Can Africa trade with Africa?

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.”