EAC trumps SADC in trade integration

Windhoek – The East Africa Community (EAC) has leapfrogged other regional economic communities in Africa in terms of deepening trade integration and is operating at levels comparable to those in Asia, analysts have said.
Standard Bank research shows that the five-member EAC has successfully deepened levels of trade integration to the extent that 43 percent of exports are destined for African markets, a ratio consistent with regional trade integration in Asia.
Analysts at Standard Bank say in 2011 alone, 48 percent of Kenya’s exports, 49 percent of Uganda’s, 36 percent of Tanzania’s and 35 percent of Rwanda’s were destined for African markets.
Even though Ethiopia falls outside the EAC, it also displays a high level of trade integration with more than a quarter of its exports finding a market in Somalia.
Levels of trade integration being witnessed in EAC are higher than those in SADC, COMESA and ECOWAS, the analysts say.
In 2011, SADC, COMESA and ECOWAS’ exports into the African markets ranged between 10 percent and 12 percent.
“Exports from the EAC to the rest of Africa have also grown relatively swiftly, expanding five-fold since 2001 compared to a more moderate three-fold increase in SADC exports to the rest of the continent,” the Standard Bank research says.
EAC exports within the region enjoy even greater relative importance than exports to the rest of Africa, the analysts added.
Kenya holds sway in the trade matrix in the bloc with 55 percent of its exports being taken up within the EAC market, while Uganda exports 48 percent of its produce to EAC markets. Rwanda and Burundi send 50 percent and 85 percent to EAC markets respectively.
Most of the EAC’s exports are destined for South Africa, the DRC and Egypt.
Kenya dominates trade within the bloc and in 2011, it was a counterpart in almost 80 percent of total intra-EAC trade, running a roughly US$1 billion trade surplus with the region.
Standard Bank researchers have also challenged the claim that intra-Africa trade accounts for around 12 percent of the continent’s total trade with the world.
They say the figure is “exaggerated”.
In 2011, intra-Africa trade, according to the Standard Bank researchers, stood at around nine percent as compared to a quarter of total trade in Latin America and nearly half of trade in Asia being conducted with regional peers.
“Weak infrastructure, primarily hinged on crumbling or non-existent road and rail networks, is a notable causal factor. “Unnecessary bureaucratic delays brought about by cumbersome documentation, as well as corruption, continue to hinder the fluid flow of goods across borders,” the researchers say.
Non-tariff barriers were greater than the cost of tariffs in 2010.
“For the most part, the political will which rests behind the deepening of (regional economic communities) on the continent has not sufficiently translated into the types of pragmatic and concerted action necessary to ensure that trade and investment can take place more efficiently,” the analysts say.
The mismatch between what most African economies produce and what they are able to consume is also one reason intra-African trade is not rising as anticipated.
Statistics show that in 2011, in the basket of Africa’s exports, 72 percent were unprocessed commodities. These find a ready market in countries with sophisticated industrial bases.
“The inability of most African economies to produce the types of largely manufactured goods its rising markets are increasingly demanding presents a powerful barrier to deeper regional trade ties,” the analysts say.
Intra-Africa trade edged up to US$90b in 2011 from US$17b in 2001. The statistics excludes informal trade.
During the same time China-Africa trade has surged to almost US$200b in 2012 from US$11b in 2001.
South Africa and Nigeria play a leading role in deepening intra-Africa trade.
Within SADC, South Africa’s export profile is clearly visible with almost all members of the bloc absorbing between 60 percent (Malawi) to 90 percent (Mozambique) of exports from that country.
“Much stands in the way of Africa realising the gains of deeper regional trade. Structural, logistical and historical impediments are towering.
“The opportunities, though, are equally compelling, particularly as Africa’s rising consumer markets provide increasing commercial depth.
“While the formation of a more viable manufacturing base on the continent will take time, the gains for intra-regional trade in agricultural goods are immediate, and necessary,” the analysts say.
 

April 2013
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