’s Principal Secretary in the Ministry of East African Affairs, Commerce and Industry John Konchellah confirmed that the planned meeting by the Tripartite Council of Ministers had been postponed but declined to provide more details.

“We were meant to sign this tripartite agreement in Egypt this month, but it has been postponed until next year. We will consult further to determine the date,” the source said.

The 3rd Meeting of the Tripartite Sectoral Ministerial Committee Responsible for Trade, Finance, Economic Matters and Home/ Internal Affairs was held in October 24-25 in Bujumbura. The purpose of the meeting was to receive progress reports and resolve any outstanding matters in preparation for the 3rd Summit to be held in December 2014, which has now been postponed.

The meeting agreed that the Summit should launch the Tripartite Free Trade Area on the basis of the principle of variable geometry, which provides that countries that are ready may proceed while others may join them later.

It is understood that the EAC is negotiating the FTA agreement as a bloc while Comesa and SADC member states are pushing their agenda as individual countries.

Sacu, which comprises five Southern African countries — Botswana, Lesotho, Namibia, South Africa and Swaziland — is also lobbying for its interests as a coalition, with South Africa being a central figure.

According to the progress report on Tripartite Free Trade Area (TFTA) negotiations, tariff offers are ready for all EAC partner states and Comesa countries that are not in EAC or Sacu.

Offers for Burundi, Kenya and Rwanda are based on the EAC acquis of 100 per cent tariff liberalisation for existing FTA countries, subject to reciprocity.

According to the report, Eritrea has liberalised tariffs up to 80 per cent under the Comesa trade regime and is currently validating a dummy offer prepared by the Secretariat while Ethiopia has liberalised tariffs up to 10 per cent under the Comesa trade regime and is preparing to join the Comesa FTA.

Common tariff offer

According to the report, non-Comesa and SADC countries such as Swaziland have not finalised their tariff offers. Angola and Mozambique have also not concluded their tariff offers while a common tariff offer is being prepared for the Sacu members. Only 15 of the 26 countries have concluded their tariff offers.

Negotiations for the establishment of a single market were launched in Johannesburg in June 2011 by Comesa, EAC and SADC heads of state.

The move is part of the broader objective of the African Union to accelerate economic integration to achieve higher economic growth, reduce poverty and attain sustainable economic development.

Spanning the continent from Cape Town to Cairo, the grand FTA comprises 26 countries with a combined population of nearly 625 million people and a total GDP of $1.2 trillion. The region accounts for half of the AU membership, over 58 per cent in terms of contribution to GDP and 57 per cent of the total population.

The establishment of a Tripartite Free Trade Area is expected to bolster intra-regional trade by creating a wider market, increasing investment flows, enhancing competitiveness and developing cross-regional infrastructure.

The June 2011 summit adopted a developmental approach to the tripartite integration process that will be built on three pillars: Market integration, infrastructure development and industrial development. The Tripartite FTA also seeks to improve the movement of business people across the three regional economic blocs.