Experts told participants at the inaugural Africa Trade Forum (ATF) in Addis Ababa that there are opportunities for intra-Africa trade to be exploited for the benefit of regional member countries.
Lamin Barrow, African Development Bank (AfDB) representative in Ethiopia told the forum that the crisis in the euro zone and other emerging threats that might lead to a global economic slowdown provides an urgency to reflect a new vision of Africa’s “economic diplomacy through enhanced intra-African trade”.
“While the continent might not be under immediate threat from the direct consequences of these challenges, our reliance on primary commodity exports make it impossible to escape the medium to long-term impacts — the more reason we should boost intra-African trade,” he said.
He said that intra-African trade was low stagnating around 10-12% at a time other regions have increased trade among themselves. The low intra-African trade, he said, has many far reaching implications for sustained growth and poverty reduction in Africa.
In Europe, intra-trade is 72%, in Asia 52%, and 48% in North America. In the Middle East, intra-trade is 16%. This low intra-African trade means there is scope for expansion, according to exports.
“… it is evident that there is scope for expansion in regional trade,” said Abdoulie Janneh, UN under-secretary general and the executive secretary of Economic Commission for Africa.
African Trade Ministers have proposed that one way of boosting intra-trade is through accelerating the process of setting up a continental Free Trade Area (FTA).
According to statistics, harmonisation of regional economic communities’ trade policies through a continental FTA would result in an additional US$34 billion in intra-African exports, just from eliminating current intra and inter-REC tariffs. If non-tariff barriers are tackled through improved trade facilitation, intra-African trade could rise to about 22% in the next 10 years showing that intra-African trade can be optimised.
Barrow said, as the continent pushes for increased intra-trade, transaction costs have to be examined to lower the cost of doing business through commensurate investments in regional and national infrastructure and improved policy harmonisation among African countries. Zimbabwe has been trading primary commodities with no value addition.
In addition, because the country is picking its pieces after a decade of recession, the finished products are expensive compared to those obtaining in the region due to the high cost of production.
Oswell Binha, Zimbabwe National Chamber of Commerce president told Standardbusiness that the country needs to have a long-term vision, identify its comparative advantage and create the necessary environment for businesses to operate.
“We need to start identifying critical markets we have not been able to serve. Mauritius is begging for Zimbabwean products and we need to revisit on the traditional products we used to supply them before,” he said. He said that the country can intensify trade in services “because we are better placed to call the shots in the region”. According to Binha, there is need for political will and Zimbabwe must cease to talk politics but business.
Regional blocks’ trade growing
Janneh said recent analysis in the forthcoming Economic Report on Africa 2012 shows that some regional economic communities have exceeded the intra-African growth.
“Intra-Comesa trade offers one such example growing by at least 35,4% between 2009 and 2010, rising from US$12,7 billion to US$17,2 billion,” he said.
He said intra-African growth can be accelerated by regional value chains which have contributed to high intra-regional trade elsewhere. This, he said, has helped firms in other parts of the world to be key players in global value chains.