The usually cautious Tanzania is yet to sign the Tripartite Free Trade Area (TFTA) agreement that comes into force within the Sub-Saharan Africa region, due to fear of competition.
The business community in Tanzania look at the TFTA with a mixture of hopes and fears, as it incorporates three regional blocs including the East African Community (EAC), the Southern African Development Community (SADC) and the Common Market for Eastern and Southern Africa (COMESA) into a single commercial bloc.
Already,14 African states out of the intended 29, have welcomed TFTA with optimism as they will trade freely within the three regional blocs except, Tanzania.
This is after having ratified the TFTA agreement and deposited their instruments of ratification that have enabled the deal to enter into force with effect from early August this year.
Tanzania left COMESA in 2000 precisely because of fears that it would open the ‘floodgates’ to cheaper more competitive imports from other African countries, especially Egypt.
The Director of policy and advocacy of the Confederation of Tanzania Industries (CTI) Akida Mnyenyelwa, said the Tanzania business community have been participating in the TFTA from the beginning, but has been demoralised by little benefits that will accrue to them.
He reasons that stand as an obstacle for traders to venture into this free trade area such as unpreparedness to meet stiff competition and might find themselves struggling in future.
“Tanzania has not entered these markets because there are intolerable conditions which have caused tension and fear among traders and that is why the country is still evaluating as it cannot open all the doors at once but have to go step by step,” said Mr Mnyenyelwa.
He however noted that for Tanzania to benefit from the markets, it must improve its infrastructure such as roads and railways as well as the electricity supply which are not sufficient so that industries can reduce operational costs and increase production otherwise local traders will be reduced to mere observers.
The TFTA framework is based on three pillars, market integration which involves trade liberalization through the creation of a free trade area and arrangements for the movement of business persons. Secondly is the infrastructure development which focuses on enhancing connectivity and reducing business costs.
The third pillar is industrial development which aims to create a supportive environment by improving regulatory and legal frameworks as well as adding values and diversifying industries to increase productivity and competitiveness and program implementations for structural change.
A free trade area is a group of countries that have agreed to mutually lower or eliminate trade barriers for trade within the area. This allows participating countries to benefit from reduced tariffs while maintaining their existing protections for trade with countries outside of the area.
A recent statement issued by the Secretariat of the EAC headquarters in Arusha city located in northern Tanzania noted that the free trade agreement has immediately started following the attainment of the required threshold.
Countries who have deposited their instruments of ratification include Angola, Botswana, Burundi, Egypt, Eswatini, Kenya, Lesotho, Malawi, Namibia, Rwanda, South Africa, Uganda, Zambia and Zimbabwe”.
These countries accounted for 75 percent of the Tripartite Gross Domestic Product (GDP) in 2022, but unfortunately, the United Republic of Tanzania has not yet ratified it the tripartite.
However, analysts in Tanzania say that there were several advantages as well as disadvantages to be attained by business partners for the country to ratify the TFTA agreement, but due to inadequacy in technological applications, nothing will be achieved.
Regional blocs have many market advantages since they expand the scope of trading across many countries. Despite such opportunities, the Tanzanian business community believes that larger economies are likely to benefit the most than the smaller ones if the market does not promote a win-win situation for all countries.
Dr Amani Nthangu from the University of Dar es Salaam Business School outlined the importance of trade agreements and said that it will boost the ability of these countries to attract global businesses and investments.
“More foreign direct investments into these countries are expected to increase which will help to meet their development goals. The agreement gives investors market assurance to sell in the whole region thus boosting their trade and investments”, he said.
He added that the agreement will enhance these countries’ ability to mobilise capital using various financing models from different parts of the world.
For example, some taxes will be lifted thus helping business people boost business flow and increase their earnings. “The tripartite agreement is an important mechanism for trade creation intended to boost businesses among the member countries,” he noted.
The total 29 Tripartite member states represent 53 percent of the African Union’s membership with more than 60 percent of the continental Gross Domestic Product (GDP) equivalent to $ 1.88 trillion and a combined population of 800 million people.
