Africa trading less and less with Africa, research finds

Johannesburg, 30 October 2013 -  Africa has the lowest internal trade volume compared to other trading blocs in Europe, Asia and Latin America according to findings of four different research studies.

Presenting their research papers at the African Economic Conference, which is taking place in Johannesburg from October 28-30, four researchers from across Africa and one from Asia concluded that that trade within Africa was very low and its participation in the global trade negligible and fragmented. The papers were presented during a session entitled “Gravity Model Approach and Trade Potential.”

Edris Seid, a Research Fellow of the Social Policy Institute in Ethiopia, said intra-Africa trade is less than five per cent. Trade within Africa has not grown despite having many Regional Economic Communities (RECs). 

According to the findings of his study, using the Gravity Model Approach looked at four RECs – the Common Market for East and Southern Africa (COMESA), Southern Africa Development Community (SADC), Economic Community of West Africa States (ECOWAS), and Intergovernmental Authority on Development (IGAD) – trade in Africa has remained staggeringly low and the performance of RECs varying, but generally disappointing. “SADC and ECOWAS have created trade in the ‘Vinerian’ sense; COMESA has an implausibly negative coefficient suggesting that it has not expanded trade among the member states. Whereas IGAD has an insignificant positive coefficient implying that it has not contributed to the expansion of intra-regional trade,” the research concluded.

Research by PhD Student Mouhamed Njikam from the University of Yaoundé, Cameroon, concluded that intra-Africa trade was low, outward looking, primary-commodity based and undiversified.

According to his findings, the ECOWAS region has the lowest intra-trade volume standing at one per cent – 10 times lower than that of the continent and other RECs. He concluded that the region held greater trade potential if it addresses infrastructure and legislation issues.

Meanwhile, research by Dr. Albert Makochekana of the University of Zimbabwe found that improvements in port efficiency and increased use of e-business are some of the factors which boost intra-SADC trade in exports. “Whilst the positive influence of each of these two variables differs between exporting countries and importing countries, the fact remains that SADC policymakers should implement strategies which improve port efficiency and also encourage use of e-business.”

The research also looked at country-specific trade potential with other countries in the region. The simulations showed mixed results, some countries had exhausted their trade potentials, while others were shown as having untapped trade potentials. Exhaustion of trade potential does not imply that these countries should not trade, but that it may be difficult to increase the levels of trade between such trading partners.

Makochekana also observed that that although tariff rates had significantly reduced in SADC, non-tariff barriers had taken centre stage and negatively affected the trade environment in the region.

The research findings, including that of Atif Moheeldeein of Malaysia National University, conclude that Africa is trading less and less with itself and suggest policy and structural transformation, including investment in physical infrastructure to link neighbouring countries, harmonize trade policies, and simplify custom procedures so that the existing regional economic communities would promote intra-regional trade.

The annual African Economic Conference is jointly organized by the African Development Bank, United Nations Economic Commission for Africa and the United Nations Development Programme.