AfDB Kigali meetings: Why intra-Africa trade took centre stage

Facilitating Intra-African trade featured prominently among the deliberations at the just-concluded 49thAfrican Development Bank (AfDB) Annual Meetings and was severally listed among the ways to achieve economic prosperity of the African continent. To create the “Africa we want,” delegates observed that the continent should increase trade within itself and foster relations as there was supply and demand internally before seeking to do business with other continents. Currently, intra-African trade stands at 15 per cent compared to 54 per cent in Asia and 73 per cent in Europe. In January 2012, the African Union adopted an action plan to promote intra-African trade but not so much progress has been made two years since the plan was endorsed. Infrastructure Among the drawbacks that derail the growth of trade volumes between African countries is the state of infrastructure linking most African countries. As much as there may be demand, means accessing the markets is at times an uphill task for some African suppliers due to poor road network, lack of railway systems which makes it difficult and expensive for neighbouring countries to trade. But in recent times, regions such as the East Africa have gone ahead to plan and begin the implementation of infrastructure projects that would link African suppliers and markets. The standard gauge railway, which is expected to run from the port of Mombasa through Kampala to Kigali, is one of those infrastructure interventions that is expected to reduce cost of intra-African trade. The AfDB meetings in Kigali launched what they called Africa50, a fund that seeks to raise $100 billion to finance infrastructure development on the continent over the next 50 years. However, it was observed that as much as infrastructure had been in recent years singled out as a barrier to trade, there are other challenges that do not require as much resources as they require a change in mindset. The Minister for Trade and Industry, Francois Kanimba, said during one of the discussions that the structure of production of most African countries where they produced almost similar products reduced the chances of African countries trading among themselves. The minister said the homogeneity only leaves chances of trading with other markets, most of them Asian or European. “There is need for diversification if we are to trade with each other. If counties specialised in producing what is efficient and economically viable for them and buy what they can’t produce from neighbouring countries, it would not only boost the quality of outputs but also foster intra-African trade,” Kanimba said. Market fragmentation Among the ways to counter the challenges holding back regional trade–as suggested on the various panel discussions–was deepening regional integration. In a panelist session titled, ‘Facilitating Africa’s Trade,’ delegates discussed the role and importance of integration in increasing continental trade. Noting that Africa cannot prosper with 54 fragmented markets, the delegates concluded that integration would cause countries to open up borders to each other. Dr Richard Sezibera, the secretary-general of the East African Community, said regional economic communities such as the East African Community are what would turn the continental free trade area into reality. “Facilitating Africa’s trade takes leadership, confidence and a deepening of regional integration. Regional economic communities such as EAC, are the building blocks of integration to turn the Continental Free Trade Area into reality. This is Africa’s moment to turn trade into incomes for Africans,” Dr Sezibera said. He cited trade in the East African Community that has doubled in the last decade from about 10 per cent to over 25 per cent as the region had increasingly integrated, shared common goals and implemented harmonised government policies. “It is through integration that we have been able to reduce non-trade barriers to cut down on the cost of doing business in the region. The more we get rid of the trade barriers the more we boost regional trade and the more we develop our countries’ economies,” the EAC chief said. He added that the envisaged payment systems that would enable businesspeople carry out transactions in their local currencies across borders would further boost regional trade. Another aspect to boost regional trade was the facilitation of movement of people across the continent. In his opening remarks, the President of the African Development Bank, Dr Donald Kaberuka, called for the free movement of Africans on the continent. He backed calls for a visa-free Africa, saying that it would be an ideal way to deepen domestic markets. “This is not a sentimental issue of our ‘Africanness’; it is about deepening Africa’s domestic market, which is the indispensable platform for stronger economic growth and prosperity. That is how we build resilience to external shocks,” Kaberuka said. Arancha Gonzalez, the executive secretary of the International Trade Centre, said policy reforms were necessary but not sufficient to create trade-led growth because Africa’s companies should be able to produce goods and services that are competitive outside domestic markets.

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AfDB Kigali meetings: Why intra-Africa trade took centre stage