AFRICA remains a highly “fragmented” continent when it comes to trade, making it difficult for individual countries to compete against bigger economic blocs, experts and analysts have said.
This comes after South Africa last week hosted the Africa Continental Free Trade Area (AfCFTA) Business Forum in Cape Town, where it was observed that despite the operationalisation of the trade pact three years ago, little progress has been made in making intra-Africa trade a reality.
The landmark agreement to create a 54-nation trading bloc was signed in March 2009, culminating in the launch of the world’s largest free trade zone at the African Union Summit Niger in January 2021.
The AfCFTA will have a market of about 1,3 billion consumers with a total gross domestic product (GDP) of US$3,4 trillion. According to the Economic Commission for Africa (ECA), the AfCFTA was projected to increase the value of intra-African exports from around 17 percent in 2017 through the elimination of tariffs on 90 percent of goods to 40 percent in the next two decades from its launch.
Mr Stavros Nicolaou, South Africa’s Aspen Pharmacare group senior executive responsible for strategic trade development said Africa continued to be a serial importer of products and services and “that’s precisely why we need to increase intra-Africa trade.”
“If you start aggregating 54 markets, a population of 1,3 billion people, GDP combined on the continent, that starts exceeding US$3 trillion; then suddenly you start having economies of scale that you can start leveraging,” said Mr Nicolaou.
“But leveraging those economies of scale also means the continent needs to have pooled procurement mechanisms so that we start buying from each other, from African facilities for Africans. Now, despite the FTA (free trade area) coming into effect almost three years ago, we haven’t shifted the needle, regrettably.
“So our input dependence as a continent continues and there’s only one way to break that. Either you’ve got to increase your ability to buy from the continent, or you’ve got to export more out of the continent.”
According to the World Bank, although intraregional trade still accounts for only a small share of total trade in Africa, it has increasingly grown in importance, but the AfCFTA remains hampered by a coterie of factors.
The bank says Africa suffers from challenges that most other regions do not face; hence, the region requires unprecedented levels of commitment for the AfCFTA to succeed.
“These challenges include geographic and political fragmentation and thick borders (a complex of both tariff and nontariff restrictions that slow trade)—all of which increase the per unit cost of moving goods across borders” the bank said.
It says strengthening the integration required for a successful AfCFTA calls for (1) improving physical integration; (2) strengthening political cooperation; and (3) facilitating business integration. These efforts must accompany the harmonization of rules and regulations through regulatory cooperation.
Speaking during the opening Business Forum, South Africa’s Trade, Industry, and Competition Minister Ebrahim Patel said the AfCTFA could address the legacy of colonialism that left Africa with fragmented markets that have contributed to weak economic performance.
Mr Patel said while Africa had 17 percent of the world’s population, it only accounted for 3 percent of world trade and generates less than 3 percent of the world’s GDP. The continent produces less than 2 percent of the world’s manufactured products.
Mr Nocolau said the continent should export manufactured goods as opposed to the current situation where most commodities were being exported in their raw form.
He said the continent required an organised procurement mechanism to enable countries to procure from a pooled resource.
“So when we start achieving those two things–reducing the trade deficit in the continent and establishing our own procurement platform and mechanism — then for me that constitutes meaningful progress,” Mr Nocolau added. “I know that is a direction we want to go towards . . . but we need to accelerate that otherwise the missed opportunities will continue, regrettably.”
He went on to say there was need to turn political will into execution, “and that is part (on which) I think there has got to be greater focus and emphasis in the weeks and months ahead.”
Industry and Commerce Minister Dr Sekai Nzenza emphasised the need for export-oriented growth and encouraged the need for supporting women to achieve inclusive trade. About 93 percent of Zimbabwe’s exports have been to the Southern African Development Community (SADC), according to the Competition and Tariff Commission (CTC).
The top 10 exports to the SADC countries show that Zimbabwe substantially exported natural resources and cash crops, which include tobacco, natural pearls, precious stones, metals, ores, iron, steel, sugars, confectioneries, cotton, tea, and spices.
“To zero-in on Zimbabwe, in pursuit of an inclusive approach to trade, Zimbabwe has undertaken sector-specific strategies under His Excellency’s mantra ‘moving the economy up the value chains’ as espoused in the National Development Strategy 1.
“This has registered a success story for the Zimbabwean industry with increased capacity utilisation, investment, and export-oriented growth,” revealed Minister Nzenza. – The Herald
