Thursday, February 09, 2012

Can Africa trade with Africa?- Ermmm not yet

At the recently concluded AU summit, the talking point was boosting intra- African trade as a tool for the economic development of the continent. Advocates of intra-African trade listed reasons why Africa should trade with Africa. One of the strongest voices was Oby Ezekwesili who made a case for this trade. She said,  “increased intra-African trade is an area of potential growth and as the global economy deteriorates, it is important that Africa discovers Africa”. Supporters of intra-African trade also frame it as a tool for regional integration.
First what is trade? Simply defined, trade is buying and selling. International trade is buying and selling across borders. Ok, that’s not all. International trade is the exchange of goods and services and human capital (not human trafficking) across borders. International trade contributes a significant amount to a country’s GDP.
Trade barriers- high import tariffs that exist in most African countries, restrictions of movement across borders, infrastructural deficits especially in transportation and corruption (where would Africa be without corruption!) have been identified as factors that inhibit intra- African trade. An issue that is not usually mentioned is that most African countries have parallel economies, Nigeria has yams, Ghana has yams, what kind of trade can they have? Of course, they would export their yams to Europe, America, and Asia.
That said, I wonder why intra-African trade is the trade policy tool African leaders are focusing on considering that most African countries are mainly primary producers. Africa’s economy is mainly made up of raw agricultural produce and crude minerals such as oil, diamond and gold. We do not manufacture as such – South Africa and countries in Northern Africa manufacture goods (e.g textiles) but not in significant amounts. Africa’s population is about twenty percent of the world’s population (over a billion), thus the logic of intra-African trade is plausible. I submit that for intra- African trade to truly work as a means of economic development, African countries need to shift from just being primary producers but also manufacturers i.e diversify our exports. We can do this by refining what we produce. Imagine, other African countries importing petroleum from Nigeria rather that Venezuela or Nigeria importing clothes from Egypt. How about producing our own  crockery rather than exporting raw steel?
Individual countries have to rework their economic policies and lay the groundwork for the needed infrastructure or as Norman Girvan advised “come together share services and undertake joint activities in order to reduce costs and achieve synergies” (He calls this functional cooperation).
As an aside, African leaders and policy makers seem to forget that most of their economies are comprised by the informal economy. World Bank statistics state that this sector’s contribution to Africa’s GDP ranges from 25-40%. If Africa wants to drive her economic growth, she needs to look inwards and integrate the informal economy with the formal economy.
How can this be done?
·         1) Provide legal, political, social structures that would enable the emergence of decent jobs and business opportunities and ultimately drive innovation and inventions ( History shows that the development of most first world countries was a result of innovation, inventions and patents and China, India and most East Asian nations followed the same track)
·         Implement pro poor policies that would include and incorporate informal workers especially women.
·         Reinvent and simplify economic and business processes such that there are no prohibitive and restrictive barriers to entry mainly for uneducated business owners
If Africa has to trade with Africa, African leaders must walk their talk by creating an enabling environment for the social and economic development of their individual economies. Then, Africa can trade with Africa

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