Monday, October 25, 2021

AfDB Group urges Africa to trade more with itself

Figures released from the2016 African Development Bank (AfDB) Group Annual Meeting indicate that intra-regional trade in the SADC region currently sits at 13 percent. This latest figure has not changed since the regional integration policy paper: intra-regional trade in Southern Africa: structure, performance and challenges during the period 2000 and 2008. The unchanged figure is demonstrative that intra-regional trade remains limited; in fact the AfBD posits that “Africa needs to trade more with itself.” 

The SADC region is among the five African Regional Economic Communities which include COMESA, EAC, ECCAS and ECOWAS. Out of the five, SADC recorded the highest intra-regional trade whereas ECCAS registered the lowest at 2 percent. The AfDB notes that “compared to the other regions in the world, inter-regional trade in African Regional Economic Communities is low.”   

The 51st Annual Meeting started on Monday and ended on Friday last week. The meetings, according to AfDB President, present a window of opportunity to the world for Africa to share what it has done, to garner views and perspectives among other things. The meeting focused on three key issues: challenges and opportunities facing Africa in the global world and the two interlinked themes: energy and climate change. 

Botswana, which is a member of SADC comprising of 15 member states, has a firmly established cooperation with AfDB that dates back to 1972. According to the AfDB website as at October 2012, Botswana had benefitted from the Bank through 41 loan projects, seven institutional support operations and two studies valued at approximately US$2.1 billion. The projects are in the areas of infrastructure, agriculture, finance and multi-sector. One particular project relevant to the intra-regional trade that AfDB highlights is the key road and rail bridge crossing over the Zambezi River along the North ÔÇô South Corridor, a key trade route linking the port of Durban in South Africa to the inland countries of Botswana, Zambia, Zimbabwe, Malawi, DRC, and up to Dar-es-Salaam in Tanzania termed the Kazungula bridge. The total project cost is estimated at UA 162.06 million (approximately US$ 259.3 million), funded through a co-financing arrangement with JICA. 

The Bank covers UA 51 million from the ADF window. The balance is shared between JICA (57.5%), Governments (9.2%) and EU-ITF Grant (1.8%). Experts cite that though countries such as Zimbabwe and Botswana are landlocked they however aid the transportation of goods enabled by the transit routes they provide. None of the countries in that regard can be looked at as lesser than the other. “At the same time, some landlocked countries are also important transit routes. For example, Zimbabwe serves this role for the Democratic Republic of Congo (DRC), Malawi and Zambia while Botswana does so for DRC and Zambia – and could become even more critical after the construction of the Kazungula Bridge linking Botswana and Zambia. Similarly, Malawi is the most direct link between north-east and north-west Mozambique,” asserts the 2013 regional integration policy paper. 

Africa is often described as a continent poised for a rising, a narrative that recognises the prospects and opportunities offered by the continent as it does its challenges. With the exception of South Africa and Angola, countries in the SADC region do not have the capacity of market sizes which support activities that meet the high costs of doing business. Hence, experts deduce that an “integrated regional market offers the only route for countries to overcome the disadvantages of small size by pooling resources or combining markets.” 

Research has also shown that the Kazungula Bridge promotes coordination and supports trade. More so, the establishment of the bridge will act as an important trading link that connects DRC, South Africa and Zambia, a prospect anticipated to increase the production volume. The major challenge that remains however, as widely discussed, is that the region predominantly relies on its primary goods particularly mineral resources, which narrows the scope and potential of commodities that are traded. 

The 2016 Africa Business Agenda Report by PriceWaterHouseCoopers (PwC) proclaims that the cost of doing business in the SADC bloc can be high, but so too are the rewards, particularly for those prepared to take a truly long-term view. Although the report particularly referred to investors interested in setting up in Africa, the same principle can be applied to intra-trading, which given the existing challenges requires a committed and long term view to harnessing its opportunities.   

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