Statement by Mr Sindiso Ngwenya, Secretary General of COMESA and Chairman of the Tripartite Task Force to the 3rd COMESA-EAC-SADC Tripartite Summit in Sharma el Sheikh, Egypt which launched the Tripartite Free Trade Area

On behalf of my Colleagues and Staff in the Secretariats of COMESA, EAC and SADC and indeed on my own behalf, I would like to take this opportunity to sincerely thank His Excellency Mr Abdel Fattah el Sisi, the President of the Arab Republic of Egypt, the Government and the people of Egypt for the warm reception and excellent facilities put at the disposal of the Summit and the meetings that preceded the Summit. There could not have been a better venue than Sharma el Sheik the peaceful holiday resort for this historic Summit which will change the political and economic geography of the Tripartite region in particular and the African continent in general. Indeed, the Vision of this Summit “Towards a Single Market” and Theme: “Deepening COMESA, EAC and SADC Integration” is testimony of the visionary leadership and inspiration that, Your Excellencies, have and continue to provide to Honourable Ministers and all Officials and indeed the Tripartite Secretariat.

The decisions you will be making at this Summit will further confirm in a practical way the narrative of the Africa Rising story, that the African Cheetah is on the move, which is otherwise overshadowed by the pockets of conflict within the region that continue to cause unimaginable human suffering, loss of lives and destruction of property and infrastructure.

It is almost seven years since you directed that a single market be established through the merger of the Free Trade Areas of the three regional economic communities of COMESA, EAC and SADC. At your second Summit held on 12 June 2011, you adopted a developmental approach to integration that is anchored on the following three pillars:

• The first pillar is market integration based on the Tripartite Free Trade Area; 

• The second pillar is infrastructure development aimed at improving physical connectivity in the region to reduce the cost of doing business and facilitate the movement of goods, people and services; and

• The third pillar is industrial development to address the productive constraints with the objective of realizing the structural transformation of the economies from low productivity economies that relay on export of unprocessed primary commodities with either little or no value addition to high dynamic competitive economies that produce and export value added products.

You also decided that there should be a parallel track on the free movement of business persons and that after the launching of the Tripartite Free Trade Area there would be negotiations on trade in services, intellectual property rights, cross border investments and other trade related issues.

My task this morning is to briefly highlight where the Tripartite region is with respect to the three pillars on the basis of what Tripartite Member/Partner States have achieved on the basis of the programs that each Regional Economic Community has been implementing which further strengthens the case for the expeditious establishment of the single market which this Summit will be doing today.

On the establishment of a single market, the following statistics and comparisons make a compelling case for the Tripartite integration arrangement that will change the political and economic geography of the region. The twenty six Tripartite Member/Partner States have a combined population of 625 million people and a combined gross domestic product of United States Dollars 1.3 Trillion and accounts for almost half the membership of the African Union and sixty two percent of the continents gross domestic product .In addition, the total land mass of the countries that make up the Tripartite region is 17.3 million square kilometers which is twice the size of China with a population that twice that of the Tripartite Member/Partner States.

Excellencies, if the twenty six Tripartite Member/Partner States were one country they would rank number twelve in the World with respect to GDP. Another way of looking at the Tripartite region is to draw comparisons with Brazil which has twenty six States but is one country with a GDP of United States Dollars 2.2 Trillion. One can imagine, a Brazil that has twenty six different sovereign States each with its own trade policies and border controls to mention but a few. This would make the economy inefficient as that fragmentation would create land locked States with high costs of doing business and make it difficult to integrate in the global economy.

Your vision of creating a single market is precisely to address the challenges that arise from the fragmentation of countries in the region by creating a borderless economy that is sine quo non for structural transformation, inclusive and sustainable development. The potential for the Tripartite integration arrangement is further supported by the following statistics. In 2008, when you directed on the expeditious establishment of the Tripartite Free Trade Area, trade between and among the Tripartite Member/Partner States was United States Dollars 62 billion and by 2013 this trade had increased to United States Dollars 98 billion. During the same period trade with the rest of world marginally increased from United States Dollars 531 Billion to United States Dollars 545 billion. An interesting feature of the intra Tripartite trade is that it is dominated by trade in intermediate products and manufactured goods thus further confirming available evidence that the Tripartite Free Trade Area can serve as a basis for industrialization anchored on value addition.

Within the COMESA, EAC and SADC regions we are witnessing increased cross border investment in manufacturing, trade in services including logistics and financial services by companies that are emerging as regional champions. The regional trade and industrial policies through the Tripartite are likely to further stimulate and enhance these investments. An interesting feature of the domestic companies that have decided to make cross border investments within the region is that their market expansion strategies support regional integration. This is not the case with multinational companies whose strategies within Free Trade Areas result in rationalization and closure of production plants in different countries as they can supply the single market from one production facility within the FTA. This has the potential of creating resistance to FTA’s as these strategies result in factory closures with loss of employment, a situation that runs counter to public policy of job creation.

It would, therefore, be advisable as had been the case in Asia and South East Asia that Tripartite trade and industrial policies give preferential treatment to emerging regional firms

This is not the case with respect to trade between the Tripartite countries and the rest of the world which is dominated by exports of unprocessed primary commodities and imports of manufactured products.

This brings me to the pillar of industrial development. Although the program for Tripartite industrialization pillar is still under development substantial progress has been made by COMESA, EAC and SADC in coming up with regional industrial policies and strategies which are under implementation. It is against this background that the Tripartite Sectoral Council of Ministers have directed that the Tripartite industrial program should take into account the best practices and policies of the three organizations.

