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21 Jun 2013 00:00
The lack of trade between African countries is said to have had a serious effect on the continent's development
This explains why intra-African trade only amounted to 13.1% of the continent's total trade, according to one expert.
"The infrastructure of most African countries is still geared to transporting goods to ports and out of the country to former colonial countries or the developed world, not to connect African countries," he said.
Africa's intra-trade figures are, to quote Visa, "exceptionally low", especially compared to World Bank data, which places intra-trade for South-East Asia and Europe at 50.2% and 72.1% of the total respectively.
The lack of trade between African countries has had a serious effect on the continent's development and, while it is growing very slowly, it will continue to prevent real gross domestic product (GDP) growth.
Professor Adrian Saville, a visiting professor of economics at the Gordon Institute of Business Science, and Dr Lyal White, the director of the Centre for Dynamic Markets at Gibs, did not mince their words in saying that they believed that a lack of regional integration when it came to trade had had an impact on "the development of a lucrative consumer market, while rendering the development of any value chains or productive economies of scale near impossible".
Their report, in short, found closer regional integration was crucial, to address underlying weaknesses in Africa's long-term competitiveness and to ensure that the continent delivers on its massive growth promise.
Unable to build economies of scale, Africa is being left behind by the likes of Asia.
Not that Africa's global trade is much better. Countries on the continent must make a substantial effort to move from "digging the dirt and exporting goods as low-value items" experts said.
Africa is the world's least globalised continent.
Dropping from its peak in 1948, when Africa's contribution, both in exports and imports, was about 7.7% of total world trade, Africa's trade has increased from a low of 2.3% in 2003 to 3.2% of world trade in 2011.
South Africa is seen as the most integrated economy, but it and Angola have unusually high gaps between their global and regional scores, and are considered "outliers", while the 11 other countries looked at in a World Bank study received equable global and regional trade scores.
On the plus side, most groups, particularly in the financial sector, believe the disparity points to a lot of potential for growth on the continent, but they warn that the fundamentals need to be fixed before that potential can be tapped.
Birju Sanghrajka, the regional head of transaction banking product management, Africa at Standard Chartered, said a lack of growth in trade between African countries and the global market had more to do with the trade environment than with infrastructure.
"Why is it that everyone talks about railway and port access when, for many, trade regulations and rules at origin often do more harm?" he said.
"There has been a lot of work done in allowing free movement of people across Africa and making movement of goods across borders easier, but there needs to be greater harmonised trade and efforts to make cross-border trade easier."
Praises for the Eastern African trade block
In this regard, the Eastern African trade block, consisting of countries such as Rwanda, Kenya, Tanzania and Uganda, has repeatedly been praised for its interactions.
Sanghrajka said it is important, when comparing the sub-Saharan region and Eastern African countries, to keep in mind that the sub-Sarahan region, including Angola, Mozambique, South Africa, Zambia and Zimbabwe consisted of countries with very different economic circumstances, dominated largely by South Africa.
"In the Eastern African bloc, the GDPs are similar and they have different strengths," he said. "Kenya is strong in manufacturing, but Tanzania has minerals and mining."
Competitive pricing is also vital if Africa wants to compete, as it is considered expensive to buy from.
Trade delay means loss of money, as the World Bank's Doing Business research division indicates clearly in its report, Trading Across Borders.
Referring to two sub-Saharan studies, Doing Business said reducing export costs just 10% through increased efficiency of trade processes would increase exports by 4.7%, and a one-day reduction in inland travel times in sub-Saharan Africa would lead to a 7% increase in exports.
The research also found that regulatory efficiency like ease in sharing of credit information and efficient debt reinforcement also boosted trade.
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