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Thursday, 28 August 2014

Intra-Africa trade: Going beyond political commitments

Among Africa's policy wonks, underperforming trade across the continent within the region is a favoured subject. To unravel the puzzle, they reel off facts and figures at conferences and workshops, pinpoint trade hurdles to overcome and point to the vast opportunities that lie ahead if only African countries could integrate their economies. It's an interesting debate but with little to show for it until now.

The problem is partly the mismatch between the high political ambitions African leaders hold and the harsh economic realities they face. Case in point: they have set up no less than 14 trading blocs to pursue regional integration.

Yet they have shown "a distinct reluctance to empower these institutions, citing loss of sovereignty and policy space as key concerns," says Trudi Hartzenberg, executive director at the Trade Law Centre (TRALAC) for Southern Africa, an organization that trains people on trade issues. As a result of this reluctance, she says, "Regional institutions remain weak, performing mainly administrative functions.

"Trade flourishes when countries produce what their trading partners are eager to buy. With a few exceptions, this is not yet the case with Africa. It produces what it doesn't consume and consume what it doesn't produce. It's a weakness that often frustrates policy makers; it complicates regional integration and is a primary reason for the low intra-regional trade, which is between 10% and 12% of Africa's total trade.

Comparable figures are 40% in North America and roughly 60% in Western Europe. Over 80% of Africa's exports are shipped overseas, mainly to the European Union (EU), China and the US. If you throw into the mix complex and often conflicting trade rules, cross-border restrictions and poor transport networks, it's hardly surprising that the level of intra-Africa trade has barely moved the needle over the past few decades.