The launching of this Tripartite Free Trade Area is taking place at a time when there is no longer a debate on the role of government in guiding and facilitating structural transformation and modernization through macro-economic policies and appropriate institutions. After the demise of the Washington consensus whose bankrupt ideological policies were exposed by the global financial crises of 2008, it now universally acknowledged that, for the invisible hand of the market to deliver meaningful development it must be complemented by the visible hand of government to provide guidance 

Allow me to make the case for the Tripartite Industrial pillar to quote two eminent experts. The first was Rosentein Rodan, who, in 1943, stated that and I quote “If left to markets industrialization would not come up because other divergence between private and social net product: the cost of training a peasant to become an industrialist is too big for any one firm to bear”. All I can say is how right Rodan was and how right he still is as this contemporary world the Tripartite economies have not emerged from peasant farming and are still to embrace applied modern technologies.

The second quotation is from Justin Li, former Vice President and Chief Economist at the World Bank who stated and I quote “mistakes are inevitable when you have a government trying to guide development of industry, but the costs of non intervention far outweigh the benefits ... For a government to coordinate economic activities, failure is of course the likely result, but without government coordination it could be a worse failure. Economists should help the Government to figure out a better course of action”.

You also decided that without the infrastructure development pillar the Tripartite regional integration will remain a pipe dream and rightly so because without physical infrastructure connectivity and energy which is an enabler to development our countries will remain under developed. I would like to quote the famous Chinese saying that “if you want to be prosperous build roads”.

As your Tripartite Secretariat we are the first to admit that the Tripartite infrastructure program has made modest contribution to realizing the shared vision that you have articulated as our leaders. This is because for decades in the Tripartite region, in particular, and Africa in general, investment in infrastructure has been dependent on the prevailing wisdom of financial institutions. Allow me, Your Excellencies, again to paraphrase a World Bank appraisal Report on Nigeria Railways in the 1960’s which concluded that rail transport was inefficient compared to road transport and resulted in the neglect of investment in railways as donors moved away from supporting investments in flip ways with all the negative consequences that we all know. Another opposition to railway investment is the case of the famous Tanzania-Zambia Railways by the Governments of Tanzania and Zambia with the support of the Government of the People’s Republic of China by the Brookings Institute of Washington who published a book on transport investments in Africa in the 1960’s and described TAZARA as a politically motivated project which was not supported by rate of return considerations. Again those who profess to what I have described as masters of the universe on Africa have been proved wrong. In any case, Your Excellencies, it is a historical fact that is conveniently ignored, that the infrastructure that was build in developed countries was not subjected to cost benefit analysis, otherwise the American frontier would not have been opened, to mention only one example.

The good news is that thanks to your resolute and visionary leadership and support from multilateral and regional development Banks, mega investments mare taking place in infrastructure and energy within the region. In addition, several Tripartite Member/Partner States have, through innovative means of financing, been able to issue infrastructure bonds in domestic and global markets to finance infrastructure and energy projects. In this regard, two examples will suffice.

Allow me Excellencies, since we are in Egypt to draw your attention to the financing of the second Suez Canal which is currently under construction. The Nine Billion United States Dollars for the project, which was raised from the domestic market in Egypt, was closed in a record nine days after being oversubscribed.

The second is the Ethiopian Grand Renaissance Dam which when complete in 2017 with 6000 megawatts of power will be the biggest hydropower project in Africa. This mega hydro power dam is funded by Ethiopia and a Diaspora bond to the tune of United States Dollars 4.4 Billion.

We have the standard railway gauges being constructed for the first time in the region. This will replace antiquated railway lines that were built at the turn of the twentieth century. All these projects contribute to physical interconnectivity of the Tripartite region and should be reported and celebrated as such. It is regrettable that we continue as a region and continent underselling our individual and collective achievements.

At your last Summit you also directed that a parallel program on the free movement of business persons should be developed and implemented. On this program very little progress has been achieved as the proposed framework for facilitating the free movement of business persons is worse than current arrangements. It is important to note that at the country level, some Member/Partner States have completely liberalized travel with Visas being issued on entry. These countries that are leading by example include: Kenya, Rwanda, Mauritius and Seychelles. It would appear to us that the free movement of business persons would require the “visible hand” of Government at the highest level as those who are used to the status quo and think of borders as “fortresses” to control people and not facilitate movement, will continue to make the Tripartite region a region with not only thick borders, but opaque borders.

Notwithstanding some of the challenges that have been experienced, the Tripartite Framework of integration has and continues to provide valuable lessons, which include but are not limited to the following:

• The first lesson, is the need to move away from processes and focus on results, otherwise we run the risk of being slaves of processes which will consign the region to the third tier in the League of Nations.

• The second lesson is that the Tripartite integration arrangement will have to build on the best practices of COMESA, EAC and SADC. For example, the Single Customs Territory of the EAC has reduced transit from an average of 22 days to 3 days with substantial savings to economies.

• The third lesson is that the whole Tripartite process of program formulation and design should include the private sector and other stakeholders as at the end of the day they are the ones to deliver jobs and economic growth.

• The fourth lesson is that there is need to invite private sector companies that stand to benefit from the Tripartite Free Trade Area to come to the table, open their wallets and fund regional integration programs.

In closing my remarks I wish on behalf of my colleagues, Dr Stergomena Lawrence Tax, Executive Secretary of SADC and Ambassador Dr Richard Sezibera, Secretary General of the EAC and all staff in the three organizations to thank you for the privilege you have given us to serve you individually and collectively in facilitating the implementation of the Tripartite FTA and associated programs that are game changer and marks the beginning of a renaissance and golden age in regional integration, in the Tripartite region and Africa in general.

The time for Africa is now for one people, one continent and one destiny.

I thank you for your attention.