What is holding back trade in Africa?

17 April 2012

Business Day - 17 April 2012

What is holding back trade in Africa?

Business Day talks to Valentine Rugwabiza of the World Trade Organisation about the need for barriers to trade between African countries to be reduced

VALENTINE Rugwabiza is deputy director-general of the World Trade Organisation (WTO). 

BUSINESS DAY: Why is trade among African states still so low?

VALENTINE RUGWABIZA: (Intra-African) trade remains at about 10% (of the continent’s overall trade) due to barriers of a regulatory nature that African countries impose on each other. It also has to do with existing infrastructure where much has been done in the past 20 years but it’s still insufficient to support the movement of goods. Those are the structural reasons.

There are also historical reasons — political independence didn’t come with commercial independence, and commercial structures remained unchanged after independence, so those structural barriers remained. It remains costly to trade with another African country, so countries trade with partners that may be far away but are more competitive.

BD: In colonial times, Africa was used as a source of raw materials. Why hasn’t that changed? 

VR: To change the systems takes time, and to build the infrastructure. There is also a clear need for political leadership. What is happening today is that the global context is worsening and this is becoming an imperative. Europe remains the first trading partner of many African countries, so how can the impact be mitigated?

BD: Why is Africa marginalised in world trade?

VR: Africa remains marginalised due to the structural reasons I mentioned. Also keep in mind that trade has changed a lot in the past decade towards intangible goods, which has also contributed towards this marginalisation.

DB: What are the biggest differences in intra-continental trade in South America and Africa?

VR: The main differences are levels of trade-supporting infrastructure, the size of the economies and being better plugged into the global economy, with a number of South American economies being specialised. If we look at an economy such as Costa Rica’s, it is plugged into the global supply chains with the production of medical devices and so on. The two continents both still rely on trading primary commodities but the difference is that the fruits of that have been investment in infrastructure with an increasing contribution to global supply chains.

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Categories: General

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