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Free Trade Talks to Kick Africa into Future
Source: SA - the Good News
Source Date: Wednesday, December 14, 2011
Focus: ICT for MDGs
Country: South Africa
Created: Dec 14, 2011

Industrialisation, making goods to sell instead of selling primary products, is a possible and also necessary spin-off. Competition with older established and also bigger emerging economies might be a stumbling block initially, but the huge new market may make it possible for locally manufactured goods to compete with those imported from outside the FTA. Close to 600 million people live in the FTA with a gross domestic product of $1 trillion – suddenly we are boxing in the same weight division as China, India, Russia, Brazil, the US and the EU.

It is becoming easier to make the world believe this because the continent is already being touted as the next economic frontier, as the place to be because the future is here.

For confirmation of this, look at some figures:

  • Africa’s combined consumer spending in 2008 was $860 billion and will be $1.4 trillion in 2020
  • In 2040 there will be 1.1 billion Africans of working age with 43% now under 15
  • Urbanisation enhances growth – Africa already has 52 cities with more than a million inhabitants, more than Europe. In 2030 fifty percent will be living in cities.
  • Africa’s returns on FDI are the highest in the world.

South Africa, with its advanced and sophisticated economy, is best suited to take advantage offered by such an expanded market. Already the World Economic Forum (WEF) has rated South Africa first in the world for the strength of our auditing and reporting standards and for the regulation of securities exchanges. The soundness of our banks, rated second in the world, is an important asset in these troublesome days when banks everywhere else are shaky. Add in the certainty offered by the recently announced National Development Plan, which sets out the country’s path until 2030, and it is clear that South Africa’s competitiveness will be enhanced.

We know that our fellow BRICS countries started their upward economic trend based on their huge domestic markets. With the establishment of the FTA, South Africa will now have a market which will be twelve times bigger than the fifty million customers it now has.

It is understood that the road setting up the FTA could be rocky. The Minister of Trade and Industries has pointed out that negotiations over industrial policy could be tough. South Africa has just set out to implement its Industrial Policy Action Plan (IPAP) and talks around the trade in manufactured goods will be of particular concern.

But South Africa does have an advantage. As the Minister correctly pointed out, that unlike exports to the rest of the world, a high percentage of exports into Africa are already made up of value-added products.

Other problems would be the levels of protectionism between African countries, restrictive trade permit needs and very obvious economic disparities. Additionally, the fact that three existing trade blocs aim to merge into one is a stumbling block as they are at different levels of integration with different rules and regulations. All of this will be part of the negotiations that start this week.

The fact of the matter is that economic growth in all participating countries will be boosted by increased intra-regional trade. For Africa as a whole at the moment, this stands at only 12% of all cross-border trade whereas in Asia the figure is rising toward 50% and in the European Union 80%.

The FTA would also be an important building block towards achieving the vision of the founding fathers of the Organisation of African Unity in 1963 - a continent-wide African Economic Union.

The December talks may truly be the first concrete sign of Africa rising to take its rightful place in the world.

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