Trade among African states a paltry 10%: need for huge boost crucial

Written by  Dawn Nagar

Africa remains the world's only region where intra-country trade is a paltry 10 percent. As part of efforts to integrate the continent's national economics, the African Union (AU) recently brought together nearly 400 policymakers, economists, and business people with the object of establishing a continental free trade area by 2023.

Africa's present economic anchor is the tripartite grouping of the East African Community (EAC), the Common Market for Eastern and Southern Africa (Comesa), and the Southern African Development Community (SADC).

This tripartite arrangement, created in 2008, is seen as preparing the way for 27 of the AU's 54 member states to come together in a free trade area.

But the grouping has challenges that must be resolved.

For example, the impact that the Southern African Customs Union (Sacu) has on Africa's regional integration efforts remains problematic.

According to a 2013 International Monetary Fund report on Sacu-generated revenue, Botswana, Lesotho, Namibia and Swaziland are clearly accruing enormous income from the customs union and see little reason to join another free trade area such as the EAC-Comesa-SADC tripartite arrangement.

Current account receipts as a percentage of gross national product (GNP), constitute only 28 percent in South Africa, compared with over 37 percent in Botswana, more than 55 percent in Namibia, and 102 percent in Lesotho.

Other issues at play for Sacu members include a proposed Sacu-Mercosur-India Trilateral Trade Arrangement which could create a market of 1.2 billion people and potential for intra-bloc trade of $300 billion.

The EAC-Comesa-SADC tripartite, with a population of 530 million people and GDP of $630bn pales in comparison.

In this context, it remains to be seen how serious Sacu's leaders will be in support of the AU's efforts towards regional trade integration.

Abdalla Hamdok, deputy executive secretary of the UN Economic Commission for Africa (UNECA) discussed the importance of infrastructure development, the lack of which is crippling any efforts at creating strong and viable markets.

Similar remarks were made recently by Jacob Zuma—president of the continent's largest economy—noting the importance of good roads.

Zuma, a strong advocate of Africa's infrastructural development, has devoted R827bn in the country's 2013 budget to domestic infrastructure development and R6.2bn to regional infrastructure projects through IDC projects.

Improved infrastructure and workable roads, ports and railways—along with less red tape and more efficient customs clearance and handling excise and duties—would greatly reduce border delays and clear fundamental obstacles to boosting regional integration.

A political economic perspective is also crucial to effective region-building: economic development cannot take place without peace and security.

However, the conference agenda heavily favoured pure economists and investment experts, and did not consider pertinent issues such as peacebuilding; eradication of poverty and addressing the HIV and Aids pandemic.

Also not discussed were other important issues including how the slow pace of integration is impeded further by deals signed with international investors in China and Europe, which divide rather than unite Africa's leaders.

The underlying question that remains to be answered is: how serious are Africa's leaders in the conversation on regional integration?

Nagar is a Researcher at the Centre for Conflict Resolution (CCR) in Cape Town.

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