AFRICANGLOBE – Intra-African trade increased by 50 per cent to $61 billion between 2010 and 2013, according to recent data released by the African Development Bank.
The rise is attributed to improved market access and a strong growth in re-exports among African countries.
The increase marks a strategic shift in internal trade on the continent, which was previously relatively low compared with trade flows from the European Union and China, observers say.
Poor quality roads and highways connecting national borders; non-tariff barriers and insecurity are blamed for the weak growth posted by intra-African trade in the past.
Recorded trade flows within the East African Community have grown by an average of less than 15 percent per annum since 2005 compared with an average growth rate of 20-25 per cent per year in trade activity between the bloc and the Eurozone, research shows.
Africa’s trade with Europe grew to $430 billion between 2010 and 2013 while the value of trade flows with China increased to $210 billion during the same period, AfDB data shows.
The growth of intra-African trade has the potential to reduce unemployment, household poverty and increase tax revenues.
Economists cite increased access to trade routes within economic blocs on the continent for the sharp growth in intra-African trade, with big economies such as Egypt posting bigger export volumes within the Common Market for Eastern and Southern Africa (Comesa) in recent times.
Though latest data on the country’s exports was not available by press time, Egypt’s manufacturing sector is currently considered a leading supplier of textiles, pharmaceuticals and plastics within the bloc.
Similarly, South Africa is a major exporter of building materials, wines and spirits, electronics and motor vehicle spare parts in the Southern Africa Development Community (SADC) bloc.
Increasing re-exports of technological products such as assembled cars between countries has partly driven the growth of intra-African trade, economists said.
The emergence of decentralised global value chains has led to new investments in local but affordable assembling plants on the continent, which offer cheaper route-to-market costs and tax incentives for targeted sectors.
Re-exports are goods that are imported, undergo further processing and are then exported.
“There has been increased market access to African economies, which has resulted in countries such as Egypt experiencing strong export flows within the continent. However, political challenges faced in some countries need to be addressed to sustain the robust growth in intra-African trade,” said Steve Kayizzi-Mugerwa, AfDB’s acting chief economist and vice president.
New interest in local African investments is expected as established trading firms seek to expand in targeted markets over the long term.
Some economists anticipate an increase in cross-border investments by African businesses while foreign companies are likely to accelerate their continental expansion plans.
By: Bernard Busuulwa