Intra African trade holds key for economic development - Report

Intra-African trade has the greatest potential for building sustainable economic development and integration, says African Economic Outlook (AEO) 2017.

AEO, is a flagship report of the African Development Bank (AfDB) released in Ahmedabad, India, on its 52nd Annual Meetings and made available to the Ghana News Agency.

Citing data produced by its economists and peer institutions, the report said trade among African countries expanded from 10 per cent in 2000 to about 16 per cent in 2014, reflecting the continent’s recent economic upturns.

Africa’s Gross Domestic Product (GDP) and its internal trade expanded fourfold over the past two decades, according to the report, which suggests that that intra-African trade was more resilient than exchanges with other regions of the world.

It said this was largely because manufactured goods were less susceptible to price shocks which affected primary products that constituted over 50 percent of trade between the continent and other countries.

The report also cited low manufacturing and processing capacity as a major limiting factor for trade among African countries. Intra-African trade in manufacturing declined from 18 per cent in 2005 to about 15 per cent between 2010 and 2015.

Most of Africa’s primary exports undergo little processing before they were re-exported, the report argued, citing cocoa beans from Côte d’Ivoire and Ghana and crude oil and petroleum products from Nigeria as examples.

“Petroleum exports from Africa to the rest of the world stood at US $85 billion, yet Africa’s fuel imports from outside the continent ranged between US $63 billion and US $84 billion from 2010 to 2015,” it read.

Contrary to popular notion, the heterogeneity of national exports helped intra-African trade as the spread of products across the continent allowed for more trade between regions with large food demands.

It noted for instance, resource-rich countries, could obtain supplies from countries with more advanced agricultural productivity. Similarly, countries with more advanced manufacturing sectors held a potential for growth if they could access the larger African market.

“From 2007 to 2015, the continent’s light manufactured goods imports tripled to reach US $260 billion. Africa’s prospects for greater regional trade are also highlighted by its consumer market of nearly one billion people, the rising number of affluent consumers and the increasing mobility of investment capital,” the AEO says.

It further noted that global economic developments such as the creation of the Trans-Pacific Partnership and Africa’s Continental Free Trade Area (CFTA) were likely to strengthen the continent’s appeal as a global trading partner. Similarly, Brexit, Britain’s exit from the European Union, would rather strengthen Africa’s trade ties with Europe that weakened it.

Nonetheless, Africa’s trade and regional integration faced several obstacles, including; meeting the needs of the new concept of regionalism which required a broader approach to reducing administrative and transaction costs and overcoming market segmentation; which posed challenges that required scaling up infrastructure investment to improve connections between and within African countries.

Transportation and communication infrastructure for intra-African trade was less developed than those that connected Africa to the rest of the world, the report said.