The World Bank says regional trade barriers are blocking African countries from billions of dollars in potential earnings. It says it’s easier for those countries to trade with other parts of the world than with each other. The World Bank has released a new report – called De-Fragmenting Africa: Deepening Regional Integration.
“The Africa market is split into many individual country markets and many of those countries are small. And bringing those markets together would bring a lot of opportunities for people to trade across borders, but (also) to exploit the benefits of a much larger market. And the book is about barriers that ordinary traders face every day in trying to get across borders that are fragmenting those markets,” said Paul Brenton, the bank’s trade practice leader for the African region and co-editor of the report.
Traditional markets stagnant
He said there are great opportunities for opening new markets.
“For example, in agricultural products, Africa has enormous potential to produce and sell more agricultural products. But barriers to trade are limiting that potential. There’s also potential in manufactures (sic). As Africa grows and middle classes emerge, there are plenty of opportunities for manufactures to be produced locally. But again, they’re not emerging yet. And there are also plenty of opportunities for trade in services for people, for professionals – doctors, teachers – to be able to sell their services across borders,” he said.
Africa’s traditional markets of Western Europe and the United States have been “stagnant” due to the global recession.
“There are new markets and they’re very close. And it seems obvious that Africa should be exploiting its own markets as they grow, but often it’s much harder for Africans to trade with each other than it is for them to trade the rest of the world,” said Brenton.
The World Bank official said trade barriers in Africa often occur right at the border.
“There are a lot of agreements on regional trade in Africa on paper. And the real challenge is implementation. So what we find at the borders is a real lack of implementation of these agreements. In part, that reflects issues of governance. So if you go to the border of the DRC with Rwanda, you find there are 17 agencies at the border, each trying to get some money off traders as they cross the border and, even worse, harassing them in some cases. Now, there should only be four agencies at the border,” he said.
Trade barriers can affect consumers, as well. For example, the South African supermarket chain, Shoprite, spends $20,000 a week on permits just to sell products in Zambia alone.
“If a firm has to spend a lot of resources on paperwork, on getting the necessary permits and licenses, if their trucks spend a long waiting at the border because the processing of these documents takes such a long time, then that’s passed on to the consumer in terms of high prices. This is an important issue, particularly with regard to food at the moment,” said Brenton.
The World Bank recommends simplifying border procedures; using cross border mobile banking to improve access to finance and eliminating expensive import and export licensing procedures. It also calls for reforming regulations and immigration rules to allow a free flow of goods and services between countries.
The bank currently invests more than $4 billion in regional trade integration in Africa. Much of that goes to improving infrastructure, such as transportation and energy projects. That investment is scheduled to increase to $5.7 billion by July of this year. More of the funding is expected to be directed to regulatory issues.