Intra-African trade is not the panacea to Africa’s development woes but it goes a long way in addressing fundamental dynamics that can bolster long-term economic growth. Statistics illustrate just how wanting Africa’s regional trade is compared to other continents. In 2014, Europe’s intra-regional exports stood at 69% while in Asia and North America the figure stood at 52% and 50% respectively. Africa’s level of intra-regional trade stood a measly 18 percent as a result of several factors that derail regional integration efforts.
The percentage of intra-African trade indicates that the continent produces what it does not consume and consumes what it does not produce. The Africa Rising narrative can be catalyzed through transforming words and ambition into action and actual deliverables. There has to be a deliberate effort by governments to ensure policy reforms that support regional integration. Governments need to lead from the pulpit in implementing policies that have been designed to ensure that movement of goods and services across borders is as efficient as stipulated in various policy documents.
The World Bank released a report indicating that Sub-Saharan economic growth is poised to grow moderately at slightly below 3% buoyed by improving global economic performance and an uptick in commodity prices. This rate is minimal but compares favorably to last year’s growth rate of 1.6%. Some of Africa’s large economies can attest to the downside of overreliance on extractive industries. The recent slump in commodity prices saw Nigeria slip into a recession for the first time in more than two decades. Depressed commodity prices also saw South Africa’s economy falter recording dismal expansion in 2016.
Enhancing intra-regional trade is expected to raise incomes, improving per capita Gross Domestic Product of many countries. Unemployment rates are unprecedented in sub-Saharan Africa and the region continues to experienced high levels of brain-drain. This hampers development leaving Africa as not only a primary goods exporter but as an exporter of human capital as well. Proper policies will unlock Africa’s massive demographic dividends and regional coordination will bolster economic transformation.
What are the prospects?
Despite the gloomy picture painted by the numbers, pundits agree that the potential for growth and development is immense. Intra-Africa trade will bolster foreign direct investments and improve per capita GDP. In recent years, unprecedented technological innovations have seen transformation in various sectors boosting the prospects for inter-regional trade.
Internet penetration has fostered vertical opportunities for investors and opened new markets for traders. In the wake of internet and cell phones penetration, harmonizing mobile payment platforms will go a long way in strengthening cross-border trade. Innovations have led to the development of applications that link buyers and sellers enabling sellers to sell at the right market price. This has also enabled buyers to measure opportunity cost and settle for options that deliver highest levels of utility
However, internet penetration alone is not sufficient. Information technology infrastructure requires relevant human capital and growth of STEM (Science, Technology, Engineering, and Mathematics). Investing in ‘grey matter’ infrastructure becomes paramount. Education needs to take into account changing times and ensure academic credentials match labor market needs.
Access to electricity is still a dream to many Africans. Less than 30% of Africans have access to electricity compared to about 40% in similar developing countries in other regions. Good road networks are needed to facilitate the movement of goods and services across borders and transportation of farm produced to factories for processing and value addition.
Lack of export diversification is stifling intra-African trade. To take advantage of the Tripartite Free Trade Area (TFTA) and the proposed Continental Free Trade Area (CFTA), economic diversification becomes vital. African countries need to focus on adding value to primary products. There is little trade complementary among African countries with most exports focusing on extractive industry and agricultural commodities. This naturally hampers economic transformation derailing economic growth.
According to the World Bank’s Africa Infrastructure Country Diagnostics (AICD), Africa needs to spend US $93 billion per annum in the next ten years to bridge the infrastructure gap. Current expenditure on infrastructure falls short of this figure leaving a deficit that continues to hamper integration efforts. It is estimated that 90 % of Africa’s trade happens by sea reinforcing the need to modernize ports and expand their ability to handle greater trade volumes.
Bottom line
Regional integration will offer increased potential when economic transformation and coordination expands into other areas such as trade facilitation, infrastructure, and investments. Addressing issues such as visa restrictions, arduous customs procedures and overlapping membership across several trading blocs will bolster intra-African trade. Africa is in a unique position where there is a ready market which has for many years been shunned by the rest of the globe. The middle class is rising and so is their spending power. There is need for institutional reforms to ensure the various institutions execute their duties and roles as per expected standards and efficiency. Peace needs to take precedence and the rule of law to stand as the hallmark of democracy. Addressing prevailing structural handicaps will also bolster sustainable growth.
Greater intra-African trade is likely to have a more direct impact on poverty by creating opportunities for the poor who both produce and trade the basic foodstuffs that dominate intra-regional trade.