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Can Africa trade with Africa?

Obiageli Ezekwesili's picture

Obiageli Ezekwesili chairs the seminar: Can Africa Trade with Africa? (Photo: Arne Hoel, The World Bank)

I chaired a very lively seminar on Friday afternoon that focused on the question, “Can Africa Trade with Africa?”  The answer was a resounding yes. 

Today, there is strong consensus among African leaders that regional integration is indispensable to unlock economies of scale and sharpen competitiveness. And promoting intra-African trade has emerged as a top priority, in recognition that the African market of one billion consumers can be a powerful engine for growth and employment.

Yet despite the introduction of free trade areas, customs unions, and common markets within the Region, the level of intra-African trade remains among the lowest in the world -- only about 10% of African trade is within the continent, compared to about 40% in North America and about 60% in Western Europe.

So our discussion drilled into the actions that are required to accelerate intra-African trade.
The most important message was the need for stronger implementation of political commitments under existing regional trade agreements. Pravin Gordhan, the South African Minister of Finance, acknowledged that governments have fallen short on some of the difficult political actions that are required to enhance regional integration, like the overlapping membership in regional economic communities. There was a strong sense that African leaders need to be held accountable for their performance against agreed commitments—to this end, we urged Maxwell Mkwezalamba from the African Union to hold a summit with heads of state this year to agree on a time-bound action plan to fulfill their regional integration agreements.

The discussion also stressed the urgency to diversify economies beyond natural resource extraction and agriculture. But to break into manufacturing, countries will need to strengthen their competitiveness—by enacting policy reform to ensure more competitive markets for transport and trade facilitation, improving the efficiency of government agencies at the border, and addressing behind-the-border trade constraints to promote value addition, increase productivity, and undertake infrastructure investments that reduce the costs of inputs. Bill Egbe, the President of Coca Cola in South Africa, estimated that they would only need about half of the current 163 plants in Africa if internal trade barriers were removed and transport services were improved – think of the huge efficiency gains here that could be redeployed for investment in new areas!

Given the central role of the private sector, the seminar noted the continued importance of improving the investment climate and reducing the cost of doing business—not only for large multinational and pan-African companies, but also for SMEs and the informal sector.  Tony Elumelu, who recently retired as Chief Executive of the United Bank for Africa, flagged the need for more innovative approaches to monetize the assets, build the capacity, and enhance the productivity of small and informal enterprises, particularly in the agriculture sector.

Several panelists emphasized the synergy between intra-regional trade and global trade integration, particularly the critical importance of development-friendly trade agreements with global partners that provide broad and comprehensive market access. Two innovative proposals to incentivize trade cooperation were floated. Rosa Whitaker, one of the original architects of AGOA, outlined a series of proposed US tax incentives to award investors who invest in Africa or retailers who source products from Africa.  And Paul Collier, author of The Bottom Billion, made a very compelling case for a “Super AGOA” that would grant Africa preferential market access across the entire OECD.  Right on!

All in all, I was delighted to see the energy and passion in the room—and on line, where we had 550 participants from around the world actively engaged.  I want to close with a wonderful comment that was submitted on line by Mary Mah from Senegal, which nicely captures the sense of optimism in our discussion today—and the need for visionary leadership from all of us to move the agenda ahead:

“Yes, Africa is a ‘can do’ place and there has been enormous progress within the past few years for effective business between African countries.  It is true that most of this has been more with agricultural products, but more countries are building capacities and becoming more competitive and open to industrial trade no matter how slow!!! There is hope for a way forward, but we need more visionary leaders at all levels.”

Comments

Submitted by Anonymous on
is it a new south south trade policy? its my view in all case. the former policy though some successful experiences but mostly the south south experience failled to achieve targeted committments.

Submitted by charles oben on
The opportunities abound for Africa to trade with Africa. From an intellectual standpoint ths should be easy to do. However as someone who has worked across Africa over the past several years, I would say that there are a lot of structural & capacity issues that need to be addressed for this to be sustainable. We need people who understand what these issues are to work with the various institutions and governments to address the "INVISIBLE" barriers that stiffle these opportunities.

Submitted by Rick Scobey on
I work on African regional integration issues at the World Bank and strongly agree with your recommendation to address structural and capacity issues. We have been focusing a lot on infrastructure constraints in Africa -- see http://www.infrastructureafrica.org/aicd/. Also trade policy restrictions -- see http://go.worldbank.org/M8SXRN80G0. What other dimensions do you think we should be drilling into to help unleash increased intra-African trade?

Submitted by aSHIE tHAKUR on
I am currently dealing with 24 African Countries and have to mention that each country is unique from the other. I find different customs requirements with different countries and there are several challenges. I am a final year MBA student and decided to do my Dissertation on The Impact of trade into Africa.

Disjunctive Moments are just that disjunctive. The Current Low Base Effect of Intra African Trade is just that a Low Base Effect. I think we are at the Cusp of a new super Growth Curve in this Niche. I think Borders are being broken down and Enormous Scale is to be found in our Urban Centres. Interestingly, in many instances, the Margins are much wider as well. Wal-Mart's entry into Africa needs to be seen in that Context. Africa suffered from a Perception Gap and that is being narrowed like a snapping Elastic Band. Aly-Khan Satchu www.rich.co.ke

Submitted by Julie Oyegun on
African women in particular have been trading across Africa for generations against incredible odds, especially at the borders between our countries. So the question is not whether this is possible: as usual women continue to prove this and their persistence deserves acknowledgement and research. The real question for institutions like the Bank and the AU is "How can we support and grow Africa's trade with Africa?" I hope that gender analysis and ensuring women's access to new opportunities will be factored into our future work in this vital area of economic innovation in Africa.

