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Africa must trade as a bloc


guest column:Admire M Dube

IN LIGHT of the economic weakness Africa exhibits on the global arena, and with all the mediocre economic numbers individual African countries produce annually, it bodes well for the continent to increase its negotiations and its trade with the world if it does so as a bloc than continue trading as individual countries. Indeed, consensus among policymakers and political leaders is that it will not harm African countries to develop through regional integration and trading blocs to achieve sustained development and increase their negotiation clout, and, therefore, participation in the global economy.

The 2019 statistics show that Africa’s population stood at 1,3 billion with a combined nominal GDP of US$2,58 trillion and a healthy 3,7% growth rate. This stands it firmly abreast with fellow rising economies like India with the exact same population count and a GDP of US$3,2 trillion and Brazil with a nominal GDP of US$2 trillion.

However, Africa’s poverty rates for its individual countries are steep and the combined GDP does not seem to positively influence constituent country performance. All the world’s 10 poorest nations are domiciled on the continent. For instance, Niger has a national GDP of a measly US$9 billion, and a meagre per capita GDP of US$414 while India, which has a similar population to Africa as a whole and with a comparable GDP as well, sees its people five times better off as they have a per capita GDP above US$2 000! This African population poverty is despite its total merchandise trade with the world of almost a trillion US$, according to the Africa Import-Export Bank.

It goes without saying that development flows to Niger would be significantly greater if the nation’s trades were under the auspices of a trading bloc than is currently obtaining where each country goes alone in the dog-eat-dog global arena. The same averment does apply to varying extents even to the so-called continental giants — Egypt, Nigeria and South Africa.
Size does matter in economics

This is not to say there are no currently existing trading blocs in Africa. The main blocs are the Economic Organisation of West African States (Ecowas), Common Market for Eastern and Southern Africa (Comesa), Southern African Development Community (Sadc), and Community of Sahel-Saharan States (CEN-SAD).

Ecowas is composed of western African nations while Comesa encompasses central and eastern African nations. Sadc brings together southern African countries while CEN-SAD is composed of northern, central, and western African countries.

Their main thrust though is to realise increased regional integration through customs and monetary unions, free trade areas, and common regulatory and legal frameworks. It’s noteworthy to highlight that their focus is thus on internal intra-trade enhancement through removal of obstacles more than it is about improving Africa’s trade with the world.

This, though noble and quite helpful, is not exactly what Africa may necessarily need at present. We may harp on the need to migrate from primary goods producers and increase benefaction by value addition so we export more valuable products, improve job creation and the like. But it goes without saying that we are still a minerals and other raw products exporter, so we need a (single) bloc that facilitates that to the world and representing a solid US$1 trillion worth voice for better deals on a global market. This must be the immediate plan to coagulate the mini country trades into a formidable trade monolith and speak with might to already powerful industrialised nations.

Intra-trade would then be looked at as a medium-term plan for when Africa industrialises to a point where Rwanda will need machinery produced in Zambia after it adds value to its copper and Kenya imports completed jewellery from the Democratic Republic of Congo with its world’s biggest known reserves of jewellery grade diamonds.

In any case, a myriad of social, economic, and political challenges also weaken current African trading blocs and their ability to promote that integration and intra-trade among each other. The share of intra-African exports among constituent countries as a percentage of total African exports was still a miniscule 17% as at 2017, which remains low compared to levels in Europe (69%), Asia (59%), and North America (31%).

This is an important reason to expect that trade will be a key driver of growth in Africa. The long and short of it is that more than 80 cents per dollar worth of merchandise exported by any African country is destined outside Africa and this ipso facto necessitates that there be a bloc occupied with “increasing (international) integration through customs and monetary unions, free trade areas, and common regulatory and legal frameworks” for international trade facilitation as much as these current economic blocs do for intra-trade. Size has benefits, economics fundis speak of it as “economies of scale.” Addressing these hindrances would strengthen the continent’s erstwhile weak piecemeal trade agreements with the world and enhance their positive impact on African trade and economic growth.

This single trading bloc I dream of will not only present a unitary voice to the world for all of Africa’s trade but will establish free trade areas with international markets for free flow of goods out of Africa and for capital to come back into the continent and perhaps even a common monetary union. This is not as farfetched as it may seem. I know there is need to align economic fundamentals for participating nations (and likely political benchmarks as well) but all these are not insurmountable obstacles. The Southern African Customs Union (Sacu) is a great reference point. All Sacu members (Botswana, Lesotho, Namibia, South Africa and Swaziland) except Botswana belong to a monetary union.

That African countries are performing poorly regardless of their strong commitment to regional trade and economic growth is testament to energies being exerted towards regional integration with individual countries left to fend for themselves where international trade is concerned. Yet 83% of their trades are with international partners, not with each other.

Many African trading blocs are struggling with high and increasing poverty levels among their member countries. This is despite being in trading blocs aimed at improving economies and lifting the people from poverty.

Granted, the reasons for GDP differences among member countries of each trading bloc vary for reasons as diverse as factor (resource) endowment, different geographical land sizes, variations in population sizes, connections to international, trading routes (some countries are landlocked, whereas others are not), differences in the enabling business environment and corresponding government policies. But these can be bridged if a big brother bloc approach is used to engage the world. Even those nations who take it as having comparative advantages now will benefit as a negotiating power is consolidated in one union as juxtaposed with when they approach the market as single divided (and therefore selfish) nations.

As alluded to expansively in this piece, Africa must trade as a bloc to increase its rewards and minimise its risks from international trade, which constitutes four-fifths of its overall trade.

Use of an integrated bloc representing all of Africa in trade and investment could bolster Africa’s voice on the globe representing a trillion worth of merchandise, some of which are goods only abundantly found in Africa the whole world over, like rare earth minerals. This could provide a major avenue for the continent to achieve sustainable development and enhance its economic competitiveness on the globe.

The current trading blocs that have sprouted were formed mainly with intra-trade goals in mind and thus contrary to expectations, are not helping much a continent not industrially developed enough to competitively produce goods for internal trade, and thus have had minimum impact thus far, if any. A big bloc to engage the world is sorely needed. Size does matter in economics.

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