This summary of African Trade Blocs and Agreements was prepared by Whitehouse & Associates for the African Resource Network.

There are essentially 6 key trading blocs in Africa:

• the Southern African Development Community (SADC),
• Southern African Customs Union (SACU) and Common Monetary Area (CMA),
• Preferential Trade Area for Eastern and Southern African States (PTA) and Common Market for Eastern and Southern Africa (COMESA),
• Economic Community of West African States (ECOWAS),
• Union Douaniere et Economique de l’Afrique Centrale (UDEAC) (Customs and Economic Union of Central Africa),
• and the East African Community

Originally known as the Southern African Development Co-ordination Conference (SADCC), one of the ironies of SADC is that the organisation was launched in 1980 with the original objectives of reducing dependence on apartheid South Africa and creating a channel for donor aid to the region. The Declaration and Treaty establishing the current Southern African Development Community (SADC) which replaced the Co-ordination Conference was signed in August 1992. The organisation currently has 14 member states namely Angola, Botswana, Democratic Republic of Congo (DRC), Lesotho, Malawi, Mauritius, Mozambique, Namibia, Seychelles, South Africa, Swaziland, Tanzania, Zambia and Zimbabwe.

The aims of SADC are:

• the promotion of economic co-operation and integration amongst member states with a view to becoming a fully-fledged common market;
• the strengthening of regional solidarity, peace and security;
• and the pursuance of common economic, political and social values and systems.

These aims are achieved through the application of eight basic fundamentals as follows:

• Preservation of democracy, peace and security in the region;
• Investment in infrastructure and spatial development corridors;
• Investment in human resources;
• Conservation and management of natural resources;
• The pursuit of market economic principles;
• The creation of a large market;
• Investment protection;
• The promotion of science and technology.

The SADC region represents a vast market with a total population of 186 million people and a combined GNP of US$178 billion. The combined imports of the SADC region excluding South Africa amount to an estimated US$20 billion. Economic conditions vary markedly within the region and there exists a huge dichotomy between member states. Since South Africa joined in 1994, there has been a great deal of comment on the role that South Africa can play within SADC due to the size of her economy relative to other member states.

South Africa accounts for 13% of the total land area of SADC, 22% of the total population and 73% of the total GNP. Commentators have repeatedly expressed concern at possible resentment towards the "big brother" of the organisation and the image of a grouping of satellite states clustered around a regional superpower.

Intra-regional trade figures do little to alter this image. Prior to South Africa joining SADC in 1994, intra-SADC trade accounted for 2,6% of regional exports. Since South Africa’s inclusion, this has increased to 14,5% largely as a result of South African exports to SADC states. Currently, 86% of intra-regional imports are supplied by South Africa. Overall, total intra-SADC trade is estimated at 25% of total regional trade, a figure that could increase to 35% once the free trade area is in place.

The SADC Free Trade Agreement (FTA) should encourage economies of scale creating competitive SADC-wide industries thereby increasing intra-regional trade and boosting foreign investment to the region. The former executive secretary of SADC, Kaire Mbuende, has said the FTA will contribute to the creation of 5-million jobs in the short term and add US$2,6bn to SADC's GDP.

It should also be remembered that the creation of a FTA is not going to solve all of the region’s problems. Trade and investment are not going to double overnight, as individual governments need to do a great deal of work in order to create the right framework for industrial development and foreign investment. Certain SADC states have an even greater task of developing completely underdeveloped industrial sectors. The problems that have hampered African trade for years such as bad economic policies, foreign exchange shortages, poor transport infrastructure and intermittent telecommunications remain. These issues need to be addressed before foreign investors flock to the region.

The current political turmoil in Southern Africa centered on the conflict in the DRC and Angola do little for SADC’s image internationally. The open conflict between the South African government and President Mugabe over SADC’s role in the DRC conflict has highlighted the cracks in the SADC grouping and has questioned the ability of the organisation to maintain order in the region.

Despite the inherent problems, the SADC region offers good trade and investment opportunities. On a SADC-wide basis, a key focus is the development of Spatial Development Corridors. These initiatives provide immediate opportunities for companies involved in infrastructural development’ both contractors and suppliers of materials. A down-stream opportunity lies in the development of industry and support infrastructure along these corridors. The private sector is being encouraged to take the lead in these developments not only as contractors but also as investors in infrastructure.

On an investment level, aside from the large SADC market, exports from SADC enjoy virtual duty-free access to the European Union under the current Lomé agreement and the recently concluded trade accord with South Africa. Investment opportunities abound. SADC states are richly endowed with natural resources, from the natural gas opportunities in Mozambique and Tanzania to the agricultural potential of Zambia and the rich mineral wealth of most countries within the region. A number of SADC states are involved in privatisation initiatives providing easy access for foreign investors to established markets.

SACU is a customs union comprising Botswana, Lesotho, Namibia, Swaziland (the BLNS states) and South Africa. The agreement includes, among other things, the levying of uniform customs and excise duties, free interchange of duty-paid goods imported from outside member countries, imposition of additional protective duties by BLNS states and regulation of the marketing of agricultural produce. There are no duties payable on goods traded between SACU members. For a number of South African exporters, trade with SACU is considered more as a local sale than as export business. The procedures for export are very simple and the distances to the markets are short and frequent.

Import tariffs imposed on goods from outside of SACU generally discourage the switching of the BLNS imports to alternative sources of supply, even where the cost of South African products is higher than for comparable items sourced elsewhere. As a result, the BLNS states depend on South Africa for the majority of their imports.

