Ideas & Debate

Elevate Africa’s free trade plan to a growth priority


Within the context of the African Continental Free Trade Area, one indicator — trading across borders — shows the region lagging. FILE PHOTO | NMG

Economies in sub-Saharan Africa (SSA) continued to improve business climates with best performance seen in the area of getting credit.

Some 25 per cent of the reforms recorded by Doing Business 2020 were in the economies of SSA. Economies of the region enacted 73 reforms in the 12 months leading to May 1, 2020. Mauritius (13), ranked the highest in the region overall, followed by Rwanda (38) and Kenya (56).

Compared with the previous year, SSA economies increased their average doing-business score by 0.9 points. Notably, most reforms in the region were in the areas of starting a business, dealing with construction permits and getting credit.

Be that as it may, despite the advancements, there's still a long road ahead. Seventeen economies had no reforms in the 12 months through May 2019; three economies (Eritrea, Somalia, South Sudan) have never implemented any reforms in the past five years and two (Somali and South Sudan) have never implemented reforms in the areas.

Regional score at 51.8 (out of 100) is way below OECD high-income average of 78.4 and the global average of 63.

Only two SSA economies rank in the top 50 on the ease-of-doing-business rankings while most of the bottom 20 economies in the global rankings are from the region.

Within the context of the much-hyped African Continental Free Trade Area (AfCFTA), one indicator — trading across borders — shows the region lagging.

For instance, time to clear exporting goods at the border takes 97 hours compared to eight and 13 for European Union (EU) and OECD high-income group, respectively.

On cost, it takes about Sh60,000 compared to Sh8,600 and Sh13,600 for EU and OECD high-income group, respectively. It's worth noting that roughly 69 per cent of all European exports are to trading partners on the same continent, according to the UNCTAD 2019 report. In Asia, this rate is 60 per cent. In Africa, intra-regional trade is only 15 per cent.

Additionally, the region will need to improve on energy access. Going by the report, the cost to obtain a permanent electrical connection in the region is three times higher than the global average and getting electricity takes more than 100 days.

On a scale of zero to eight, the reliability of supply of electricity in the region is 1.6 compared to 3.6 and 7.5 in the Arab world and the EU.

Going forward, I do believe the region is on the right track.

Reflecting on the historic move towards the adoption of the AfCFTA to drive intra-regional trade, it calls for the region to intentionally make co-ordinated improvements to ensure the fruits of the agreements are realised. So, non-tariff barriers need to be reduced and efficiency in intra-Africa trade increased while catering to losses in affected countries, to achieve inclusive growth.