Integration cure to Africa’s economic woes

Tobias Alando

The story of trade among African countries is grim. According to 2016 COMTRADE (United Nations International Trade Statistics Database), intra-European trade stands at an estimated 60 per cent, intra-Asian trade (40 per cent) while intra-Africa trade stands at about 20 per cent.

Historically, the freedom of movement of goods and people has always been a natural attribute of growing societies. This movement is paramount to building Africa’s regional economic integration, facilitating trade and fostering economic growth.

A look at intra-European trade comparatively, the establishment of the European Union’s (EU) single market in 1993 revitalised the region’s economy significantly. Businesses, especially those in the manufacturing sector, enjoyed the fruits of economies of scale.

This vibrant single market was made possible through elimination of barriers (tariff and non-tariff), allowing citizens and industries to benefit from direct access to 28 countries and over 500 million people. This resulted to higher GDP, increased employment opportunities, trade, and better investments into the EU economy.

Africa’s regional integration has constantly been hampered by, among other things, political instability, poor infrastructure, inadequate power supply, inadequate market intelligence, high cost of doing business and corruption. Consequently, trading with each other has become a costly affair.

A report by African Development Bank indicates 75 per cent of countries in the top 20 most Visa-open countries are in West Africa or East Africa. Out of the 20, only one is in North Africa and none in Central Africa.

Africa has employed various strategies to remedy this. For example, the African Union (AU) has promoted integration through initiatives such as the 1980 Lagos Plan of Action, 1991 Abuja Treaty-African Economic Community (AEC) and New Partnership for Africa’s Development (Nepad), and recently, the Africa Continental Free Trade Area (AfCFTA) which is seen to provide feasible solutions to the regional trade predicament. This agreement commits governments to remove tariffs on 90 per cent of goods produced within the continent.

The AfCFTA presents us with an opportunity to focus on value addition, especially since the main reason Africa’s trade with the world is imbalanced is because the continent mainly exports raw material.  The agreement seeks to create the world’s largest single market of 1.2 billion people, and is likely to result in a continental GDP contribution of about $3.4 trillion (Sh340 trillion).

Africa’s regional integration will not only create an economically powerful bloc, but also enhance competition, promote diversification of production, access to markets and benefit from an exchange in social-cultural engagements.

President Uhuru Kenyatta, who was among the first African leaders to sign AfCFTA, noted that intra-Africa trade will increase competitiveness of Africa’s industrial products, through harnessing economies of scale, of this large continental market.

Reduction of tariffs and non-tariff barriers within the AfCFTA will transform our trade and increase the volume of exports. This will mean better bargaining power and a boost in commercial activities for many countries guaranteeing productive job creation.

This is what we have to do to achieve our economic goals by 2030. Opening up our borders to each other as a continent promises to modernise our industries and infrastructure.  

Writer is Head of Membership at Kenya Association of Manufacturers —[email protected]

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