As the countries of Eastern and Southern Africa and Indian Ocean integrate, they offer a large single market for manufacturers and service providers who will seek to offer a whole range of services to the manufacturing sector including finance, insurance, transport, telecommunication, packaging, printing, quality control and of course staff training in emerging fields such as Information Technology.
Evidently, a market of over 340 million people offers enormous potential for mass production of goods and for offering services at economically competitive and affordable prices. As the purchasing power (disposable income) of an average African is quite low, it is important that producers take advantage of economies of scale so that they can price their goods as lowly as possible but still remain profitable and expand production. This is the single most important attraction of the COMESA FTA.
COMESA recognises this phenomenon and is taking steps to ensure that the COMESA FTA also serves as a Common Investment Area. Already, investment promotion agencies are meeting from time to time under the COMESA umbrella to agree and formulate a regional investment regime.
While each Member State will promote particular projects and areas of investment depending on its resource endowment and other investment attractions, they will all seek to portray the region as a good destination for investment and will refrain from unhealthy and counterproductive competition for foreign investment.
3.1 Trade and Investment in the COMESA FTA
With the launch of the FTA, businesspersons have increased their active and interaction across borders. Increased trade is being conducted by: -
- small scale cross-border traders between Malawi and Zambia; Zambia and Zimbabwe; Kenya and Zambia; Kenya and Sudan; and even between Uganda and Kenya;
- medium to large and formal businesses between Zimbabwe and Egypt mainly in tobacco; Mauritius and Egypt in baby wear and diapers, and edible oil; Mauritius and Kenya in wheat flour and flour products; Malawi and Kenya in maize and sugar; Sudan and Kenya in steel coils and edible oils, and sugar; Zambia and Kenya in detergents and bathing soaps; sugar and leather products; between Madagascar and Kenya in sugar; Swaziland and Zambia canned beer, sugar and until recently refrigerators and deep freezers.
The region's business community is at the time developing alliances and close business ties such as those between Mauritian and Malagasy textile producers. Mauritian producers find Madagascar a lower cost production centre and so they are taking some of their investment to Madagascar to take advantage of both the COMESA market and the US market under AGOA as well as the EU market under the Cotonou Agreement and the EBA initiative.
The Mauritius-Madagascar developments are quite significant in the investors from regions, especially Asia, are also considering moving into Madagascar following the Mauritian lead.
Egyptian producers are also considering investing in Zambia and Malawi to produce for the US market. Other linkages include alliances between Zambian freight forwarders and sugar importers of Kenya; Malawian and Zambian insurers and exporters and importers in Kenya and Egypt.
The potential for investment and trade is, however, much larger than is currently being exploited partly to due limited investible funds but largely because of conflict in the region.
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