African Union Pushing for More Intercontinental Trade
ADDIS ABABA, ETHIOPIA — Both the African Union and the U.N. Economic Commission for Africa (UNECA) have held countless meetings and conferences on increasing intra-Africa trade. Efforts so far, however, have not translated into results. How intra-Africa trade can be improved is one of the most discussed topics at the AU and UNECA. African countries do only 11 percent of their foreign trade with other countries on the continent. In comparison, Asian countries do 50 percent of their trade with each other, while European Union countries do 70 percent. UNECA Regional Integration and Trade Division Director Stephen Karingi said several conferences during the past decades were needed to find common positions. “They have had to come up with common positions on their discussions, negotiations with bilateral partners, for instance the European Union. But much more importantly, they had to come and agree on what they need to do as sub-regions in the context of deepening regional integration through the regional economic communities,” said Karingi. World Bank urges changes. A 2012 World Bank report says the continent loses billions of dollars annually because of continental trade barriers. A U.N. report on intra-Africa trade released in July, urges African governments to boost the private sector, reduce trade barriers and expand infrastructure.
The slow progress makes it difficult for businesses to tap markets in surrounding countries.
The Jittu Horticulture company is Ethiopia’s biggest exporter in its sector. General Manager Jan Prins said Ethiopia has huge trade opportunities, but that there are too many challenges when trying to trade with neighboring countries.
“The major challenge is to reach these markets. And it can either be logistic problems like over flooded border areas, bad roads or no roads, trade barriers, political issues or security issues," Prins said. "For Ethiopia it is very difficult to reach the markets in the surrounding countries.”
Poor infrastructure, visa difficulties, corruption and extremely high transportation costs are just some of the barriers companies face when trying to trade within the continent. A truck in Africa will, on average, only travel nine kilometers an hour because of the many checkpoints. Therefore, transport costs make up 40 percent of a product's price.
Diversity of trade
Intra-Africa trade, both imports and exports, amounted to $131 billion in 2011. UNECA's Karingi said this number could grow as trade within the continent is much more diverse than trade with countries outside the continent.
“If you take the top five products that, say Ghana, trades with the rest of the world and you compare that with the top five that Ghana trades with the rest of Africa, you will find that four out of five of the commodities, tariff lines, that Ghana trades with Africa are actually value added. Whereas five out of five of the trades with the rest of the world, there is no value addition. And you can repeat the same stories on other countries,” said Karingi.
African Union countries have agreed to make the continent a free trade zone by 2017. African Union Trade and Industry Department Director Treasure Maphanga said it is up to governments to make the goal of a continental free trade zone a reality.
“In many countries there is political will that exists at a certain level. Intra-Africa trade does not just depend on one ministry, it does not just depend on the head of state. It depends on the whole government machinery. And coordinating toward a specific goal,” said Maphanga.
The African Union will hold another conference on how to improve trade within the continent at the end of October.