Intra-African Trade: A first step to a continental free trade zone

Africa is touted as the continent of opportunities, where there are endless resources available for economic growth and transformation.

But for Africa to take its rightful position in the world’s global economy, then it must dream of becoming borderless in terms of doing business. If the continent can create a single economic space, eliminating the regulatory and administrative physical barriers, they can start to take on the role in the global economy that their size truly deserves.

Africa is still grappling with poor infrastructure, cumbersome procedures and tariffs, and an unpredictable power supply. Trade is difficult in the continent, and intra-African trade is weak, because fundamental aspects of logistics, such as transport, energy and ICT are lacking. These are the challenges that need to be tackled.

The boosting of intra-African trade requires the adoption and implementation of current trade policies at the national, regional and continental levels, which should be geared specifically towards its promotion. For regional markets to operate efficiently there is the need for stronger regulations on trade related issues of intellectual property rights, competition policies, investment, government procurement, trade and the environment.

Unclear policies also hamper trade across the continent. For example, goods from Togo may be left at the Nigerian border, because they ‘do not satisfy local requirement’.  Or perhaps a trader may get his grain to the Burkina border only to find out that a ban on exports has been imposed.

The solution is a continent-wide free trade zone, where businesses can trade in relative confidence. A free trade zone is an arrangement where member countries agree to cut or scrap import duties for other members in order to lower business costs and remove bureaucracy.

The aim is to give a massive boost to trade, especially between raw material producers and manufacturing based economies. Such an agreement in Africa could also bring about greater trade synergies and strategic coordination of the continent’s free trade and economic development zones, and through this, maximize and cheapen the flow of goods and services.

Post-independence conflict in Africa has left much of the continent with a legacy of poor governance and a lack of political integration that free trade zones aim to address. But before Africa can even hope to achieve this goal, more regional free trade agreements, like the Economic Community Of West African States (ECOWAS), need to be strengthened or even established, before consolidating into a continental free trade area. These will serve as an engine of growth and sustainable development in Africa.

About 80% of African countries’ exports are to markets outside the continent and similar amount of the continent’s imports come from external sources. Boosting intra-African trade is appropriate and timely given the current economic boom that the continent is experiencing.

But there are a number of challenges that any attempt will face. The creation of a monetary union in East African, for example, has thus far been unsuccessful as leaders struggle to compromise, but difficulties have also arisen because of the political, economic and even cultural differences. For anything on the scale of a continental free trade zone to succeed, it would require a great deal of co-operation between all African countries.

The attempts at a monetary union have also been woefully under-resourced, working with a budget of only $55m per annum for negotiations between the five East African countries. Needless to say, a pan-African agreement would require a budget many times larger to have any hope of success.

Other challenges have also been recognized as hampering the continental Free Trade Zone agenda. These include undiversified und underdeveloped production structures, inadequate infrastructure, and prevalence of non-tariff barriers and lack of trade governance structures.

On the other hand, increased intra-African trade will enable the continent to create a large market, as well as encourage the diversification of economies. In the post-independence period, integration has been a core element of the development strategy of African countries. The importance that African countries attach to regional integration has been reflected in the high number of integration schemes on the continent.

Although some progress has been achieved on the process of intra-African trade, the objective of African market integration is far from being realised. Serious efforts must be made to help Africa develop a culture where eventually, we would want to see Africa being borderless, particularly in terms of doing business.

Africa is a continent of opportunities: a billion people and a billion dreams. All of them can be realised if there is the conscious effort to encourage intra-African trade in order to achieve eventually, a continental free trade zone.