Increased global trading tonic for Africa

Lazarus Sauti

Global trading can provide important opportunities for Africa by contributing to economic growth and poverty reduction.

Sadly, African countries face considerable challenges to achieving global trading.

One reason is that the costs of trading remain stubbornly high, which prevents potential African exporters competing in global and even in regional markets.

“Most African countries face a myriad of challenges to integration into the international trading system. For instance, official intra-African trade is still relatively low, and as a result, African companies are struggling to participate in regional and global value chain,” noted a 2011 World Bank report.

The report added that despite the existing diversity and potential for production, regional value chain production is mostly absent in the continent, and accordingly, opportunities for jobs along with income creation are lost.

Emmanuel Iruobe, a Nigerian management consultant, writer and leader, believes that despite considerable challenges, global trading is good for countries within the African continent.

Sadly, he added, African countries are not vocal about the case of boosting global trading.

“Philosophically, African nations are endowed with different sets of natural resources that can help them to facilitate trade and exchange; but beyond philosophy, however, the case for boosting global trading has never been louder,” he said.

African countries, therefore, need to increase global trading if they are to create more jobs, transform socio-economically, reduce poverty – a cancer ravaging Africans as well as compete with other continents.

Abdalla Hamdok, the deputy executive secretary of the United Nations Economic Commission for Africa (UNECA) – established by the United Nations Economic and Social Council to encourage economic cooperation among its member states (the nations of the African continent), also stressed that increasing global trading and deepening Africa’s regional integration are necessary ingredients for harnessing the potential benefits of a large and growing internal market.

He added, “It is also key to building the industrial production capabilities that the continent needs in order to be competitive in global trade.”

According to Hamdok, the vision is that of “a prosperous and united continent that is effectively integrated and that has strong links within the global economic system.” In this vision, stressed the Deputy Executive Secretary, “poverty becomes a thing of the past, and the living conditions of the peoples are characterised by sustained improvement.”

The International Monetary Fund (IMF), an international organisation of 188 countries working to foster global monetary cooperation, secure financial stability, facilitate international trade, promote high employment and sustainable economic growth, and reduce poverty, concurs.

“Trading does more than just provide money for nations; it triggers a virtuous cycle that spikes growth and innovation, while reducing poverty. Consequently, low and medium countries need to increase global trading as it can increase external competition in the products and services markets over and above encouraging key infrastructure investments and strengthening institutions by encouraging better governance and improved business environments,” noted the International Monetary Fund.

Christine Largarde, the International Monetary Fund’s managing director advocates: “If you care about growth and innovation; if you care about jobs and the real incomes of the middle-class; if you care about poverty reduction and greater economic fairness; if you do care about all these things, you need to be serious about fostering global trade.”

Economist and writer Barbara Rippel is also of the view that increased global trading can provide important opportunities for Africa not by increasing the benefits from open trade, but contributing towards socio-economic growth.

To realise the benefits of increased global trade, government sectors, development partners and key stakeholders in the continent should pay urgent attention to the costs of transportation and logistics, trade infrastructure and standards as well as additional market entry barriers – issues that widen the gap between Africa and other continents when it comes to global trading.

“Business and political leaders need to address trade-discouraging non-tariff barriers, and there is need for cross-sector analysis, for example along the value-chain of products, to address global trade bottlenecks,” explained Rippel.

As the biggest obstacle to greater global trade integration is the lack of accompanying policy and regulatory reforms, stakeholders in the continent also need to craft strong strategies and policies that promote trade facilitation reforms, especially soft, policy-related and trade facilitation measures.

“Business and political leaders need to ensure that both hard infrastructure and technical advice are backed by equally ambitious policy reforms. Further, trade facilitation measures must also be designed to assist African countries to become more competitive in regional and global markets,” added Rippel.

African countries must also incorporate trade facilitation in overall development and poverty reduction strategies. This, however, demands multi-sectoral approaches.

Therefore, as Rippel affirms, stakeholders must find common positions on cutting trade costs on all trade-related issues so as to increase global trading.

The World Bank, a United Nations international financial institution that provides loans to developing countries for capital programmes, is also of the idea that tackling trade costs is a core element of any trade strategy.

“African states must strive to deal with trade costs so as to enhance programmes that eliminate poverty in the continent. Significantly, tackling costs require coordinated efforts in the areas of data collection along with defining benchmarks,” added the World Bank.

Zimbabwean scientist, Professor Francis Gudyanga, believes African countries should add value to their natural resources and diversify their export-base if they are to find a mark in global trading.

“Most African nations are blessed with an assortment of natural resources such as oil, natural gas, and minerals, but have found it difficult to expand exports. They need to add value to these resources as well as to diversify their export-base so as to increase global trading in addition to avoiding being too dependent on a few export products,” he advised.

Hamdok sums up:  “The exports from Africa of raw materials with little or no value addition, have limited their contributions to job creation and improvement in the living conditions of the people. The continent is, thus, exposed to exploitation and left poorer.”

“To increase global trading, African countries need to diversify and add value to their respective resources; and the aim should not simply be to expand trade, but also to focus on the broader goal of sustainable and broad-based social and economic transformation.”