Dozens of African countries agreed to join the continental free trade zone while businessmen and experts alike urge governments to expedite the process so that intra-Africa trade and investments are boosted.
Arguing as global trade practices disfavor the continent, policymakers intensified the debate on a single and free market in Africa over the last few years.
Trade among African countries has long been low which experts mainly ascribe it for colonial legacies. Still, the continent trades more with the outside world than within itself. And, intra-African trade only accounts for less than 20 percent of the continent’s total trade.
Trade among African countries expanded from 10 percent in 2000 to about 18 percent in 2017, according to the African Economic Outlook report of 2017. However, still Africa’s intra-trade is regarded as the lowest compared to other parts of the world.
The report also cited low manufacturing and processing capacity as a major limiting factor for intra-Africa trade. Intra-African trade in manufacturing declined from 18 percent in 2005 to about 15 percent between 2010 and 2015.
Experts who exhaustively studied Africa’s political economy argue that Africa’s low trade volume within itself has partially something to do with the colonial legacy.
The incorporation of colonies to former colonial powers in new economic and political arrangements has long hindered trading among each other. The fact that African countries have been forced to produce the same product also weakens trade among the member countries, argues, Lere Amusan, a political-economic analyst, in his article ‘Africa in the Global Trading System.’
The global trading system apportioned the production of industrial inputs to Africa rather than encouraging finished goods that would attract higher prices, according to him.
Aimed at expanding intra-Africa trade through better harmonization and coordination of trade liberalization and facilitati on, African countries have started continental free trade zone, a hallmark initiative with so many expectations from countries.
For instance, removing tariffs on intra-African trade will boost net income at the continental level by up to 2.8 billion USD per annum, according to economists.
Showing slight improvements, internal trade expanded fourfold over the past two decades, according to Africa’s Economic Outlook report which also suggests that intra-African trade is more resilient than exchanges with other regions of the world.
Scott Mather is the Chief Investment Officer and Managing Director of the Pacific Investment Management Company (PIMCO). He was one of the panelists who spoke at the 3rd African Business Forum themed: “Investing in people, Planet and Prosperity” held recently in Addis Ababa.
His company has been investing in Africa for 25 years. He tells The Ethiopian Herald that time is changing; African leaders and policymakers are now recognizing the importance of strong linkage of business and companies within the continent.
“We do need higher levels of cooperation among African countries through trade and investment. African countries cannot afford to move alone and compete in global trade. Africa indeed is the continent to raw material and process goods. The continent needs consistent policy and common markets as well as joint investments if it is to sustain the upward economic trajectories.
A joint venture among foreign multinationals and local companies has to be encouraged in the continent. The continent should also be establishing a strong linkage between the public and private sectors to promote energy development through innovation and investment.
Fast-tracking policy and regulatory reforms and easing taxes and financial barriers are the urgent requirements to unlock Africa’s potential for intra-trade and sustainable development on the continent.
On the other hand, diverse skills and abilities are what matters most in boosting trade and investments among African countries. Big companies require diversification of skills as they do not invest in one project. But, they design several projects in several countries. “When the prerequisites are fulfilled, multinational companies can link one African country with another one through their business.”
Dr. Atkelesh G.M.Persson is an expert in developmental studies who published different articles— ‘Commercial farming in Africa’ being the latest one.
Africa’s economy is largely dependents on agriculture and mineral exports. Africa should diversify its economy and add value to its products. There is no value addition, the prices are determined by the international market; hence, the economy suffers a lot when there is price shock. Hence, it is imperative for Africa to invest more in the manufacturing sector and focus on the processing of goods, says Dr. Atkelelsh who is also a Programme Management Officer at Economic Commission for Africa.
Countries must look for their competitive and comparative advantages. The need for looking at ways of trading among them, the continental free trade zone and trade act are some of the instruments in which African countries can bolster their economic integration.
She says agriculture is the mainstay of the African economy and represents 45 percent of the continent’s workforce. To commercialize the agriculture sector of the continent, it needs to be transformed. It begs for policy review and strong institutions as well as decent infrastructure. The way forward is to look opportunities inside and compete strongly with the outside world, she adds.
“An African country cannot singlehandedly compete with the largest economies of the world. When Africa is united, it will have more bargaining power and share in the global trade and investment activities.”
According to the experts, creating a single continental market for goods and services, with free movement of business and investments paves the way to accelerate intra-trades.
The Ethiopian Herald February 21/2020
BY DESTA GEBREHIWOT
