“It is high time we realised that trading amongst ourselves is smart,” Rwanda’s Minister of Trade and Industry Monique Nsanzabaganwa recently pointed out. She was addressing journalists at a press conference ahead of the 6th African Union Ministers of Trade conference which runs till the 2nd of November at Kigali Serena Hotel.
Besides intra-Africa trade, other key issues to be addressed at the five-day conference include creating a common market for African agricultural products, reviewing trade partnerships, reviewing multilateral trade negotiations and Africa’s assessment on Aid for trade mobilization among others.
However, according to Nsanzabaganwa, “It is more complicated to trade with the western world than with our fellow African nations. Those who have given it a shot are already enjoying a fortune.”
Nsanzabaganwa’s comments come after a recent report which highlighted the low levels of intra Africa trade; it accounts for less than 10 percent of total trade. For example, between 1999 and 2006, Africa’s intra-trade increased by an average of just 14 per cent per year, while trade with the United States and China expanded by 26 per cent and 61 per cent respectively.
It is true that Regional Trade Agreements (RTAs) like the South African Development Community (SADC), Economic Community of West African States (ECOWAS) and the East African Community (EAC) are in place to foster intra-Africa trade by primarily dismantling tariffs and customs duties. However, a lot still needs to be done.
To accelerate intra-African trade, three things are needed. Firstly, there must be political commitment from the leaders in the region and the sub-region to actively pursue and strengthen regional trade agreements.
Secondly, specialization and outsourcing should dominate our trade policy discussions. As we have learnt from Asia, Europe, we cannot promote greater intra-regional trade if we are all trying to sell the same goods to each other. We need to answer questions such as where and what kind of out sourcing or supply chain production management can be developed on the sub-continent?
The minister noted here that when you look at the map of the continent, you have food deficit countries beside food abundant countries. “There is no reason why we should have people in one part of the continent starving while others are putting food to waste.”
With some improvements in the trade facilities, we could increase agriculture production and productivity of African staple foods and export to the food deficit countries in raw and or processed forms.
The third aspect is the need to improve the investment climate; that is improve the provision of infrastructure, improve the regulatory framework, and simplify trade logistics.
For landlocked countries like Rwanda, the overall impact is that transport costs can be as much as 75 percent of the value of exports. These weaknesses in connectivity combined with poor power supplies significantly raise the cost of doing business in Africa, constrain trade, and undermine competitiveness.
In Rwanda, greater border cooperation has allowed more trucks from Kenya and Uganda into the markets, while, the upgrading of the port of Dakar has led to substantial improvements in port clearance times.
A recent World Bank report estimates that over $93.3 billion in infrastructure investments is needed in Africa over the next 10 years to make the continent competitive.
But infrastructure costs and availability are not the only constraints; competition is also a big problem. Poor business practices are imposing a huge toll on intra-Africa trade, for example, the trucking industry. The main cause here is the existence of limited competition combined with highly regulated market practices.