The Agreement has been under review for a number of years. For SACU to continue there will have to be a reassessment so that the benefits of the Union accrue more equitably to all partners.

Allied to SACU is the Common Monetary Area (CMA) which links South Africa, Lesotho and Swaziland into a Monetary Agreement, essentially the Southern African equivalent of the Franc Zone in West Africa. Namibia automatically became a member upon independence but withdrew with the introduction of the Namibian dollar in 1993. Namibia has chosen not to pursue its own flexible exchange-rate policy, and the Namibian dollar is at par with the rand and there is no immediate prospect of change. The same is true with the lilangeni of Swaziland and the loti of Lesotho. Although the rand is no longer legal tender in Swaziland and Lesotho, it still circulates freely in both countries. Foreign exchange regulations and monetary policy throughout the CMA continue to reflect the influence of the South African Reserve Bank.

The Preferential Trade Area for Eastern and Southern African States (PTA) was established in 1982. The original treaty called for a gradual reduction and eventual elimination of customs duties and non-tariff barriers. The PTA moved into its next phase - the establishment of a common market with the formation of COMESA in 1995.

COMESA currently has 21 member states (Angola, Burundi, Comores, Democratic Republic of the Congo, Djibouti, Egypt, Eritrea, Ethiopia, Kenya, Madagascar, Malawi, Mauritius, Namibia, Rwanda, Seychelles, Sudan, Swaziland, Tanzania, Uganda, Zambia, and Zimbabwe). South Africa is not a member of COMESA and it is unlikely that the country will ever join. Botswana has also been invited to join. Lesotho and Mozambique were members of COMESA, but have subsequently left the organisation to focus their attention on the development of SADC.

The aims and objectives of COMESA are very similar to those of SADC can be summarized as:

• Attaining sustainable growth and development of the member states by promoting a more balanced and harmonious development of its production and marketing structures
• Promoting joint development in all fields of economic activity
• Co-operation in the creation of an enabling environment for foreign, cross-border and domestic investment
• Co-operation in the promotion of peace, security and stability among member states
• Co-operation in strengthening the relationship between the Common Market and the rest of the world
• Contributing towards the establishment, progress and the realisation of the objectives of the African Economic Community

In order to promote the achievement of the aims and objectives, COMESA has established a customs union that aims to abolish all tariff and non-tariff barriers among member states. This means among other things, the evolution of uniform national customs legislation and procedures and the reduction and eventual elimination of import duties and non-tariff barriers on trade among themselves. The target is set for October 2000.

Overall COMESA is a relatively efficient organisation that has gone far in liberalising trade within the region. The benefits to trade are significant. Although South Africa is not a member of COMESA and cannot therefore benefit directly from these tariff preferences, South African companies working on projects within the region would be well served to learn a little more about COMESA and suppliers within COMESA.

As the following slide shows, import duties on a random selection of building materials sourced from within COMESA for a project in COMESA are considerably lower than the duties on identical projects sourced from outside of COMESA.

One of the criticisms that is often leveled at COMESA is that it spans too wide a geographic area, incorporating too many countries of varying size and economic potential. Over the years there have been various proposals to spilt COMESA along SADC lines creating a “southern” and an “eastern” trade bloc. The argument against this has always been that the existence of South Africa in a “southern” bloc would unfairly skew the balance of trade. At the 1997 SADC summit, a report on SADC-COMESA relations expressed that “the sister organisations had amicably reached a common understanding on the need to co-exist while ensuring maximum co-ordination and harmonisation of their respective programmes of action”.

ECOWAS was formed in 1975 by 15 West African states in order to promote trade co-operation and self-reliance in west Africa. Today there are 16 members of ECOWAS, namely Benin, Burkina Faso, Cape Verde, Cote d’Ivoire, Gambia, Ghana, Guinea, Guinea-Bissau, Liberia, Mali, Mauritania, Niger, Nigeria, Senegal, Sierra Leone and Togo.

ECOWAS aims to create a common external tariff with the elimination of all tariff and non-tariff barriers between member states. It should be noted that whilst many of these measures have been planned by ECOWAS, many do work in practice because of the lack of adequate controls in the region and the porous nature of the borders in West Africa.. Most of these measures were due to be in place by the mid-nineties, but political and economic upheaval has hindered much of the progress.

Despite this, certain tariff preferences are in place and although South African companies cannot benefit directly from ECOWAS preferences when exporting to West Africa, the same comment to companies involved in projects in the region applies.

The Customs and Economic Union of Central Africa, established by the Brazzaville Treaty in 1966, forms a customs union with free trade between members and a common external tariff for imports from other countries. The members of UDEAC are Cameroon, Central Africa Republic, Chad, Congo, Equatorial Guinea and Gabon. UDEAC has signed a treaty for the establishment of a Economic and Monetary Community in Central Africa to promote the entire process of sub-regional integration.

As with COMESA and ECOWAS, although there are no direct preferences offered to South African goods, benefits to contractors operating in the region should be explored.

At the end of November 1999, Kenya, Uganda and Tanzania signed a treaty for the establishment of the East African Community (EAC). The EAC aims to create a free trade zone in East Africa and to allow freedom of movement across borders for the nationals of the three countries. By the terms of the treaty the three countries will negotiate the framework of a customs union over the next four years and thereafter, move towards the establishment of a common market.

The East African community is still in its infancy with very few tangible benefits to members or exporters to the region.