Appeal for intra-trade as Africa incurs $2.7bn export loss

13May 2016
Costantine Muganyizi
The Guardian
Appeal for intra-trade as Africa incurs $2.7bn export loss

Lack of sustainable long-term partnerships and trade relations, existence of export barriers and absence of strong regional value chains are costing African countries dearly leading to $2.7 billion in business losses, a senior official at a top American multinational consumer goods company has said.

Former UK prime minister Tony Blair (l), Rwanda president Kagame (C) and and Howard Buffett, Chairman and Chief Executive Officer, Howard G. Buffett Foundation at WEF Kigali

Mohamed Samir, president of India, Middle East & Africa (IMEA) at Procter & Gamble (P&G), raised the concern at the WEF-Africa 2016, which is being held here under the theme of “Connecting Africa’s Resources through Digital Transformation”.

Embracing new technologies and investing in innovation are aspects the senior executive of the maker of brands like Pampers, Vicks and Ariel Detergent Powder says modern business cannot do without.

“Leaders should therefore strive in developing sustainable long-term partnerships and trade relations, solve export barriers and strengthen regional value chains,” Samir noted in the company’s update on Africa’s external trade challenges.

Customs procedures are onerous, visa restrictions are high, while failure to produce value-added goods and to diversify from natural resources and goods different from neighbouring countries continues to stifle trade, argues Jacqueline Musiitwa from Rwanda, who is among key panellists at WEF-Africa 2016.

The Director of Africa Analysis at market intelligence outfit IHS Economic and Country Risk of the UK, Natznet Tesfay, said the EAC bloc has made tremendous progress intra-regional trading. She told The Guardian that growing trade relations was one of the factors that has enabled Tanzania, Kenya, Uganda, Rwanda and Burundi to put on a brave face on the commodities crisis that has had adverse fiscal effects for countries like Nigeria and Angola.

EAC Secretariat statistics show that intra-EAC trade grew to US$5.5 billion in 2012, up from $4.5 billion recorded in 2011. According to the Trade Policy Training Centre in Africa at the Eastern and Southern African Management Institute (ESAMI), the economic grouping recorded an 8-fold increase in intra-EAC trade on value terms between 2000 and 2011.

“The value of intra-EAC trade declined by 3.0 per cent from US$5.8 billion in 2013 to US$5.6 billion in 2014,” reads the Secretariat’s 2014 Trade Report noting that the decline was driven by the decrease in value of exports that decreased by 12.7 per cent.

“However, Kenya, Tanzania and Uganda recorded an increase in the shares on intra-EAC trade while that of Rwanda and Burundi declined,” adds noting that removal of non-trade barriers and fully implementation of integration protocols would boost the business in 2015 and beyond.

Samir, who will be leading a panel discussion at the WEF summit on how the next generation of integrated production systems are being fuelled by innovation, said the future of Africa’s exports lies in intra-African trade. He added that trading amongst African countries has huge potential to deliver economic growth and social prosperity they desperately need.

IHS’s Tesfay told The Guardian in an exclusive interview on Tuesday evening at the Kempinski Milles Collines Hotel that the WEF summit will explore strategies to do away with the hiccups hindering trading within the continent. The Eritrean said the security of export trade now lies in countries moving from raw material exports to economies that are backed by high tech manufacturing and service industries.

To Musiitwa, there is one way of boosting intra-regional trade and with it economic growth and development: technology. Currently Africa has the lowest level of intra-regional trade at less than 20 per cent.

The Hoja Law Group founder has it that African decision-makers can do three things to unlock the intra-trade potential. Firstly is to embrace new technologies and then investing in the right infrastructure and connecting more people on the continent to the internet.

“We know all too well the opportunities trade can offer for development and growth. Africa is in a unique position in that it has the chance to trade with an untapped market: itself. Nobody is saying that will be easy. But technology will go a long way to making this ambition a reality,” she recently noted in an article reproduced today in The Guardian.

Musiitwa wants Africa to quickly get its infrastructure right noting that its advancement is a top developmental priority in Africa, particularly in two critical areas: electricity and transport.

She argues that access to electricity forms the basis of an industrialized economy and hence trade; yet less than 30 per cent of Africans have access to electricity, compared to about 40 per cent in similar low-income countries from other regions.

“Unless we can do something to tackle this issue, we have no hope of increasing intra-regional trade in Africa,” the former advisor to the director general of the World Trade Organization on trade policy as well as to the Rwandan Justice Ministry on investment, trade and infrastructure and private sector development further notes.

Musiitwa appreciates progress Africa is making to improve interregional transport. She says connecting the vast continent is not without its challenges, but already great investments are being made in major carriage ways and regional railway projects, such as the Standard Gauge Railway that will connect Kenya, Uganda, Rwanda and South Sudan.

According to her, it’s not just with electricity access that Africa lags behind. It’s also with one of the most powerful tools for boosting trade, opening up new economic opportunities and fostering innovation and entrepreneurialism: the internet.