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Africa’s Should Reduce Its Dependence on Traditional Commodities

Africa is still heavily dependent on traditional export crops and commodities, reducing the scope for mutually beneficial trade. Yet this paints an excessively simplified view of trends in regional trade. Patterns of trade are changing rapidly. The traditional export market outside the continent of Africa (Europe, the United States and, increasingly, India and China) are of primary commodities, but the intra-regional component of trade is much more diversified, with high shares of non-traditional exports and manufactured goods, as illustrated by the case of the East African Community (EAC).

The conclusion is self-evident. If African policy makers wish to accelerate the diversification of their economies, higher levels of regional trade and the AfCFTA are the ways to achieve this. Although intra-African trade has been progressively rising over the last decade, there is no doubt that intra-regional exports have remained at low levels for most countries on the continent, accounting for an average of around just 16 percent of total exports, compared with an average in the European Union of 64 percent and 70 percent for Asian Pacific Economic Co-operation (APEC) countries. Indeed, within some African regional blocks, intra-regional trade has been stagnant or actually declining.

There are several reasons for this: persistent barriers to trade in the form of high tariff and Non-Tariff Barriers; physical hurdles that cannot be overcome due to a lack of infrastructure; and regional disputes. AfCFTA implementation would alleviate these barriers to trade, boost infrastructure development, and, with its legally-binding element, ensure that the prospects for intra-regional trade do not rely on political goodwill. As an Africa-wide effort at harmonisation and reduction in barriers to trade and investment, the AfCFTA can thus breathe new life into Africa’s regional economic communities and help integrate those blocks better into the wider continental market.

It needs conceding that the implementation of regional treaties and protocols within Africa has often not been satisfactory. There is, however, a new sentiment that lessons have been learned on this score. At an Extraordinary Meeting of the African Union (AU), the AfCFTA agreement was signed in March 2018 in Kigali, Rwanda, by no less than 44 member states. Since then, the number of signatories has risen to 54 of the 55 member states of the AU – a remarkable degree of consensus that is rarely achieved in regional bodies in other parts of the world. Moreover, of those 54 countries, more than half (28) have now ratified the agreement through their national parliamentary processes. That, in itself, signals the seriousness with which member states are taking the AfCFTA. With every member state committed to the AfCFTA, there will be significant ‘peer pressure’ on signatories to implement the Agreement fully.

To conclude, the rationale for greater economic co-operation and integration among African countries has always been strong. In a global economy increasingly dominated by large economies and regional blocks like the European Union, the United States, China and India, and against a backdrop of increasingly pronounced trading tensions between them, those arguments become even more compelling. The AfCFTA presents a way to achieve that goal and create a more prosperous, economically resilient, continent.

 

Source: OECD