Opinion
Africa needs Trade not Aid
Trade is an engine of growth and if Africa is to sustain the current growth momenta which currently stand at averagely more than 6 percent, we should ensure that we increase the volume of trade and business within the continent.
The investment in Africa which is currently taking place in many jurisdictions and regions, will positively impact on intra-African trade. Poor infrastructure has in the past increased the cost of doing business – the average impact of transportation to businesses in Africa amount to approximately 40 percent – a cost that is usually passed on to the consumer. While this cost continues to come down with improved roads and rail systems, Africa still remains uncompetitive globally. Improved infrastructure will bring in an additional US$ 34 billion of trade annually.
This will in turn help Africa’s booming informal trade transform into the formal economy, which means more jobs for Africa’s 400 million young people, increased global competitiveness and a significantly reduced reliance on the struggling economies of the west.
Trade Challenges
A number of challenges have been recognized as hampering the continental free trade zone agenda. These include un-diversified and underdeveloped production structures, inadequate infrastructure, and prevalence of non-tariff barriers and lack of trade governance structures. Increased intra-African trade will enable the continent create a large market of close to one billion people as well as encourage the diversification of economies. In the post-independence period, integration has being a core element of the development strategy of African countries.
Unclear policies also hamper trade across the continent. For example, goods from Togo may be left at border in Nigeria with the reason that they do not satisfy Nigerian requirements. A trader may purchase their grain at the Burkina Faso border only to find out that a ban on exports has been imposed. The leadership in Africa must continuously work to implement current policies and legislation that helps to reduce the challenges hampering trade.
Trade facilitation will provide important opportunities for Africa by increasing the benefits from open trade, and contributing to economic growth and poverty reduction. However, the quest for more open trade is not an end in itself but rather driven by the experience that open trade provides more economic opportunities for people. Producers can offer their goods and services to more customers, and consumers have more choice, lower prices, and access to innovations. Open markets increase prospects of producing and selling new ideas and products locally, regionally and in global markets, which leads to more income opportunities and the improvement of living standards on the continent.
Africa needs Trade not Aid.
Paul Frimpong is an African Affairs Analyst and Emerging Markets Strategist. He is also a Chartered Economist, and his area of interest includes macro-economy and global affairs.
