TFTA to bring in the extra length

By Honorine Kaze
August 2015
Prime Business

Although Namibia is already part of various regional economic agreements communities, being a signatory of the Tripartite Free Trade Areas (TFTA) will further unlock its trade potential within the whole of Africa experts point out. Namibia is signatory of Southern African Customs Union (SACU) And of Southern African Development Community (SADC).

Minister of Industrialization, Trade and SME development Deputy Permanent Secretary Michael Humavindu responding to Primefocus Magazine noted that the vision of African leaders and their citizens is to achieve an African economic union and the TFTA is a broad achievement in that direction.

“The TFTA offers an opportunity to increase intra- African Trade which ultimately will be cemented through the Attainment of the Continental Free Trade Areas (CFTA). SACU is a customs union that is characterized by the common external tariff and which has only five member States and SADC comprises only 15 member states. Although both these Regional Economic Communities (RECs) play a vital economic and political role for Namibia and other members, it still does not adequately address the challenges of limited sources of inputs and at competitive pricing,” he said.

On the other hand, Humavindu notes that TFTA is an expended market that is designed to unlock the potential of African Trade at continental level. It will further address the challenges of multiple memberships for some of the countries; “Once the TFTA and ultimately the CTFA is fully operational it is expected that Africa will have one trade regime and in that regard, will reduce the prevailing barriers to trade and reduce the cost of doing business in Africa. It will offer a broader platform for the import and export of goods and services for the Namibian people.”

The declaration launching the TFTA was signed by 24 out of the 26 members/ partner States in Sharm El Sheik, Egypt on June 10 this year, primarily designed to enhance the free movement of goods and services amongst them. Other important areas of interest for the Member/ partner States are the free movement of business persons, developing industrial capacities and infrastructure in the tripartite region. Humavindu stress that it is then expected that the TFTA will culminate into the CFTA by the indicative date 2017 with the overall objective being to increase intra Africa Trade which at the moment accounts for approximately only 3% of global trade.

While most African countries currently are either experiencing internal conflicts or still lacking efficient linking infrastructures, the deputy PS recognized that at the tripartite summit launching the TFTA negotiation recognized that infrastructure remains poor in most of the Member/ Partner States constituting the tripartite region and therefore agreed to the pillar or infrastructure development, so that Member / Partner States could find ways to finance national and regional infrastructure development projects.

“Within the TFTA context, it is understood that goods cannot move efficiently when infrastructure (modes of transporting goods: roads, sea, air and rail and other services) is poor as this could dramatically increase the cost of doing business. As a result, a concurrent process of negotiation under the infrastructure development is being negotiated by the institutions that are mandated to coordinate infrastructure development on how best the TFTA Member/States can best address the challenges of infrastructure development,” he explains.

He however stresses that while peace and stability are essentials for countries to trade and develop optimally, the TFTA is not designed to resolve the current and future insecurities caused by military conflicts. There are established structures at regional level mandated to deal with the diffusion of regional conflicts; “there are organs within AU that are established for conflict management and diffusion, same as we have the SADC organ on Politics, Defense and Security Cooperation to deal with conflict and political instability in the member states.” In terms of Namibia’s preparedness for the TFTA, he says that as Namibia actively participated into the TFTA negotiation recognized the smallness of its industrial base compared to countries such as South Africa, Kenya and Egypt amongst others.

“In that regard, the country’s industrial policy is one of the tools which should be well implemented in order to increase the country’s industrial base and produce goods and services for exports to the other TFTA members / partners which is a market of round 600millions people with a combined GDP of approximately 1.3 trillion USD. The TFTA would also serve as a broader platform from which Namibia can source some of the inputs (raw materials) that the country utilize its manufacturing processes to which it can export some of its competitive services.”

While TFTA promotes free trade and movement of people across the continent, Humavindu argues that there is not likely threat those movements will impact on the country‘s economy. He goes on that in any likely event where trade flows to Namibia might cause injury to the domestic industries, thus national policies could be triggered to protect such industries; “these instruments of protection may include for example imposition of quantitative restriction, granting status of infant Industry Protection status to new industries and other countervailing measures.”

Likewise, IPPR economist researcher Klaus Schade recognized the importance of being a signatory of TFTA besides the regional agreement as it opens more borders for Namibia which were not easier to trade with initially. “Competition can increase over time and Namibian businesses will need to adapt to it. But likewise, Namibian businesses have access to other markets and compete there with established companies. Namibia needs to continue exploring business opportunities in the member States and market and brand Namibian products in order to reap benefits from the enlarged market. In addition, Namibian companies will have access to a broader variety of inputs from different sources at lower costs, once imports duties are being reduced. Consumer will have a broader choice if other countries, such as East African producers enter our market.”

On the banking side, Bank of Namibia Director Strategic Communication and financial sector development Ndangi Katoma notes that ahead of TFTA the local banking does not need to introduce any new mechanism to ready themselves for TFTA since banks can act on any international transactions, based on the existing legal requirements.

“Further, BoN does not anticipate any changes that banking institutions will have to introduce to their existing systems to cater for these eventualities.” He adds “the trade pact will open up new trade opportunities in goods. It is expected that intra trade volumes between the participating countries will increase; however this is not expected to impact the currency in circulation immediately. Currency in circulation is primarily determined by transactional demand for goods and services and this is mainly expected to remain steady, consistent with the growth in income, unless there is substantial increase in income due to the removal of barriers of trade.”