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Unleashing Africa’s Intra-Trade Potential

How to break the colonial legacy of exporting goods overseas and raise the level of trade between African countries? This has been an issue the African Union (AU) has grappled with since it devoted its January 2012 summit to the issue of Intra-African trade.

The annual Economic Development in Africa report by the United Nations Conference on Trade and Development (UNCTAD) launched in Ethiopia July 11, gives interesting answers to some of the questions African governments and the AU have been asking.

African governments are increasingly aware that socio-economic development is an essential pillar of securing a peaceful and stable continent. Former Ethiopian Prime Minister Meles Zenawi often spoke about the pursuit of greater cooperation among African countries in this regard.

During last year’s debate at the AU summit in Addis Ababa, Zenawi reprimanded his peers for being too shortsighted. One couldn’t simply scrap tariffs and speed up bureaucracy at border posts to ensure intra-African trade, he believed. If every country in East Africa produced tea and coffee why would they export to one another?

Zenawi and a number of other heads of state also complained at that debate that the AU’s plans for creating a continental free trade area in 2017 was, at best, unrealistic.

Intra-African trade – which is linked to greater regional cooperation and stability – has become a buzz word in Africa since it was pointed out that only 11 percent of Africa’s trade is within the continent, compared to Asia, where 50 percent of total trade is between countries in the region.

African governments have, over the last number of years, taken up the challenge and announced ambitious plans for mega-continental infrastructure projects, development corridors and free trade areas – a continental integration seen as one of the essential drivers of African development.

But UNCTAD says this is not enough. In its report entitled “Intra-African trade: unlocking private sector dynamism,” it calls on the AU to make a “paradigm shift” and for governments to let go of plans that have become outdated in a globalized environment.

They should instead look at new notions like a “developmental regionalism” built around value chains, be more realistic and face the fact that it is actually the private sector that imports and exports and not government institutions.

The advice to governments is also to look at outcomes rather than only removing barriers to trade.

UNCTAD does acknowledge that lifting tariffs within Regional Economic Communities (RECs) and one-stop border posts are good steps toward improving intra-African trade. However, many discrepancies remain.

How can it be that, for example, an Ethiopian company exporting to Tunisia faces tariffs of up to 50 percent on average, while a Tunisian exporter to Ethiopia faces a protection rate of 16 percent? A Moroccan exporting to Nigeria faces an average protection rate of 66 percent while a Nigerian exporting to Morocco faces an average protection rate of 18 percent, the report states…

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