The establishment of the Tripartite Free Trade Area (TFTA) by African leaders at a summit held in Egypt in the Red Sea resort town of Sharm el-Sheikh last week creates a market larger than any other individual economic space on the continent.
The Independent Editorial
However, the pact brings with it challenges and opportunities which Zimbabwe may struggle to grasp.
The deal seeks to create a common market spanning 26 countries, setting up a framework for easing the movement of goods and in the process breaking the barriers of space that hinder trade growth in Africa.
Signed by Egyptian President Abdel Fattah al-Sisi, President Robert Mugabe, Ethiopian prime minister Hailemariam Desalegn and Tanzanian vice-president Mohamed Bilal, the TFTA aims to integrate three existing regional trade blocs — the East African Community, the Southern African Development Community and the Common Market for Eastern and Southern Africa — whose countries have a combined gross domestic product of more than US$1 trillion.
Members to the free trade area are expected to reap several benefits, among them, an enlarged market for products and population, increased market access for products and elimination of challenges associated with overlapping membership. There are also opportunities for increased foreign direct investment and infrastructural development, improved competitiveness of goods through elimination of import duties and exploitation of untapped resources.
While members celebrate the founding of the TFTA, operationally, it is not a stroll in the park. The new enlarged trade agenda demands competitiveness, and in this game there will be winners and losers.
Zimbabwe unfortunately is at a higher risk of being a victim of failure. Instead of expanding its industrial base through opening up industry to increase capacity, the country is experiencing major economic reversals.
Faced with quickening company closures and job losses, Zimbabwe is likely to contribute to the development of other nations through brain drain and importation of goods, while exports remain subdued. The majority of plant equipment within the industry is obsolete and subject to frequent breakdowns, negatively impacting on production output.
In this regard, local manufacturing firms have to be proactive and source long-term capital to purchase modern and efficient technologies to tap into the potential benefits of an enlarged market.
Government has to create conducive environment for industry to thrive in. This includes ensuring that key enablers such as electricity, water and telecommunications are available and affordable.
Accordingly, the local industry has to raise its game if it is to recover and wad off competition from other member states within the TFTA.
It is also imperative for government to mend the political situation to bring about economic certainty and avoid chasing away potential investors. With ruinous policies such as indigenisation law still in place, Zimbabwe will continue to watch from the sidelines as other member states enjoy the fruits of the agreement. A good perception of the country’s investment climate plays a pivotal role as it promotes investment and attracts cheap capital. Zimbabwe has nothing to celebrate in the TFTA as long as industry is on its knees.