Infrastructure deficit hampers trade

 

Intra-Africa trade is crucial to the continent’s progress, but sadly, it is very low between African countries.

The United Nations Conference on Trade and Development, in its 2013 report on Intra-Africa trade, noted that between 2007 and 2011, the average share of intra-African exports in total merchandise exports in the continent was 11 per cent, compared to 50 per cent in developing Asia, 21 per cent in Latin America and 70 per cent in Europe.

Stanley Subramoney, PricewaterhouseCoopers South Africa agrees that Africa is a continent on the move, but its tragedy is that nations export wealth and import poverty.

“Intra-Africa trade, if you look at the sub-Saharan region, is a mere 7 per cent, so as Africans we do not trade amongst ourselves. 

If you compare the intra-European trade, it is an excess of 70 per cent, intra-Asia trade is an excess of 55 per cent,” concurred Stanley

He went on to say the problem is heightened by the fact that nations in Africa shun each other when it comes to trade and related developmental issues.

“Clearly as Africans we spurn each other; we do not trade amongst ourselves. 

As a result, trade amongst African countries is stagnant, and the continent’s share in the world is also small,” Stanley asserted.

The president of the African Development Bank (AfDB), Donald Kaberuka, nevertheless, urged countries to trade amongst themselves so as to strengthen inter-Africa trade.

“Industrialisation, through new technologies and strengthening of inter-Africa trade is a necessity for Africa.

“The continent needs to fund its industrial initiatives and promote its own investments, exploit opportunities from global value chains and utilise its growing internal market,” said Kaberuka.

South African President Jacob Zuma recently called for more intra-regional trade and unions between African countries as a means of improving relations as well as fostering political, economic, social and technological progress.

“One of our weaknesses (as a continent) is that there is no intra-trade. Once we are together, we trade with other people (outside of the continent), to their advantage. We are now saying let us create the intra-trade among ourselves,” he said.

Zuma, however, affirms that intra-Africa trade is still hampered by infrastructural deficit.

“As a position in the African Union (AU), we have agreed that without the infrastructure, we cannot achieve that objective. Therefore, we are dealing with the infrastructure that is going to make intra-Africa trade flow very well,” he said.

Minos Gerakaris, head of trade and finance at Rand Merchant Bank, similarly agrees that infrastructure is at the base of all possible trade.

“Intra-Africa trade is clearly the best route for trade, in that it brings down the cost of doing business on top of promoting continental relations as well as keeping the cash flow within the continent, but one of the challenges we face on the African continent is a lack of infrastructure to trade amongst ourselves,” said Gerakaris.

Jay Ireland, Chief Executive Officer (CEO) of General Electric Africa, is also of the view that Africa’s growth will accelerate through success in building intra-African trade, but infrastructure deficit is stalling progress.

“It takes a significant amount of time and money to cross borders because of the poor logistics and transport infrastructure, which is a deterrent for intra-Africa trade and international trade with Africa. As an effect of this, the cost of doing business in the continent is more expensive,” noted Ireland.

Philna Potgieter, Nedbank Capital head of Africa and export credit finance, also attributes low intra-Africa trade to infrastructure deficit.

“The continent of Africa can reap huge rewards if states embrace intra-Africa trade, but the challenge is the huge need for adequate infrastructure,” he explained.

To foster social transformation in addition to economic competitiveness by means of intra-Africa trade, Ireland and Potgieter think that it is within African governments’ capacities to bring bankable infrastructure projects to the market.

As a result, they urged government sectors on the continent to invest more in building efficient and reliable infrastructure for energy, logistics management, as well as movement of labour across borders if intra-Africa trade is to have a strong multiplier effect on growth, entrepreneurship and employment.

“Getting co-operation from government sectors is a necessary aspect of improving infrastructure on top of enhancing inter-regional trade,” affirmed Ireland and Potgieter, adding that strategic partnerships and collaboration at the bilateral and multilateral levels are essential for infrastructure development over and above enhancing intra-Africa trade.

“African nations have to forge strong partnerships, driven by shared values and policy objectives if they are to embrace intra-Africa trade and transform socio-economically,” added Ireland and Potgieter.

Further, to push infrastructure development and intra-Africa trade projects forward in an inclusive approach, trade policy and facilitation expert Valentine Sendanyoye Rugwabiza, believes that integration and political will are of supreme importance.

“The world economy has undergone substantial transformation in recent times and it is imperative for African countries to be fully integrated into it, otherwise it would be difficult for them to alleviate poverty and attain sustainable growth and improved living standards for their people.

“First and foremost, what is needed is strong and lasting political resolve to remove barriers to intra-Africa trade,” she noted.

Export Credit Insurance Corporation of South Africa acting Chief Executive Officer (CEO) Mandisi Nkuhlu added that democratic systems in African countries must also work.

“Democratic systems in African countries must work if the continent is to take intra-Africa trade projects forward in a sustainable manner.

“This means governments, key institutions as well as development partners (civic organisations and the media) should be committed to identify best practices that will not only help facilitate, but also coordinate the implementation of infrastructural development and intra-Africa trade programmes,” said Nkuhlu. 

Frankly, intra-Africa trade is key to Africa’s progress.

At the same time, infrastructure is essential for integrating regions – realising social and economic potential in addition to fast-tracking sustainable growth in Africa.

For that reason, it is quite clear that African Union member states must increase trade amongst themselves and deal with the shortage of infrastructure if the continent is to achieve its vision of an integrated, prosperous and peaceful Africa, an Africa driven and managed by its own citizens and representing a dynamic force in the international arena

April 2015
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