course

Africa’s FDI sources:
diversity supports ongoing
resilience
32
According to the World Trade Organization (WTO), Africa
accounted for merely 2% of global merchandise exports in
2015. 33 Trade and FDI are interlinked, considering they are
opportunity exists to strengthen Africa’s role in the global
trade and investment order.
At present, several mega-regional trade agreements are in
progress around the world. First, among them, is the Trans-
Brunei Darussalam, Canada, Chile, Japan, Malaysia, Mexico,
New Zealand, Peru, Singapore and Vietnam. Signed in
February 2016, the TPP affects 40% of the world economy.
Besides the TPP, the US is also negotiating the Transatlantic
Trade and Investment Partnership (TTIP) with the European
Union (EU). Another mega-regional agreement under
negotiations is the Trade in Services Agreement (TiSA),
which will focus on liberalizing barriers to trade in services.
Finally, the Association of Southeast Asian Nations (ASEAN)
along with China, Japan, South Korea, India, Australia and
New Zealand are negotiating the Regional Comprehensive
Economic Partnership (RCEP) agreement.
In this regard, the continent’s steps toward regional
integration are a top priority. In June 2015, 26 African
countries agreed to establish the Tripartite Free Trade
Area (TFTA), comprising the EAC, the Common Market for
Eastern and Southern Africa (COMESA) and the Southern
African Development Community (SADC). The TFTA is
expected to provide a US$8.5b boost to intra-African
trade, with processed food, light manufacturing and heavy
34 The TFTA is also
the building block toward a Continental Free Trade Area
(CFTA), likely by 2017, which could lift intra-African trade by
52% or about US$35b by 2022. 35
Several RECs, including the EAC and the Economic
Community of West African States (ECOWAS) continue
signing new trade agreements among their members. The
US and the EU are also inking trade deals with the continent’s
RECs. As such, policy is moving in the right direction, but
efforts need to be stepped up to cement Africa’s position in
the global trade order.
Africa is not involved in any of these mega-regional trade
negotiations, whose rules are expected to become de
facto global standards. With new rules and market access
preferences, African countries are likely to be impacted
by increased competition and could experience erosion of
preferences in markets that form part of mega-regional trade
agreements.
32
Foresight Africa: Top priorities for the continent in 2016,” International Centre for Trade and
Sustainable Development website, www.ictsd.org, accessed 7 June 2016
33
” World Trade Organization website, www.wto.org, 7 April 2016.
34
” United Nations Economic Commission for Africa website, www.uneca.org, accessed 7 June 2016.
35
” International Centre for Trade and Sustainable Development website, www.ictsd.org, accessed 7 June 2016.
EY’s Africa Attractiveness Program 2016 Staying the course