Monday, October 18, 2021

Intra-African trade still undesirably low

The costs to trade across the African continent are the highest in the world, and even 50 percent higher than those in East Asia, a region known for its diversity, growth and opportunities. This comes as no surprise given the existing trivial trading amongst the African countries. The latest report from the World Bank titled ‘Africa’s Pulse’ says that the continent’s overall trading is less than 15 percent.

This is bad news, for Botswana especially. A previous report compiled by Ernest & Young pointed out that from the country’s total exports diamonds make up over 80 percent of them. With diamonds taking up the lion’s share of total exports it means that non-diamond export commodities and non-mineral exports will have huge shoes to fill during times when the international markets purge the country’s diamonds. This simply speaks to the urgent need for Botswana to bolster its non-mineral trading within the continent, thus reducing its heavy reliance on diamonds. Africa presents an alternative market for the country to generate revenue from selling the commodities it produces to it. But the fact that trading across Africa comes with exorbitant bills means that Botswana will struggle to pursue the continent’s lucrative market.

Moreover the trading costs undermine the country’s efforts to promote trade and export opportunities. In February last year the Botswana Exporters and Manufacturers’ Association (BEMA) and the Botswana Investment and Trade Centre (BITC) formalised their working relationship as a deliberate move to improve the operating environment and accelerate the readiness of local producers for export markets.  BEMA uses membership subscriptions to empower members with trade skills that enable them to penetrate export markets whereas BITC offers export development and promotion services to qualifying companies, for example those who make a minimum annual turnover of P500, 000. 

Another effort that was advanced by BITC at the same time as its forging an official partnership with BEMA was launching the Botswana Trade Portal. The portal which was funded by the World Bank at US$ 600,000 (then approximately P7 million) was introduced to the local market in expectation that it will result in a decline in the cost of doing business, as the time taken to collect information will be significantly reduced. This is because it contains comprehensive, timely and up to date information concerning trade as given by different agencies that deal with exporters and importers.

The existing African markets which Botswana has membership and trade agreements with include Southern African Customs Union (SACU), Southern African Development Community (SADC), ACP and the Cotonou. The issue therefore isn’t the absence of markets but rather the unsuccessful approach to them.

“Africa will not, however, realise the benefits of regional and global trade without, at minimum; liquidity, access to capital, progressive foreign exchange regimes, and clear tax systems. Being supported by; rational infrastructure, agile labour policies, relevant education and efficient customs and excise rules coordinated by regional trade bodies, will free Africa to expand growth internally ÔÇô while continuing to attract foreign investment,” says Vinod Madhavan, Group Head of Trade for Standard Bank Group based in South Africa.

Though trading across Africa is considered to be growing, from what it previously was, the World Bank Chief Economist for Africa, Albert Zeufack, admitted that it is still low. He urged that efforts to reduce barriers to trade, particularly physical ones, should be intensified. At one point the depiction of an Africa that is rising was convincing but such credibility wears thin in the face of a continent whose countries to this day still do not trade with each other, at least not significantly.

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