Thursday, 29 Jul 2010
Africa: The S.A.D.C. Free Trade Area - Angola steps aside
20 February 2009
Premised on the gradual removal of tariff barriers, the FTA signalled the creation of one the largest free trade zones on the African Continent, with some 250 million people and an economy worth more than $430bn.
Based on the classical principles of economics, the main argument for the implementation of the FTA is that participating member states will proceed to export exclusively those goods in which they have a comparative advantage while, contrarily, they will be importing those goods that they cannot efficiently produce from other members.
Considering the above, the FTA will undoubtedly make the SADC a more attractive location for doing business, reducing and, at a later stage, eliminating import tariffs among its participants (currently the FTA will exempt 85% of trade from tariffs and the aim is to fully liberalise by 2012), and allowing goods originating from SADC member states to enter neighbouring country economies with reduced customs duties or full exemption. This will have a significant impact on the national economies of each FTA participant, boosting trade and investment opportunities and, evidently, creating job positions.
However, some critics have publicly commented that the rationale behind Angola's decision to delay its participation in FTA for two to three years, lies in its current lack of infrastructure and its unwillingness to be exposed to more intense direct competition from South Africa – which still is the continent's economic powerhouse. By joining the FTA at this stage Angola could possibly delay its aim of becoming one of the main economic powers at a regional level, since all FTA members are bound to observe the regulatory economic constraints arising from the FTA rules. On the other hand, the implementation of the FTA may conflict with economic partnership deals that Angola has with countries such as China, Portugal, the Community of Portuguese Speaking Countries (CPLP) and the Organisation of Lusophone African Countries (PALOP).
These ideas were partially set aside by the official position of the Angolan Government, which justified Angola's decision on the grounds of the incipient state of its economic development, impaired by two wars that, jointly, lasted for 40 years – the war for independence was a 13-year conflict and the Angolan Civil War lasted for 27 years (ending in 2002).
Notwithstanding the consolidation of Angola's political stability, recently confirmed during the political campaign and elections for the legislature held on 5 September, 2008, and recent significant growth and transformation of its economy, allowing Angola to achieve exchange-rate stability, balanced public accounts, a drop in interest rates, a stable inflation rate of about 11% (from more than 300% in 1999), and the highest growth rate in the world (19.8% in 2007), the prevailing view is that if Angola wants to enter the FTA successfully and benefit from such a process in a balanced way, the Angolan Government must further strengthen the fundamentals of its economy. By doing this Angola will fully benefit from the FTA and will take its place as one of the main players within the FTA. This will take time, at the very least, the two to three years required by the Angolan Government.
Jorge Santiago Neves (jsneves@barrocas.com.pt) is a partner and José Miguel Oliveira (jmoliveira@barrocas.com.pt) an associate of Barrocas Sarmento Nevesin Portugal
