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What can we do to help Africans trade with each other?

Paul Brenton's picture

Uganda has become a successful exporter of education services to countries in East Africa. In West Africa, Nigerian financial institutions have expanded branch networks throughout the region making available the benefits of scale to consumers in very small countries. African supermarket chains are spreading throughout the continent. These are some of the successes Africa is seeing as it fights to integrate the market for regional trade in services.

But non-tariff barriers continue to mar the growth of these services, and the flow of goods and investments throughout  Africa, imposing unnecessary costs on exporters that limit trade and raise prices for consumers, undermine the predictability of the trade regime, and reduce investments in the region. In southern Africa, a truck serving supermarkets across a border may need to carry up to 1600 documents as a result of permits and licenses and other requirements. In central Africa, the majority of traders who cross from DRC to Burundi, Rwanda and Uganda are women carrying staples—85 percent report having to pay a bribe and over 50 percent report physical and sexual harassment. As one trader said, “I buy my eggs in Rwanda; as soon as I cross to Congo I give one egg to every official who asks me. Some days I give away more than 30 eggs!” This experience is not unique to this group of countries.

The incidence of barriers to regional trade fall most heavily, and disproportionately, on poor small traders, preventing them from earning a living in activities where they have a comparative advantage—catering for smaller, local markets across borders. Most of these small scale, poor traders are women and their trading activities provide an essential source of income to their households. 

Deeper integration of regional markets can lower trade and operating costs and relax the constraints faced by many firms operating in small national markets. And regional trade can bring staple foods from areas of surplus production across borders to growing urban markets and food deficit rural areas.

To do this, policy makers have to move beyond the conventional and drive a more holistic process to deeper regional integration.

Earlier this month , our team at the World Bank launched a report, Defragmenting Africa, that calls for African governments to reform policies that create non-tariff barriers; put in place appropriate regulations that allow cross-border movement of services suppliers; deliver competitive regionally integrated services markets; and build the institutions that are necessary to allow small producers and traders to access open regional markets. With rising incomes in Africa there are emerging opportunities for cross-border trade. We hope to work together with governments and their partners to exploit these opportunities and help Africans trade with each other.

Comments

Submitted by Anonymous on
This is a great report and timely - 'defragmenting Africa'. In 2005, I wrote my thesis on 'regional integration in Africa: lessons from Europe'. In a nutshell, the study concluded that integration should be driven by demands from below --- as economies grow, demand for transacting beyond geographic boundaries will organically grow and hit the barriers off the way. If the value is created through organic demand, national authorities will open up and take policy action to minimize barriers. The great thing in Africa is that there is a strong political will and organizational pillar through the AU that can drive the agenda and host powerful policy dialogue for impact. Based on the lessons from Europe and historical evolution of the 'integration' agenda, the study suggested that 'civil society' organizations complement economic integration by bringing in stakeholders of importance together. The business proposition for regional integration in Africa is much appealing that it was a decade or two decades ago. The AU and its leaders should capture this moment and turn it into something that can benefit countries across the continent.

Submitted by Andrew Lord Thindwa on
this has been a song for decades yet we see only minimal advancement in African trading blocks. All African countries are afraid of the unknown as we all know that change is so uncertain. African leaders who feels that their countries will be victims of free trade refuse to open up their economies for free trade hence trade restrictions continue to be present. Regional integration will be a success story only if we marry the currency of African economies. for example SADC can have its currency so in ECOWAS and COMESA . For countries who have dual membership of these trading blocks will have to toss a coin so that they should decide which trading block to belong to. If Africa can have four to five currencies the trading between countries will be rampant although limited to each block. This will facilitate economic growth between the countries in each block given that the theory of comparative advantage comes into play. Then the major trading blocks will decide how to limit the restrictions between each trading blocks hence opening up of African economies for Africans. The niche trading in each trading blocks might help some countries to discover their absolute advantage. However this is on paper and we have a lot of assumptions. For example Africa is a continent with high political instability, we have a lot of corruption and nepotism. These three viruses have made even the best economic policies not to bear sweet fruits. There are so many conspiracy theories about why Africa is still crippled with civil wars and poverty. I believe that AU and Trading Blocks in Africa they can be instrumental for ending African woes only if they tirelessly work together.

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