AFRICAN leaders signed Wednesday a potentially historic 26-nation free trade pact to create a common market spanning half the continent from Cairo to Cape Town.

The deal on the Tripartite Free Trade Area (TFTA) caps five years of negotiations to set up a framework for preferential tariffs easing the movement of goods in an area home to 625 million people.

Analysts say the pact could have enormous impact for African economies, which despite growth still only account for about two percent of global trade.

The TFTA pact was signed by Egyptian President Abdel Fattah al-Sisi, President Robert Mugabe of Zimbabwe, Prime Minister Hailemariam Desalegn of Ethiopia and Mohamed Bilal, vice president of Tanzania, at a summit in the Red Sea resort town of Sharm el-Sheikh.

But hurdles remain, with the timeline for bringing down trade barriers yet to be worked out and the deal needing ratification in national parliaments within two years.

"What we are doing today represents a very important step in the history of regional integration of Africa," Sisi said as he opened the summit.

Addressing the summit, World Bank President Jim Yong Kim said the TFTA would allow Africa "to make tremendous progress and move the entire continent forward".

"Africa has made it clear that it is open for business," he said.

The deal will integrate three existing trade blocs -- the East African Community, the Southern African Development Community and the Common Market for Eastern and Southern Africa (COMESA) -- whose countries have a combined Gross Domestic Product of more than $1 trillion (885 billion euros).

"The geographical area covers Cape to Cairo... the agreement paves the way for a continental free trade area that will combine the three biggest regional communities," Desalegn said at the summit.

Mugabe said the deal will create a "borderless economy" that would rank 13th in the world in terms of GDP. Members of the three blocs range from relatively developed economies such as South Africa and Egypt to countries like Angola, Ethiopia and Mozambique, which are seen as having huge growth potential.

Negotiators drafted the deal this week at Sharm el-Sheikh, and said it had addressed concerns such as management of trade disputes and protection for small manufacturers once the TFTA comes into force.

Officials said the agreement envisions the eventual merger of the three blocs. "The ultimate goal is to ensure easy movement of goods in these countries without duties," said Peter Kiguta, director general of the East African Community.

The TFTA has been widely welcomed by world business leaders, with experts pointing out that only 12 percent of Africa's trade is between countries on the continent.

The United Nations Conference on Trade and Development said in 2013 that if Africa is to boost its intra-continental trade, it must focus on creating "more space for the private sector to play an active role".

Analysts say that although the continent's growth over the past 15 years outstripped global GDP expansion by nearly three percentage points, falling commodity prices, power shortages, political instability and corruption are still holding back its economies.

Egypt's Minister of Industry and Trade Mounir Fakhri Abdel Nour told AFP the TFTA will help Africa boost trade and attract investments, while also building infrastructure and production capacities.

"Egypt itself expects to export about $5 billion worth of goods over the next five years" to TFTA countries, he said.

Officials said companies would benefit from an improved and harmonised trade regime, which would reduce the cost of doing business by eliminating overlapping trade rules.

"What we have realised is that having one trade regime is better than the costly multiple trade regimes," said COMESA Secretary General Sindiso Ngwenya, who led the negotiations among the three blocs.