Menu Style

Cpanel

23August2017

Eliminating barriers to regional integration and intra African trades will unite the Region

Although improving, Africa is still the worst region in the world to do business. African countries dominate the lower reaches of the World Bank’s Doing Business in rankings.  Some of the factors responsible for dismal performance of these countries have been at the centre of the regions ability to trade within.  While there are differences in the performance amongst the sub regions with in the continents in relation to the performance of intra-regional trade, the aggregate performance remains low. Much of the problems are the same problems plaguing the member nations.

Paranoia and political naivety   

It has been argued that free trade is misunderstood by many African leaders and people and hence despite the adoption of the agreements in paper, pressure groups within countries continue to hoodwink leaders at taking appropriate actions to back the agreements. Often times, the expected impact of freer trade regime and consequently competition on domestic production are controversially presented while key areas of opportunities such as wider market for goods produced, impact of expanded market competition on consumer prices, increased variety and quality as well as the opportunities for domestic companies to benefit from innovation, specialisation and economies of scale are played down. This political angle to trade policy and the sustained passion to have trade policy sovereignty continue to exist and derail the appropriate implementation of the agreements.

Non-tariff barriers are bigger especially the physical and geographical characteristics of market in the region

The biggest barriers are however non-tariff as we have seen in the Nigerian situation where tariff has reduced to the barest minimum since implementation of CET and adoption of ETLS. The physical and geographical characteristics of many sub-Saharan countries are often at play in the low trade volume. Sub Saharan Africa consists of 48 countries whose entire gross national income in 2011 was barely higher than that of Netherlands. The region perhaps harbours some of the world poorest people with 50% living below chronic poverty level. The region is also characterised by low population density with the least urbanised locations in the world dispersed over a large landmass. Hence, agglomeration of economic activities is substantially low. The effect of low population density on productivity in Africa is reinforced by the fact that 30% of the population lives in landlocked countries.

The challenges of infrastructure and personnel management across many West African borders are another source of barriers to intra-African trades

Most borders within the region are rustic with immigration offices at these borders behaving like a cartel. At every check point, money is expected to be paid before a person or goods are allowed to pass through. In this respect, cross border business linkages in the region remains very cumbersome and adds avoidable premium on costs of trades. Most of these developments contradicts the regional integration agreements and negates the ECOWAS Charter. It has been estimated that a 20% reduction in border crossing time in Africa could generate about 15% reduction in cost of transportation. According to a World Bank report, fixing these problems alone could generate an extra US$20 billion annually across the continent.

In addition, the activities of custom officials and border patrol agents’ smacks of poorly communicated policies to both traders and the officials. The result is wholesale confusion at border crossings which limits regional trades as a result of the heightened uncertainties. At the end, the entire benefits of regional integration agendas as well as trade liberalisation schemes are lost. In other words, there is still a lot the government and policy makers have to do to support its obvious commitment to the regional integration agreement and other plans.

Aviation infrastructure within the continental especially the West African sub region is largely suboptimal with intramodal connectivity a major problem in many countries. In other words, even where goods are flown into many of these countries, connecting transport from the airports to the market poses greater problem in many cases. In this regards, the damages of wars are consequential.

Where these constraints are reduced to minimum, the expanded market opportunities that the freer exchanges suggest for SSA manufacturers should result in higher productivity and economy of scale with attendant increase in margins. If manufacturing production activities can respond promptly to the expanding market opportunity, manufacturers in the continent would never feel threatened by the incidence of dumping as the competitive landscape gets bigger.  It can also be argued that with a uniform tariff system and improved customs services, the incidence of intra African smuggling would be substantially reduced with implications for custom revenue in the different member countries. 

Connect

Newsletter