At an African Union summit in Addis Ababa at the weekend, leaders will discuss ways of more than doubling intra-African trade, from the current 10 percent to 25 percent or more in the next 10 years.
In comparison, 40 percent of North America’s trade is with regional partners and the rate soars to 63 percent in western Europe.
Poor infrastructure, especially roads and railways, tariff barriers, reliance on export of unprocessed goods and lack of product diversification are some of the bottlenecks to trade within the continent.
“It takes about 10 days for a ship to leave Asia to come to the (Kenyan) port of Mombasa… it takes two weeks before they are cleared. It takes another three weeks from Mombasa to Kampala,” said Kwame Owino, the director of a Kenyan policy group, the Institute of Economic Affairs.
“So long as we do not coordinate infrastructure development … the volumes of trade, or the potential to exploit cross-country trade within Africa, will still be limited,” he added.
Transport cost in Africa is 63 percent higher than the average in developed countries owing to the poor infrastructure.
Regional nations often produce similar goods, forcing long distance exports. For instance, the East African countries of Kenya, Rwanda and Uganda all produce coffee, forcing them to export beans to markets outside the continent.
“Africa needs to take expeditious action in diversifying its export base,” said the AU report. “Concentration on a few exports, mainly raw materials and primary commodities, cannot ensure long-term growth,” it added.
Africa’s major imports are from outside the continent and are mostly finished products, thus limiting regional trade. Lack of skilled labour and technological advancements also impair its competitiveness.
Removal of non-tariff barriers, simplification of customs procedures and documentation as well as the easy movement of goods are fundamental to Africa’s internal trade, the AU report noted.
Despite the existence of regional trading blocs, exchange between members is still hampered by high tariffs, while negotiations are complicated by some countries being members of overlapping trade groupings.
“Free movement of goods and people remains theoretical,” said a trade expert who spoke on condition of anonymity. “There is a surplus of managers in Kenya, but a Tanzanian company would not hire them due to strict legislation.”
Different levels of development among African countries also contribute to the reticence to open up domestic markets, with smaller economies fearing domination by the more developed ones.
“Domestic pressures for governments to continue to hold trade barriers in Africa are still very strong,” said Owino.
“Africa, like many places, has very strong domestic constituencies that are very fearful of increased opening (of their economies). Barriers may be useful to our small industries, but harm the welfare of the people in general.”
A long history of reliance on raw material export to the west dates back to many countries’ colonial past, when Europeans extracted minerals, timber and other resources for their industries. Much hasn’t changes since.
However, African leaders hope that increased trade within regional blocs will lead to a continent-wide free trade area, boosting growth.
“The stark reality is that Africa is endowed with a wealth of natural and mineral resources, which if properly harnessed, could serve as an engine of economic growth and prosperity,” the AU report said.