Hopes and challenges in intra-Africa trade and regional integration |01 August 2016
The panel of African Leaders Roundtable on Intra-African Trade as Catalyst for Economic Transformation. (From left to right): Dr Nasr; moderator Cecilia Akintomide, former vice-president and secretary general of the African Development Bank; Minister Adam and Congolese minister Nganongo
During the recent 23rd annual general meeting of the Africa Export-Import Bank (Afreximbank) and related investment forum and exhibition held at the Savoy Resort & Spa, much was said on how to boost intra-regional trade and investments in Africa. This was through seminars and plenary sessions attended by prominent leaders and dignitaries from the African continent.
The event culminated with Seychelles taking the chairmanship of the bank which, according to its last president Sir Benedict Omarah, has been very profitable this year. Business & Economy brings you excerpts from the plenary sessions based on two main themes: Blue Economy and Structural Transformation of African Countries and Intra-African Trade and Structural Transformation of African Economies.
The Blue Economy or Economy in the Blues: Can Africa’s seas and oceans transform the continent?
Africa’s ocean which covers about three times the size of its landmass could be critical for unlocking opportunities for wealth creation, economic growth and poverty reduction, especially if the right steps are taken to improve coordination of efforts and strategies at national and continental levels with a view to developing sustainable maritime industries such as fishing, shipping and ship building and resource extraction. These potentials are highlighted in the African Union’s (AU) long-term development strategy – ‘Agenda 2063’, which singled out the Blue Economy as an important driver of sustainable development and declared the decade 2015-2025 as Africa’s ‘Decade of Seas and Oceans’. Blue Growth, which is broadly defined as ‘smart, sustainable and inclusive economic and employment growth from the oceans, seas and coasts, accounts for a sizeable share of overall economic growth and could set countries on a path to environmentally sound and sustainable development.
In effect, embracing the Blue Economy could offer tremendous opportunities to improve intra-African trade by connecting coastal and inland countries through trade. It could also accelerate the process of industrialisation by enabling countries to move up the value chains in auxiliary industries associated with the Blue Economy.
Lessons from successful Blue economies like Iceland, Japan, Norway and Seychelles
A number of leading nations around the world, both developed and developing nations alike, have taken full advantage of the potential offered by the Blue Economy to increase wealth creation and boost trade. Invariably, these countries have drawn on the state of the art within the maritime sectors and increased knowledge, innovation and technological developments that influence these sectors. The success achieved by some of these countries, especially Japan and Iceland as well as developing nations such as Singapore and Thailand, does indeed suggest that the concepts of Blue Growth and Blue Economy can be operationalised in support of overall economic growth and sustainable development.
Financing the Blue Economy in Africa: Techniques and instruments
While it is increasingly recognised that the Blue Economy could indeed emerge as an important driver of economic growth and structural transformation in Africa, in very few countries where attempts have been made to mainstream it, especially in small islands where tourism and fisheries account for a sizeable share of employment and GDP, growth prospects have been undermined by financing constraints.
For instance, in Seychelles where sustainable sourced products are seen as opportunities to empower local fishermen, it is estimated that financing gaps to support the Blue Economy are significant. However, over the last few years, a number of steps have been taken by governments and financial institutions to raise financial resources in support of Blue Growth. This has been in the form of financial innovation, products and instruments, including Blue Loans. After a review of the financing gaps facing the Blue Economy sector across the region, that particular session discussed innovative financing products and options which have been taken by financial institutions and governments to reduce these constraints.
The Politics of Regional Integration and Cooperation
Effective economic integration and cooperation brings with it several benefits, including improvement in regional trade, relative ease of agreements and their implementation, expansion of employment opportunities and improved welfare, expanded financial markets and associated lower cost of funds for corporate, and enhanced attraction for Foreign Direct Investment (FDIs). Despite these well-established economic and political benefits of regional integration, and proliferation of statements in favour of economic integration by African leaders, progress on regional integration has been unimpressive. The 15% share of intra-regional trade of total African trade which compares unfavourably against the performance in other regions and less than 10% share of African’s direct investment in total foreign direct investments in the continent are two statistics that amply demonstrate the low level of economic integration and cooperation.
That plenary session attempted to address the question of why has economic integration and cooperation eluded the continent despite the tremendous economic and social benefits as well as growth opportunities associated with it.
African Leaders Roundtable on Intra-African Trade as Catalyst for Economic Transformation
In the plenary session on African Leaders Roundtable on Intra-African Trade as Catalyst for Economic Transformation, three African ministers addressed the subject. They were Jean-Paul Adam, Seychellois Minister for Finance, Trade and the Blue Economy; Dr Sahar Nasr, Egyptian Minister for International Cooperation and Calizte Nganongo, Congo-Brazzaville Minister for Finance and Budget.
It came clearly throughout all the sessions that for any trade or regional integration to prosper, peace and stability are paramount.
The session provided the opportunity for African leaders to share their perspective on the history of promoting intra-African trade and on the future of African trade. It also offered them the opportunity to highlight effective means to deepen economic integration and advanced implementation of the Continental Free Trade Area (CFTA). They reflected on the nature of institutional and policy reforms that could be considered to accelerate the process of economic integration in the global trading dreamed by the founding fathers at a time when the rise of regional trading blocs after the failure of the Doha round of trade negotiations could further marginalise African economies in the global trading system.
Regarding the particular challenges of small island states such as the Seychelles, concerning the intra-Africa trade, Minister Adam said there is the risk element. But he emphasised in the context of Seychelles it is not the risks of politics or instability, but the risks due to the smallness of our market. There are capacities that need to be fulfilled like human capacity.
“We have to assure this smallness does not stop us doing commerce. This is why we have this solidarity gathering of Indian Ocean countries in our zone. We believe this solidarity will enable us to better manage our efforts regarding importation. As for exportation we are tapping into it but the transportation means is not that developed, said the minister. The minister believes we must accelerate certain things like visa exemption to African visitors here which Seychelles has already implemented.
“The reality is if people do not know each other, it is difficult to do commerce. We Seychellois go to great strides to make us known,” he said, adding if a person visits another person in a region and is able to make himself known through business link, this will facilitate the commerce.
The minister remarked it is very important that Africans are known to Africans before going elsewhere. This will generate regional trade.
As for the Egyptian minister, she said there is a need for a level playing field where everybody has equal access to information in different languages. She said it is also important to put a time frame where authorities have to comply to and also advised against less bureaucracy, less human and manual work and more technologies; capacity building where everyone follow best practices. And another thing she said her country is working on is the establishment of an industrial zone that is really independent, clean where all the licensing, registration, tariffs, taxes are streamlined.
As for the Congolese minister, he said the Congo needs to have peace and stability before anything else can be put in place, making reference to his own country where peace is an issue.