— The UN Conference on Trade and Development (UNCTAD) is calling on African nations to boost their private sectors to advance intra-regional trade. UNCTAD’s new report on the Economic Development in Africa 2013
says reducing trade barriers alone is not enough to turn regional trade into a winning enterprise.
In a newly published report, the UN Conference on Trade and Development says African governments must boost private industry and entrepreneurs if they are to compete successfully with foreign firms unencumbered by trade barriers.
The report says Africa has a lot to do to catch up with the world's other intra-regional trading blocs. It notes that trade among African nations was low, just 11.3 percent of total trade in 2011. In Asia, trade among regional neighbors was 50 percent of total trade. Europe was higher still at 70 percent.
UNCTAD Secretary-General Supachai Panitchpakdi said that Africa suffers from a number of deficiencies that work to its disadvantage, including the lack of services and infrastructure. He said African companies tend to be very small and this makes it difficult for them to be competitive.
He cited the widespread informal sector in Africa as a particular handicap in efforts to expand intra-regional trade.
“The size of the informal sector in Africa is 38 percent of GDP, compared with 18 percent of East Asia and the Pacific, 27 percent in the Mid-east and North Africa, 25 percent in South Asia. The size of the informal sector does indicate that most of the policies from the government or the kind of the formal support that would come from the economic policies of the government are not reaching into these informal sectors and so it would be difficult to give them the right kind of support, particularly in the areas of training,” said Panitchpakdi.
UN economists say Africa must expand its productive capacity. This involves measures such as upgrading infrastructure, improving the skills of domestic workforces, and encouraging and enabling entrepreneurship.
They say Africa must increase the size of existing manufacturing firms so they can satisfy larger markets and produce their goods more economically. If African nations do not have the goods they need to sell to each other, they warn foreign competitors will fill the vacuum. They say African governments can strengthen the private sector by making finance more accessible and less costly.
Taffere Tesfachew is director of UNCTAD’s Division on Africa, Least Developed Countries and Special Programs. He said agriculture can provide short-term unexploited opportunities for regional trade in Africa.
“There are about 37 African countries that are net food importers, and some 17 or 20 or so net importers of agricultural products," said Tesfachew. "In Africa about 27 percent of the land apparently is arable and available for growing food. These 37 African countries, when they import food, where do they import it - interestingly less than 15 percent they import it within Africa. Most of it comes from outside. So, there must be an opportunity for intra-African trade.”
The study finds African countries produce and export a narrow range of goods. Most are primary commodities, such as oil, natural gas, and metals. It says Africa’s lack of economic diversification and weak manufacturing base inhibit intra-regional trade.
It says greater long-term opportunity lies in improving industrial capacities so that Africa has the goods to meet the increasing demands needed for successful regional trade. The bottom line according to UNCTAD, though, is to maintain peace and stability. Without this, it maintains, Africa will not prosper and intra-regional African trade will founder.