Overcoming intra-African trade barriers

27 August 2018 | International

Otis Finck

An analysis by Afreximbank shows that a lack of access to trade and market information is one of the main reasons why intra-African trade is low.

Informal African trade is about 40% and averages between US$70 - US$140 billion. Research conducted by the South African Revenue service and Afreximbank also indicate Namibia is placed second with more than 5% and only behind South Africa with over 25% on the top ten intra-African Trade contributors list.

According to a United Nations Conference on Trade and Development and the International Trade Center, effective matching of supply and demand by substituting global sources for African sources can increase intra-African trade with up to 38%.

Gainmore Zanamwe, the senior manager for trade facilitation and Intra-African trade at Afreximbank, urged the Southern African Development Community (SADC) to take a holistic approach to industrialisation, developing regional value chains (RVCs) and increasing intra-regional trade.

“We need to act now and add value to our resources, develop RVCs, increase intra-African trade to achieve positive social and economic transformation and create sustainable jobs for our people especially the youth.”

He further emphasised the necessity for regional coordination of activities in industrial parks and export processing zones (EPZs) in order to facilitate the development of RVCs.

“A proper mapping of value chains to identify challenges and opportunities is critical. However, to be sustainable value chains must be demand driven and private sector anchored. Governments must also create a conducive environment for industrialisation, RVCs and intra-regional trade. RVCs are essentially about sharing production and countries should focus on complementing each other rather than competing in an unhealthy way.”

Zanamwe listed slow implementation of regional commitments, low levels of industrialisation, limited range of goods trade in intra-African trade with this gap being filled by other countries outside the continent as some of the key challenges affecting intra-African trade.

“Trade related infrastructure (roads, ICT, energy, transport) and weak transit and logistics infrastructure are in a poor state. Transport costs are 63% higher in Africa compared to that of the average developed economies. It takes for example up to 12 days to clear goods at some African borders as compared to an average of two days in developed countries, and cost around N$450 per day.”

He added that settlement issues and limited access to trade finance, multiplicity of exchange rate arrangements and currencies, an undeveloped cross-border payment and settle platform, difficulty to access and settle in foreign or other currency as challenges to the list of key challenges affecting intra-African trade.

“Inefficient and costly transit regimes undermine Africa’s competiveness and participation in regional and global value chains. There is currently no continental transit guarantee scheme, while only a few regional economic communities have functional regional transit schemes.”

Zanamwe proposed that African countries for example collaborate to ensure that the oil which is produced in Africa is refined on the continent.