UNCTAD, recently reported a positive rise in overall South-South exports from 13% of world trade in 2000 to 23% in 2010. Africa’s share of that was only 6%. Last week we heard numerous calls for African countries to continue in their efforts to create a Continental Free Trade Area by 2017 and to coordinate with each other to reach their economic potential.

Speaking at African Industrialisation Day, on the theme “Accelerating Industrialisation for boosting Intra African trade”, Mr Carlos Lopes, resident representative of the UN Secretary General said: “African countries are among the fastest growing in the world, yet intra-regional trade accounts for 10% of the continent’s commerce, significantly less than other regions.”

He stated that removing obstacles such as obsolete infrastructure and high transaction costs was an absolute prerequisite for Africa to fully realise its economic potential and address its socio-economic and development challenges, adding that healthy intra-African trade could free the continent from its reliance on international aid.

His comments were echoed by the Ghanaian Minister for Trade and Industry, Ms Hannah Tetteh, who called on her fellow African countries to deal with their infrastructural deficits to enable the smooth transportation of goods and consequently ease the ability of businesses and industries to grow.

Trade facilitation is indeed vital – every day required to ship goods reduces trade by 1%. On an average sea voyage of 20 days, one extra day at sea results in a 4.5% drop in trade between any two trading partners. Nigeria is already working with NEXIM bank on a proposed sea link coaster ferry service to reduce journey times along the West African coast, but more investment is needed in roads, railways and communications systems.

The cost of intra-African trade must come down in order to achieve more effective regional integration, not only by improving trade infrastructure, but also by removing tariff barriers. Currently exporting to a fellow African country attracts tax of 12.5% compared to 9.4% when the producer is exporting elsewhere. The OECD estimates that the fees, formalities and procedures constitute roughly 10% of any trade transaction. A WTO deal on trade facilitation, as proposed by Pascal Lamy, would reduce these costs from 10% to 5%.

Nigerian Minister of Trade and Investment, Mr Olusegun Aganga, last week announced his country’s plan to remove tariff and non-tariff barriers to trade within the continent, answering the call of AU Commission for programmes such as COMESA’s Maize without Borders to be imitated across the board.

Mr Aganga appealed to other African nations to follow Nigeria’s example because effective regional integration would not only enhance intra-African trade, but would also attract investment into the continent’s manufacturing sector. Africa is currently only responsible for only 1% of global manufacturing, a figure which must increase if the continent is to fully develop – in the words of Mr Aganga: “historically, no nation has moved from being poor to rich by relying on exporting raw materials without having a vibrant manufacturing sector.”

summary

UNCTAD, recently reported a positive rise in overall South-South exports from 13% of world trade in 2000 to 23% in 2010. Africa’s share of that was only 6%. Last week we heard numerous calls for African countries to continue in their efforts to create a Continental Free Trade Area by 2017 and to coordinate with each other to reach their economic potential.

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