Africa needs to boost regional trade flows - UN

Geneva – African governments should give more support to entrepreneurs to help boost regional trade flows, to allow businesses to benefit from growing consumer demand and insulate the continent from global financial crises, a UN study has said.

Geneva – African governments should give more support to entrepreneurs to help boost regional trade flows, to allow businesses to benefit from growing consumer demand and insulate the continent from global financial crises, a UN study has said.

In a break with past recommendations on African trade, the United Nations Conference on Trade and Development (UNCTAD) said boosting regional trade would require solutions that do more than simply remove trade barriers.

While trade with the rest of the world has grown quickly, inter-Africa trade - at $130.1b in 2011, up from $60b in the 1990s - has halved to represent just 11 per cent of the total.

By comparison, half of Asia’s trade is with its neighbours while intra-European trade accounts for 70 per cent of the total.

The UNCTAD study showed that Africa’s oil-exporting countries such as Libya, Angola and the Republic of Congo were especially dependent on trade with non-African markets, exporting less than 5 per cent of their merchandise to the rest of the continent.

But the group said expanding regional trade would help cushion the continent from outside risks and foster growth.

A World Bank report showed that consumer spending accounted for over 60 per cent of sub-Saharan Africa’s buoyant economic growth. This accounts for high growth rates estimated at between 5 and 6 per cent for sub-Saharan Africa.

“The report recommends building capacity through entrepreneurship development. There needs to be a mechanism between the state and the private sector,” UNCTAD secretary general Supachai Panitchpakdi noted.

This could help address the problem of the so-called ‘missing middle’ whereby African companies rarely graduate from small businesses to mid-size or large firms.

Restrictions

Thin regional trade also makes Africa vulnerable to external financial crises and overly reliant on expensive imports of items such as food even though UNCTAD data show it is has 27 per cent of the world’s arable land.

High custom fees and transport restrictions mean that it is often cheaper for African countries to import raw materials such as cotton from Asia, even though many are available from neighbours.

The UNCTAD report said governments should help improve access to finance, for example, by establishing credit bureaus.

“We see an incredibly high cost of trading,” said Frank Matsaert, the chief executive of TradeMark East Africa, a not-for-profit organisation helping to co-ordinate regional integration.

“The key question is how to address those big, high-cost bottlenecks. Let’s face it, consumers pay for those inefficiencies.”

One factor hampering integration is a proliferation of regional bodies with overlapping memberships.

Africa has eight regional economic communities recognised by the African Union, UNCTAD said. Most countries are members of several, with a mere three African governments restricting themselves to joining only one.

“My impression is that Africa wanted to buy the carpets before building the mosque,” said Hakim Benn Hammouda, a special adviser to the president of the African Development Bank, at a discussion on African trade in Geneva this week.

“We built the most complicated institutions and in the end, we haven’t got integration.”

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