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African countries told to integrate, have bigger markets and utilize trade as tool for development

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BorderIntra-African trade has been noted as one of the major tools of development for the continent. But African countries must first pursue integration, which will result in bigger markets.

Addressing a training workshop for journalists and editors from the continent on the AU transformation organised by the African Union (AU) and Friedrich Ebert Foundation (FES), Ms. Treasure Maphanga, Director, Trade and Industry of the AU said the organisation is pushing the Abuja Treaty with Regional Coordination Councils (RECs) for the integration of the continent “because integration results in bigger markets which also offers economies of scale.”

She said in seeking a common market for Africa, the AU is working at accelerating the establishment of the Continental Free Trade Area (CFTA).

African Heads of State and Government meeting at two Summits in 2012 in Addis Ababa gave political expression of support for the establishment of a CFTA

Meanwhile, studies conducted by the Economic Commission for Africa (ECA) has found that on removing existing trade barriers and tariffs, formal intra-African trade would increase from 11 percent to around 22 percent.

Intra-African trade has grown from 12.5 percent in 2011 to 13 percent in 2012 according to statistics from the ECA. But a greater part of intra-African trade is not captured. The informal sector which is a larger part of trade on the continent is not captured in the statistics. Cross-border trade between African countries is carried mostly by women.

In Ghana for instance, Economist Nii Moi Thompson has said that the informal sector forms 80 percent of the country’s economy.

The AU, Ms. Maphanga said is working with the private sector and civil society to improve intra-African trade.

In his remarks, Mr. Erastus Mwencha, Vice-Chair of the AU said trade is seen as an important development tool, arguing that if countries of the world have implemented the Doha Round agenda, the whole world would have benefitted.

He expressed Africa’s disappointment at the collapse of the Doha principles, which he attributed to ‘big interests’ such as China, Europe and the US fighting among themselves.

“They have killed the very tool that would make Africa develop,” he said.

He expressed concern about the fact that it is more expensive to import from within the continent than it is to import from outside it. “When importing from within the continent you pay 12 percent tariff, but external importation costs you 8 per cent,” he said, adding that “imports and exports figures for intra-African trade show that we import 14 percent and export 10 percent leaving Africa with a 4 percent trade deficit.”

He emphasised the importance of trade as it protects balance of payment for countries.

He urged African countries to tackle the challenges of trade by improving trade facilitation on the continent by taking a second look at tariffs and the time it takes to fill forms. He gave a personal example of one African country where an importer would have to fill about 32 forms to clear goods.

He also cited the challenge of high cost of local production which makes locally produced goods expensive. He said this situation encourages black marketeering and the importation of foreign goods.

Other bottlenecks in trade on the continent, he said include the challenge of moving goods from one country to the other. He said traders have to cross several checkpoints, face the challenges of paying bonds on goods they are transporting to another country, and the difficulties they face with time spent in getting refunds of those bonds after the goods have been confirmed to have reached their final destinations.

Mr. Mwencha therefore called on African countries to involve the business communities and implement trade dispute settlement instruments to improve trade on the continent.

By Emmanuel K. Dogbevi, in Addis Ababa, Ethiopia

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