African leaders have agreed to create the largest free-trade zone ever attempted on the continent, and the world’s second largest.
The Tripartite Free Trade Area (TFTA) deal, signed in Egypt, will ease the movement of goods across 26 member countries comprising three current trade blocs: The Southern African Development Community (SADC); the East African Community (EAC) and the Common Market for Eastern and Southern Africa (Comesa).
It has been also been dubbed the “Cape to Cairo” super bloc.
Analysts forecast intra-Africa trade will more than double to 30 per cent, and one report said it could stimulate at least $1 trillion’s worth of economic activity in the bloc.
Now each national parliament will have to vote for it, and it will also be presented to the continent’s big chiefs at the African Union this weekend in South Africa. And several African cynics and pragmatists immediately said that, with that, the project had been handed over to the burial committee.
Going by the past, there is good reason not to be optimistic that TFTA will become reality on the ground. Perhaps it is a good time to go ask why economic integration has been so troubled in Africa.
Some years ago, when Rwanda’s President Paul Kagame was still vice president, and Rwanda was still in the very early stages of exploring entry into the EAC, I raised this question with him in an interview.
His answer surprised me. He said the biggest stumbling block to economic integration was Customs taxes.
African borders, he said, were primarily Customs tax collection points first, and immigration control posts second. Thus even immigration was, ultimately, to do with Customs. If you “look like a smuggler” the immigration officials linger over your passport longer.
Now at that point, Customs taxes in Rwanda — and Uganda — were about equal to the cost of collecting them. Kagame then argued that even if they weren’t equal, the increased value of business would more than make up for the costs of “lost” Customs taxes.
In his view then, the only thing needed to make regional integration work was for countries to scrap Customs tax. After that, even having a formal EAC, for example, would be mostly irrelevant.
This argument is even more pertinent today. For ultimately, abolishing Customs tax is about one thing — rolling back the role of the state.
However, as we have seen, the EAC itself instead created a new regional bureaucratic institution. TFTA would partly be a new pan-African bureaucracy.
Thus we have a layer of national governments, to which we are adding layers of regional structures, upon which we shall lump on a continental rooftop.
Therefore the magic to making free trade work in Africa is internal reforms, especially of tax regimes and markets.
So the answer to having regional and continental trade on a mega scale, may be to have smaller states and fewer, possibly even no formal trade structures at all.
TFTA is a good start, but it can only be a temporary solution. In future, it will need to be scrapped.
Charles Onyango-Obbo is editor of Mail & Guardian Africa. Twitter: @cobbo3