Intra-African trade still low despite improvement

The increase in intra-African trade has
been identified as extremely low with bank data showing an expansion
from 10 per cent in 2000 to about 16 per cent in 2014.

Although, trade among African countries
has huge potential for sustainable economic development, but the current
level is a reflection of the continent’s recent economic upturn

The United Nations Comtrade Database of
2016 puts intra-Africa trade at 21.2 per cent, still low compared to
more developed regions of European Union with 61.7 per cent, the North
American Free Trade Agreement’s 50.3 per cent
and the Association of Southeast Asian Nations 24.3 per cent.

Several obstacles keep impeding African countries from trading among themselves.

“Low manufacturing and value addition capacity is a key limiting factor.

“ Between 2005 and 2015, for instance,
intra-African trade in manufacturing dropped from 18 per cent to roughly
15 per cent, respectively.

“ It is a big concern that in Africa
most of its primary exports undergo little or no processing before they
are eventually re-exported. Examples include cocoa beans from Ivory
Coast and Ghana, and crude oil petroleum products
from Nigeria.’’

But it is regionalism, which calls for a
reassessment of the policy of reduction in administrative and
transaction costs, and overcoming market segmentation, which are
affecting trade within the continent. It requires a scaling-up
of infrastructure investment to boost links among and within African
countries.

Transport and communication
infrastructure has been holding back the potential of trade. Even with
their wide range of heterogeneous products, African countries still
struggle to export to neighbouring nations.

Indeed, there is a danger that recent
developments such as the creation of African Continental Free Trade Area
may fail to strengthen the continent’s appeal as a global trading
partner unless the problem of inadequate infrastructure
is addressed. 

All is not lost though. China is
aggressively turning around Africa’s business profile, especially by
overhauling its roads and railway system.

The roads have become the modern symbols
of China-Africa friendship. As in December 2017, Chinese firms had
constructed a total of more than 5,200 kilometres of roads in the
continent, some of which were still a work-in-progress.

Perhaps it is the mega railway projects
that would ultimately position Africa on the global map as home to
investments and trade. Kenya’s Standard Gauge Railway symbolically
depicts how Africa’s fortunes would turn around with
the coming new network of infrastructure.

One year since its inception, the
Madaraka Express, as it is famously referred to, has ferried over 1.3
million passengers in 1,142 trips between Mombasa and Nairobi, raking in
more than $10 million in revenues.

In the same period, 600,000 tons of cargo
was hauled between the two cities. Apart from reducing road traffic,
the new railway line has increased the quantity and reduced the time
taken for goods to reach their destinations, the
reason Kenya is extending the railway network to Naivasha and Kisumu in
the west.

In the long run, the project is poised to
link Kenya to Uganda, Rwanda, Democratic Republic of Congo, South
Sudan, among other East African countries.

Intra-African trade would no doubt get a
boost from the 756-kilometre Ethiopia-Djibouti railway which connects
Addis Ababa to Djibouti on the Red Sea and the construction of the
1,344-kilometer Lobito-Luau railway in Angola which
links the Atlantic and Indian oceans. It is expected that ultimately,
the Lobito-Luau railway would link up with the Angola-Zambia and the
Tanzania-Zambia railways.

One of the most ambitious infrastructural
projects in Nigerian history, the 1,400-kilometer Lagos-Calabar
railway, once completed, will connect the cities of Port Harcourt, Uyo
and Aba along the way, thereby catalyzing the movement
of goods in the region. Already, Nigerians are feeling the impact of
the 186-kilometer Abuja-Kaduna railway which was completed in 2016 as
goods can reach the markets in time.

The Forum on China-Africa Cooperation
(FOCAC) 2018, which will take place in Beijing in early September,
offers these two regions another strategic opportunity to strengthen
their relations and deepen infrastructural development
in Africa.

It should not be lost that FOCAC 2018
ushers in a new era for the Belt and Road initiative and Africa’s
development. This being an engagement of equal consultation, planning
together and working together, there is no doubt that
China and Africa would benefit together.

It is no mean achievement that China,
through aid and financing support, has helped build or is building more
than 6,200 kilometres of railways across Africa. A more connected Africa
would no doubt trade more with itself. It will
engage in manufacturing and processing of its raw materials for export.

As the African leaders head to Beijing
for the FOCAC, let them keep in mind that they need to provide conducive
environment for Chinese firms and workers to operate.

These contractors require a working
environment that will make them work smoothly. The recent harassment of
Chinese workers over a lack of work permit and discrimination needs to
be considered seriously.