Lee-Roy Chetty
Lee-Roy Chetty

Regional trade can boost Africa’s growth, jobs

There is strong consensus that regional integration is indispensable in promoting intra-African trade especially with a large African market of one billion consumers, which can be a powerful engine for growth and employment.

Despite the underlying market potential for both cross-border and export trade, the volumes and values of the goods traded in the regional and export markets remain low.

According to the African Development Bank, in 2009, while Africa’s contribution to global trade stood at about 3%, intra-African trade was measured at approximately 10% of the continent’s total trade compared to 40% in North America and 60% with Europe respectively.

Inferior infrastructure and institutional barriers are some of the reasons impeding African countries to exploit their comparative advantage and strengthen their economic linkages.

But variables such as existing barriers, tariff as well as non-tariff, constitute the major inhibitors of the movement of goods and services across countries in Africa.

There is no doubt that facilitating trade through appropriate measures should maintain a good deal of export dynamism for African countries to ascertain their engagement in an ever globalising world.

Potential strategies to improve the potential gains from trade liberalisation, which would focus on export promotion policies as a means to expand export trade in combination with finding new products that could be introduced to the markets.

In addition, the role of technology and information and communications technology (ICT) in trade facilitation and customs modernisation to increase effectiveness and transparency can also be a focus in policy discussions as it could potentially increase the maximisation of flow of goods.

Moreover, ICT facilitates business transactions within the countries as well as provides linkages with other chamber of commerce and markets abroad.

Further policy discussions around the export processes and the single window system (SWS), which is geared towards promoting exports through creating smooth process channels that are time-efficient, cost-effective, predictable and reliable but on the premise that all government agencies are working in tandem.

Other policy recommendations could include:

— A renewed focus on the strong need for political will and commitment in creating and implementing policies that will promote trade facilitation and export promotion, both at the local and regional levels.
— African countries must place more importance on research and development, and take a proactive approach in taking advantage of all available related resources, both financial and technical/human.
— Addressing the skills shortage and lack of technical know-how, both at the private and public-sector levels. There needs to be a focus on human development through taking advantage of technical assistance opportunities offered by various development agencies around the world.
— In order to formulate policies that are effective and sustainable, the needs and rights of all stakeholders must be taken into consideration and have a direct effect on policy.
— Harmonisation is needed between national agendas and regional economic partnerships, at both the regional and continental levels. Sub-regional coordination mechanisms can help in creating and promoting connectivity.
— Feasibility studies are important when considering the implementation of systems such as ICT and SWS to ensure that investment on initiatives is not wasted. In addition, it is helpful to take from the experiences of other countries in the region that are implementing these systems.
— There is a need for African nations to concentrate on diversification of product to increase competitiveness in the region as well as in the international market.

It is clear that governments of countries on the African continent require a policy rethink when it comes to improving levels of export and trade facilitation to ensure that the continent remains competitive within the global market place and removes as many hindrances and red tape, which stands in the way of trade facilitation on the continent.

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    • Momma Cyndi

      What did happen to that legislation where country of origin had to be on the packaging?

      Local is lekker. I’d far prefer to support our own industry (or that of our neighbours) rather than contribute to some child labour sweatshop in China or India.

    • Enough Said

      Imagine how many jobs could be created by placing one million small scale organic farmers on the land within city limits or close to cities, and facilitating trade with big business and city dwellers using local markets?

      There are cities in the developing world that have their food requirements grown within a 10km radius of the city.

      Secondly, imagine how many jobs could be created by converting to nearly 100% renewable energy? Germany has already created over 300 000 new jobs while in the process of phasing out coal and nuclear energy.

    • Lennon

      Perhaps we ought to ensure that the bulk (if not all) of our minerals are refined locally. Job creation, innit?

    • bernpm

      The benefits of local production for local consumption has been explained and promoted for decades all over the world by the various branches of the New Economics (for English, check NEF (www.neweconomics.org/).

      Globalization -as pushed by big business- is one of the biggest obstacles. Would the world be richer or poorer??
      Maybe rich and poor would be better spread over the world??

    • The Naked Worker

      Unfortunately Lee-Roy only understands the economics of globalized trade. He spins what the free trade movement have been telling us since Ronald Reagan and Margaret Thatchers time. He actually does not care that his obsession increases the gap between rich and poor. He is actually not interested in social issues. His recent article on the Cape wine farms was nonsense showing how out of touch his economics is with peoples reality. Lee-Roy is a numbers cruncher. A Davos man.

    • The Creator

      Africa is an extremely poor continent and manufactures little. Hence, intra-African trade will not amount to much until the continent gets richer and becomes more significant in manufacturing. In order to do this, it is necessary to deal with the problem of capital flight.

      Rather than this imaginary African free trade system, what we need is for African countries to restrict the movement of capital and reinvest as much of the wealth of the continent as possible locally. Similarly, instead of training up more people who immediately go off to the West to make use of their skills, we need to find ways of getting skilled people to apply their skills locally.

      Nothing in this article addresses any of the real problems — which is why it’s so vague, of course. And meanwhile, almost all the growth in the continent is driven by foreign-owned extractive enterprises whose wealth almost all goes elsewhere.

    • bernpm

      @The creator: “And meanwhile, almost all the growth in the continent is driven by foreign-owned extractive enterprises whose wealth almost all goes elsewhere.”

      And -when the population strikes and burns- the most frequent cries are: “this is bad for foreign direct investment”.

      While we bicker about how much we must pay miners, we could add an industry of processing our raw materials instead of sending shiploads of unprocessed goods around the world and blame colonialism on one side while selling mines to China on the other side. Keeping income from further processing within the country, creating additional jobs. Difficult to grasp?? NO! Difficult to do ? Also NO!!

      It is called “consistent inconsistency”

    • -Sterling Ferguson

      @Creator, there is no emphasis in Africa on making goods and protecting their markets, so there is nothing to trade.

    • -Sterling Ferguson

      @bernpm, this is called adding value to your resources and the ruling parties in Africa are ignorant of this word.