Submitted by Rick Scobey on
Many thanks for flagging the gender dimension, which needs to figure much more prominently in our trade work at the World Bank as you rightly note. Some analysis that we are doing right now on East African trade highlights that women traders are subject to considerable risk from extortion and violence -- more than 80% of people trading across the borders between the DRC and Burundi, and Rwanda and Uganda report having to pay bribes, and more than half have been subject to gender based violence on both sides of the border. UNECA is also doing some very interesting related work, which we hope to build on -- see http://www.uneca.org/aria4/chap12.pdf and http://www.uneca.org/atpc/Briefing_papers/01.pdf.

Submitted by A. Ibrahim on
Intra African trade was less than 10% of total Africa trade since the nineties and African share of total trade less than 3%, in regression compared to its levels before the 60's. Despite the sustained African economic growth over the last decade and the resilience of african economies to the global economic and financial crises of 2008/09, African trade kept its sluggish trends. Lack of basic infrastructure (roads, railways, air networks, etc) connecting different countries, harassment from customs, police and emigration officers along boarders combined with the poor manufacturing industry (meaning that african countries have to export about all of their raw products in Europ, Asia. America, etc. where they are processed and exported back to Africa with high values and prices). I see two areas where Africans should invest now for fostering Intra African trade in the longer term: (i) basic infrastructure; and (ii) the development of a gradual processing capacity.

Submitted by Ian Gillson on
A. Ibrahim raises some very interesting points. But it's not just infrastructure and productive capacity that's needed to boost intra-African trade, policies matter too! While efforts to reduce tariffs have largely been met with success, under the auspices of free trade agreements such as COMESA and SADC, other forms of trade restriction remain widespread such as import bans and licensing, restrictive rules of origin, inefficient product standards and weak trade facilitation. These non-tariff barriers are hindering the competitiveness of African firms and their ability to export to regional and global markets alike and must now be addressed with the same urgency that was given to tariffs.

Submitted by Aimé on
For the effective Can Africa trade with Africa, sound infrastructure and free move of people, goods and services at countries border. AU and others inter and intra african institutions should play a vital role in the reforms of regulation to make easier the exchange between african countries with the strong help of World Bank, IMF and other africa partners! Africa needs help but Africa should build his capacity to manage and solve issues and act fast inorder to win opportunities of development through wide africa intra and inter trade!

Submitted by Joseph Foray Jnr on
the Real question is what can we do in Africa to improve inter-AFRICAN AND REGIONAL trade? Let the leaders who append their signatures to regional agreements follow through with Action and commitment. ECOWAS, AU, SADEC and all these regional bodies have beautiful ideas only on paper with no coreesponding action. We need a leadership with vision, character, compentence and the political will to develop trade around Africa. The basic hindrances such as poor road network, electricity, good air transport, tranparency and a unified documentation system should pave the way for better trade. there is so much corruption at the boarders where securirty personels take bribes, extort money from traders and make things unbearable for fellow Africans. When we get serious as a continent, all these hurdles will be overcome. Africa has hope Because Africa has you.

What will we be selling to each other and what is the allure of goods from other parts of the world over and above African manufactured goods? Quality, functionality and price are still key factors that limit the competiveness of African goods. There are untapped opportunities in the rural areas, and not just in agriculture. However indidenous African investors find it easier to invest in high end elitist goods and services, leaving little room for small players The lack of access to finance also limits entry of new entrepreneurs not to mention government apathy towards providing real support by way of information, research and standards regulation

Submitted by Ian Gillson on
Don't forget services trade. Until the financial crisis many African countries had been growing very quickly but were starting to be constrained by shortages of key professional services in areas such as engineering, accountancy and law: all vital inputs to production of goods and services alike. If Kenyan engineers were free to operate in Rwanda or Malawian accountants allowed to provide their services to South African firms, then not only could new sources of regional exports be created but all African firms could benefit from improved access to these vital services at lower cost.

Submitted by Ross Thuotte on
While I too recognize the importance of intra-regional trade in future African growth, the focus of this discussion should be pried away from the traditional framework (under which the issue is viewed in this post). Up until now, most government-led efforts to increase intra-regional trade have been strong in theory but lacking in results; much of this shortfall being owed to a fundamental absence of concerted, consistent, and cooperative political will. Instead, efforts toward further regional integration need fresh, results-based ideas in lieu of stalwart struggles using outdated methods. To highlight one such example of proven successes: the World Bank Group's (IFC) has made a significant investment in Ecobank, a private bank (co-founded by ECOWAS and the Federation of West African Chambers of Commerce). The wildly successful bank appears to be doing the legwork on regional integration by providing tangible mechanisms for cross-border trade (i.e. mobile banking, international debit cards, money transfer services, etc). African leaders (and multilateral institutions operating in Africa) should find ways to more effectively promote similar ventures in the interest of creating change from the ground up.

thly,is article will help many students to think constructive,argue coherently,judge dispassionately and solve problem with creativity relating to inter african trade.

Submitted by omar on
i am a third year economic student at the university of the Gambia.Your article help me to think constructively,argue coherent,judge dispassionately and solve problem with creativity relating to inter African trade

I am amadou gaye a second year student at the university of the gambia.since africa is blessed with verse natural resourses and have multi cuture and multi ethnic society living in peace and social cohesion and have matrimonial aliance with different symbiosis.therefore with the help of iter african trade ,peace,social-coexistance,social justice and equity can be maintain.since the end justify the means therefore we should provide any means necessary to have and ends.the means is ensuring inter african trade while the ends is peace and stability between african countries.

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