Intra-Africa trade could double to $400bn: Expert

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Sifelani Tsiko recently in JOHANNESBURG, South Africa
The volume of intra-African trade could easily double to $400 billion from the current level of $170 billion if market information is shared and widely distributed among African countries, a trade analyst says.

Gainmore Zanamwe, African Export — Import Bank (Afreximbank), senior manager for Intra- African Trade Initiative told delegates at the opening of the Sadc Industrialisation Week that if Africa addresses the issue of availability of market information, trade volumes can breach the $400 billion mark and thrust the continent firmly towards industrialization.

“Lack of access to market information is still a major barrier to intra-Africa trade,” he said. “If we address this problem, our trade volumes can increase from 15 percent to 38 or even 40 percent. If address the issue of availability of market information, trade volumes can double to $400 billion without even looking at other constraints.”

For years, analysts have bemoaned that lack of knowledge of the continent and limited access to trade information among African businesses constituted major constraints to trade.

Zanamwe also cited a study on the regional value chains for leather and leather products, jointly commissioned by Afreximbank, UNCTAD and the Commonwealth Secretariat, which found that Australia was the main source of tanned hides and skins for Southern Africa, including South Africa, even though Zambia exported the same products at lower costs and its exports were higher than South Africa’s                                                  imports.

The report, he said, also showed that South Africa imported leather that had been further prepared after tanning from India at double the price at which Ethiopia exported such leather while Mauritius and Nigeria imported leather products from Italy and Belgium at much higher costs than what South Africa and Botswana exported them for.

“In the same way, Kenya imported raw hides from New Zealand while Burundi exported the same product to the world at a much lower price and West African countries, on average, imported meats worth more than $3 billion per annum from Argentina and Australia even though Mali, Chad and Sudan could supply all the meats required by the region,” the Afreximbank official said.

The study by the bank also shows that if issues around trade and market information on the continent are resolved and more opportunities for export manufacturing are unlocked, intra-African trade can increase from 15 percent to around 40 percent without further beneficiation of existing traded products.

Intra-African trade has largely remained untapped due to poor implementation of regional commitments, settlement issues, limited access to trade finance, weak trade-enabling infrastructure, lack of unified continental standardisation and conformity systems, limited diversification of African economies and product concentration.

The narrowness of the continent’s production and export structures and excessive dependence on primary commodities as well as the existence of a range of non-tariff barriers has also prevented the growth of cross-border trade.

Zanamwe said intra-African trade at 15 percent does not compare favourably with 37 percent share for intra-regional trade in North America, 51 percent in Asia, 59 percent in Europe and Latin America 19 percent.

Africa’s industrialization level is at 52 percent compared to North America 92 percent, Europe (72 percent), Asia (63 percent) and Latin America 54 percent. Intra-Africa trade declined from $175 billion in 2014 to $142 billion in 2015 due to a decline in commodity prices as well as depressed global demand.

Zanamwe said his organisation has set aside US$90 million to support intra-African trade through a battery of measures and initiatives. “We are of the strong view that Africa’s story will also be based on the pivotal role of intra-regional trade and industrialization,” he said.

He said a strong showing by 30 African multinational corporations that have seen their revenue growing at a rate of 30 percent a year, should give Africa a huge dose of optimism.

“There are promising signs that manufacturing will drive Africa’s transformation. When you look at the Dangote Group, MTN and other giants, you can see that there is hope as these giants are moving to invest across Africa.”

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