TRALAC - Trade Law Centre

Intra-Africa trade - the key to boosting African economies

Monday, 06 October 2014

Source: Southern Times Africa

More emphasis needs to be placed on trade partnerships among African countries to drive seamless intra-Africa trade, an economic survey has shown.

While international trade agreements such as African Growth and Opportunity Act (AGOA) and the recently announced Economic Partnership Agreement between the European Union and Southern Africa are positive for the continent and should be encouraged, Africa is still the world’s least connected continent when considering the ease of moving people, trade, information and finance, according to the DHL Global Connectedness Index, released in Cape Town, South Africa, on September 30.

There are insufficient trade agreements to encourage and drive intra-Africa trade, Charles Brewer, managing director of DHL Express Sub-Saharan Africa, said while releasing the data.

As a result, there tends to be a focus on doing business with regions outside of Africa, such as the United States or China, he said. 

African countries, Brewer said, desperately need to start trading among themselves, and the push for trade agreements should therefore not only be with international trading partners, but among African countries too. 

All African countries should therefore be focused on developing connectedness on the continent and building trade relationships, said Brewer.

Intra-regional trade statistics show that Africa rates among the lowest, with less than 20 percent of what is produced in the region staying within the region. This, in essence, means that over 80 percent of what is produced in Africa is exported, mainly to the EU, China and the US, the index shows. 

By comparison, 60 percent of Europe’s trade is within its own continent, and in North America, the figure is 40 percent. 

However, some regional blocs in Africa have programmes and protocols in place to boost trade among member countries of the regional groupings.

The Common Market for East and Southern Africa (COMESA), the East African Community and the Southern African Development Community have identified border post refurbishment as one of the initiatives to improve infrastructure and increase intra-regional trade in eastern and southern Africa.

Under a tripartite arrangement, the three regional blocs are promoting the concept of one-stop border posts to facilitate movement of goods and people and therefore boost trade.

For example Zambia and Zimbabwe have established the Chirundu One-Stop Border Post and since its inception in 2009, it has more than halved waiting times for transport operators and improved the general flow of persons and goods in line with SADC’s regional integration agenda.

Under the one-stop border post scheme, travellers are cleared just once for passage into another country in contrast with the situation where travellers have to be passed on both sides of the border.

COMESA-SADC-EAC selected Chirundu a few years ago as one of the border posts for the pilot phase of the one-stop border initiative that aims to facilitate trade and movement of goods and services in eastern and southern Africa, and Chirundu has become a new benchmark for regional integration.

This development addresses issues of delays as well as promoting the smooth flow of goods through the removal of often perceived “restrictive” operational procedures at borders.

SADC’s quest to facilitate trade and free movement of goods and services is gathering momentum with more countries from the region moving closer to opening more one-stop border posts. 

Malawi and the United Republic of Tanzania have taken the first step towards creating a one-stop border post at the Songwe-Kasumulu entry point.

Officials from Malawi and Tanzania, signed a memorandum of understanding (MoU) in March this year that formalised the creation of a single customs and immigration centre at their common border.

Under the MoU, the border posts of Kasumulu in Tanzania and Songwe in northern Malawi will be operating under one umbrella by the end of this year.

Namibia and Angola have initiated discussions to ensure the efficient cross-border movement of goods between the two countries, with the creation of a one-stop border post at the Oshikango-Santa Clara entry point as one of the possible solutions on the cards.

“Some of the challenges with the cross-border movement of goods specifically at the Oshikango border post (in Namibia) and the Santa Clara border post (in Angola) need to be addressed to facilitate the smooth movement of goods,” said Namibian Minister of Trade and Industry, Calle Schlettwein, after a recent visit to Angola.

Minister Schlettwein added that upon identifying the challenges at border posts the long-term solution would be the creation of one-stop border posts where trade, import and export clearances are dealt with by one official.

The Namibian trade minister met Angola’s Minister of Industry, Bernada Martins, and that country’s Minister of Commerce, Rosa de Matos.

“The parties agreed on the need to strive to support industrialisation by increasing trade between the two countries. Namibia therefore welcomes increased exports from Angola and would equally wish to expand its exports to Angola,” said Minister Schlettwein.

While admitting that trade volumes between the two countries are relatively low, Schettwein said the higher volumes of goods entering Angola through Namibia are actually goods in transit, coming mostly from South Africa.

However, he was adamant that Namibia needs to ensure that its goods also reach Angolan shelves but cautioned that Namibia needs to increase its industrial capacity to cater for the growing Angolan, regional and eventually global markets.

Other ports of entry identified for implementation of this one-stop border concept include the Beitbridge border post linking South Africa and Zimbabwe, and the Kasumbalesa post between Zambia and the Democratic Republic of Congo.

Beitbridge and Chirundu are considered to be among sub-Saharan Africa’s busiest border crossings with hundreds of southward or northward bound commercial trucks passing through the two border posts every day.

According to the DHL Global Connectedness Index, it is well documented that one of the African continent’s biggest challenge in terms of realizing its trade potential is an underdeveloped infrastructure.

“Underdeveloped infrastructure directly impacts the speed at which goods are moved into, out of and across the region. It also drives up logistics costs, and it is estimated that supply chain costs are up to nine times more expensive in Africa in comparison to other regions in the world.

“These inflated costs also ultimately hamper economic growth in the region,” said Brewer. 

While progress on infrastructure development and investment should continue, a push now needs to be made by African countries towards developing and implementing trade agreements, which will encourage trade between the regions, Brewer added. 

Under the COMESA, EAC and SADC North-South Corridor infrastructure initiative, more than US$1.2 billion has been raised to implement the project, which traverses eight countries in eastern and southern Africa. Planned programmes include the construction of more than 8 000 kilometres of road, rehabilitation of 600km of rail track and upgrading of the Dar es Salaam port in the United Republic of Tanzania – one of the biggest and busiest ports in Africa.

SADC successfully launched its Free Trade Area (FTA) in 2008 and this milestone has contributed to improving intra-regional trade.

Under the FTA, producers and consumers in the region benefit from a tariff-free trade for all goods originating within the region. All SADC countries, with the exception of Angola and the DRC are members of the FTA. 

The two countries are expected to join the FTA soon, after requesting time to rebuild their economies following decades of armed conflict.