Opinion and Analysis
Why Africa must trade with Africa
Posted Wednesday, October 2 2013 at 18:09
In its report, Doing Business, Trading Across Borders 2012, the World Bank estimates that Africa trades with Africa at a level of only 10 per cent compared to 60 per cent among Western European countries.
For the purpose of enhancing economic growth, intra Africa trade must grow as in other regional blocs.
African leaders meeting in Addis Ababa for the 2012 African Union (AU) Conference endorsed the report by the African trade minister’s conference in Accra, Ghana, in December 2011, which envisaged a road map to establish a continental free trade area by 2017 and a customs union by 2019.
Although this was a critical step towards realisation of advancing internal trade for economic development, there is not much of action leading up to the deadline.
An American think tank group, Brookings Institute says Intra-Africa trade can help the continent’s industries become more competitive by creating economies of scale and weeding out producers that are less productive in the market place.
It can establish and strengthen product value chains and facilitate the transfer of technology and knowledge via spillover effects.
And it can incentivise and spur infrastructure development and attract foreign direct investment. For these reasons, expanding intra-African trade is a key to accelerating economic growth on the continent.
It is especially important for the continent’s many small, landlocked countries that face tremendous challenges trading internationally.
How are we to solve Africa’s problems? First Africa must deal with the challenges that stand in the way of trade. These include tariffs, conflicting regional integration initiatives, Infrastructure, value addition to primary products, internal conflicts, and enabling environment.
The most frustrating challenge to intra-African is the burden of high tariffs, which is a barrier to trade. In contrast with other parts of the world, African counties have the highest tariffs with their neighbours.
Even with regional integration initiatives, tariffs continue to delay the processes of integration. Multiple initiatives, such as the Common Market for East and Southern Africa, the East African Community and the Southern Africa Development Community with conflicting schemes too are becoming major hindrance to effective trade integration that AU must deal with.
How do we explain the fact that we export our coffee and tea to Europe for our neighbouring countries import it from you there at exorbitant prices?
Since the colonial period, Africa has not improved or built new cross border infrastructure yet this is the life-blood of the many land locked countries.
To unlock the potential that lies in Africa’s interior joint investment in infrastructure is critical. Initiatives such as the Lamu Port Southern Sudan Ethiopia Transport corridor are likely to become game changers in the region.
Ethiopia has come up with a transformational strategy to generate 10,000 MW of energy and sell to its neighbours.