by Richard Kamidza, The Zimbabwe Mirror, 17 November 2000.
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The launch of the Common Market for East and Southern Africa (COMESA) Free Trade Area (FTA) in Lusaka, on October 31, heralded the dawn of a new era for the sub-region and the continent as a whole. COMESA comprises 20 countries, nine of which agreed to eliminate duties, tariffs and trade barriers in order to stimulate economic development and integration among themselves. The rest of the countries have committed themselves to achieve the same in the short-term.
COMESA has a total population of about 400 million people, three-quarters of whom live well below the World Bank poverty threshold of US$1 a day. The grouping has a total gross domestic product (GDP) of US$166 billion and real GDP and population growth rates of 3.2 and 2.2 percent respectively. The Table below indicates the size of the COMESA economy. Egypt has the largest economy followed by Kenya, Zimbabwe and Angola. Egypt is the biggest exporter followed by Angola, Zimbabwe and Kenya. Egypt is also the biggest importer followed by Kenya and Zimbabwe. COMESA total exports and imports in 1998 stood at US$23 billion and US$45 billion, respectively. The region’s intra-trade is US$4.2 billion, and is estimated to grow at the rate of 20 percent per annum. However, this is too small when compared to other advanced regional blocs of the world. This reflects the constraints in production, trade and consumption patterns. Hence, the new dawn is expected to stimulate production and trade patterns leading to reduction of poverty among the poorest in the world.
The decision by nine countries to establish a FTA is a giant step towards creating a single economic bloc on the continent. This consolidates the process of regional economic integration and co-operation by deepening trade flows and market integration. This leads to higher levels of production, development and prosperity. Most COMESA member states are individually too small to achieve economies of scale in their production. Single market improves market access while reducing the cost of production. Reduction in tariffs, duties and trade barriers is therefore a powerful stimulus to economic growth and development, which then creates opportunities for maximising the use of factors of production. This is likely to enhance production efficiency and competitiveness in COMESA. The adoption of the Structural Adjustment Programmes (SAPs) by most COMESA member countries since the 1980s has failed to increase production and trade. There is evidence to suggest that some degree of de-industrialisation has taken place on many SAPs implementing states. This has also discouraged the flow of private foreign direct investment (FDI) in the entire region, hence the low levels of investment. In fact, the region’s gross domestic investment has fallen consistently during the past few years while there has been a huge increase in COMESA’s external indebtedness over the years. Indeed, COMESA is one of the most heavily indebted and impoverished regions in the world. Trade liberalisation and the general economic deregulation have not benefited industrialists and citizens. Trade patterns remain unchanged, and are mostly in favour of the fast dwindling formal sector. With the shrinking economic base, many citizens are joining the informal cross border trade sector, which despite all unfavourable laws, regulations and policies, remains resilient to regional economic integration and co-operation agenda. However, the loose and uncohesive nature of the COMESA indicates more challenges that might derail benefits likely to accrue to the region. But this does not underestimate the significance of this FTA. The mere fact that less than half of COMESA member states have endorsed the idea has a psychological impetus to the future socio-economic and political gains of COMESA. Of the countries which endorsed the idea, Egypt, Kenya, Mauritius, Sudan, Zambia and Zimbabwe have more intra-trade within the group than such countries as Djibouti, Malawi and Madagascar. On those still to endorse, only Angola, DRC and Ethiopia have significant trade with the group. This shows that the region is not yet ready to confront threats of globalisation as well as reducing poverty levels. The situation has been worsened by the withdrawal of Tanzania just a month before the launch. But available data shows that the country imports more from COMESA than it exports. The political instability has negative impact on integration and the issuing of a single passport and the relaxation of visa requirements in the region, particularly among the warring nations. It is sad that five member countries – Angola, the Democratic Republic of Congo (DRC), Burundi, Eritria and Ethiopia – are directly involved in armed conflicts. Some members of group are directly or indirectly fighting each other, as is the case in the DRC war. This raises the question whether COMESA is ready for a FTA. Both goods and factors of production are unlikely to move freely in the region if the conflicts persist in the region. Other areas that call for urgent attention include the flow of information on trade opportunities among member states, and the simplification of documentation required to move goods between COMESA countries. Maybe the group should adopt a single customs document if regional integration is to deepen. In this connection, it is imperative to make COMESA rules of origin more relevant, practical, understandable and usable. It is also sad to note that countries like Uganda, Seychelles and Namibia want guarantees that protect their industries before endorsing the FTA agenda. This means that some member states are not yet ready to face stiff competition from fellow member countries, let alone the rest of the world. It appears that there is fear to lose revenue and/or factors of production flight to other fellow members. Also, Namibia and Swaziland are members of SACU, and that binding means that they can not eliminate duties, trade barriers and tariffs without the consent of SACU.
COMESA has to grapple also with all sorts of non-tariff barriers and the simplification of COMESA’s rules of origin. This is more challenging in the short-to-medium term. While some member states have foreign currency problems, it is the devaluation policies that have met stiff resistance from the political leadership who fear that the worsening of socio-economic environment may result in social upheaval. This is more so in net-importing countries like Zimbabwe, where any devaluation policy has resulted in price spiral. It is important that countries liberalise import licences in order to allow fast movement of goods between them. For example, the introduction of a COMESA carrier license would allow commercial goods vehicles to use one valid license throughout the entire region. This leads to less red tape, and helps in the fight against corruption, which has affected trade flows in the past. Transport and communication infrastructure, which is underdeveloped in the region, is unlikely to sustain the anticipated increase in production and trade volumes. The above maybe worsened if the visa requirements remain too controlled. The governments must also reduce customs and bureaucratic procedures at the border crossing so as to allow fast movements of goods between countries. All the same, COMESA FTA comes right in time when the region is in urgent need of foreign investors. The large market and abundant natural resources that include mineral wealth, fertile and undulating land and tourist attractions, coupled with free mobility of factors of production are some of the factors that might lure FDI into the region. But, the region on the other hand, needs to improve relations among its members. Conflicts in COMESA are unsustainable and may dent the future viability of the new dawn in the sub-region. If the region is to achieve full integration with a common currency by 2025, then more energy should go towards cementing the objectives of the COMESA FTA.