Cooperation, Africa’s Path To Prosperity

Cooperation, Africa’s Path To Prosperity
Africa has the lowest rate on intraregional trade globally

AFRICANGLOBE – Every two or three years, African heads of state travel to a foreign capital to be wooed by one or another of the major powers jockeying for position on the continent. China has been among the more prominent organizers of these “Africa summits,” while Japan, India, Turkey, Brazil and the European Union have all held their own versions. In August, President Obama will join the fray when he invites 47 African leaders to talks on trade and security in Washington.

These forums have their merits: They reflect the rising importance of a continent that is home to six of the world’s fastest-growing economies and can provide a platform for the discussion of development plans that can benefit everyone concerned. But to a certain extent they have more to do with geopolitics — U.S.-China rivalries for example — rather than global trade.

The problem is that they reinforce the image of a continent badly in need of foreign aid to resolve its problems. The truth is that greater cooperation among African states is the most promising route to transforming the continent’s economic fortunes.

There is hardly any place that has less interregional trade than Africa. Whereas 68 percent of commerce in Western Europe in the last decade was with other West European nations, and 48 percent within North America is between the United States, Canada and Mexico, interregional trade in all of Africa stands at between 10 and 13 percent.

The problems that hobble business in Africa are mostly man-made. Artificial barriers such as high tariffs, inefficient transportation and reluctance to facilitate the free movement of people and goods within regional economic blocs are among the biggest factors. With some exceptions, Africa is booming. But more interregional commerce would bring even greater results.

In an excellent, but underreported policy paper published in January 2012, the African Union Commission and the United Nations Economic Commission for Africa outlined a road map whose implementation they projected would see intra-African trade rise to 25 percent within a decade. The central idea — establishing a pan-African free trade area — would bring an end to tariffs and import quotas, and create a market worth as much as $2.6 trillion, according to the president of South Africa, Jacob Zuma.

Anyone familiar with African Union reports knows, of course, that drafting recommendations is the easy part; implementation unfolds at a glacial pace. The proposed free-trade area was first endorsed in a meeting in Abuja in 1991 but has languished in the planning phase, mainly due to protectionism.

This is unfortunate because the benefits are so obvious. If the three major regional economic bodies — the East African Community, the Southern African Development Community and the Common Market for Eastern and Southern Africa — were to move quickly to establish a single free-trade area, for example, they would form a formidable bloc with a combined population of 530 million.

Trade within Africa can also fuel industrialization. Two of the better-exporting nations — Ghana (which sold 52 percent of its goods and services in Africa in 2008) and Kenya (46 percent) — send mainly primary goods to markets in Europe but trade manufactured produce within the continent. Some of Ghana’s key exports within Africa that year were processed gold, nonelectrical machinery and aluminum and alloy plate and sheets, contrasted with the cocoa beans, cashew nuts and unprocessed gold it sent overseas.

Kenya exported tea, flowers, vegetables and coffee to its main European markets, while its exports to other African countries, excepting tea, were mainly processed goods, including cement, medical products, cigarettes and refined fuel oil. This suggests that easing barriers within Africa might offer a greater incentive for countries to add value to primary products.

The ability to expand infrastructure also lies well within the grasp of African leaders. African countries hold cash reserves outside the continent totaling nearly $200 billion. A recent report, on efforts by the United Nations Economic Commission for Africa to get the money invested back in the continent to provide much-needed funds for building infrastructure and reducing deficits, was headlined, appropriately, “Rich Beggar Paradox That Is Africa’s Forex Reserves.”

With the solutions so well known, it is vital that African leaders find the political will to make way for closer economic ties. Kenya’s new president, Uhuru Kenyatta, moved during his first few months in office to forge a coalition with neighboring Rwanda and Uganda to speed up integration and cut invisible barriers to trade. But he appeared to lose his nerve following a din of complaints from Tanzania, whose leaders take a much more protectionist approach to these issues. National leaders inclined to reap the benefits of integration should just plow ahead and allow the rest of Africa to move at its own speed.

On a broader level, the African Union Commission should consider enlisting the services of elder statesmen like former Presidents Festus Mogae of Botswana, Thabo Mbeki of South Africa, Olusegun Obasanjo of Nigeria and Benjamin Mkapa of Tanzania to serve as its ambassadors to convince Africans to cooperate more closely on the business front.

Mr. Mogae, in particular, has often spoken forcefully of the need for integration. “As we have learned in Botswana,” he said in 2009, “investors from wealthier nations are principally attracted to large domestic markets on the continent. Although we lowered taxes, reformed our laws and got attractive credit ratings, we still mostly received greater investment in extractive industries, not quite the diversified capital inflow we hoped for. Speedier integration in most parts of the continent would change that.”

Africa certainly needs to continue engaging the rest of the world. But if its member nations traded more with one another, its leaders would stand a better chance of attending global summit meetings as equals, not supplicants.

Murithi Mutiga is an editor at the Nation Media Group in Kenya.