Boosting Intra-African Trade: Obstacles and Opportunities

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Boosting Intra-African Trade: Obstacles and Opportunities

PO
Precious OkoroMay 24, 2024

While Africa's external trade has grown, intra-African trade has remained low, reaching a peak of just 20% of total trade in 2017. According to the World Bank Doing Business indicators, total intra-African agricultural trade has consistently remained below 20 percent in recent years. This low turnout in regional trade is, however, an issue that is particularly visible in Africa as intra-regional food trade figures in Asia and Europe climbed close to 60 percent.

The need for a functioning trade system in Africa

Africa can grow and deliver good quality food to put on the dinner tables of the continent’s families… However, this potential is not being realized because farmers face more trade barriers in getting their food to market than anywhere else in the world. Too often, borders get in the way of getting food to homes and communities that are struggling with too little to eat. . - Makhtar Diop, the World Bank Vice President for Africa, 2012.

For the vast majority of people in Sub-Saharan Africa, agriculture is the basic source of income. It also contributes an average of 15 percent to the region's GDP. Across Africa, about 278 million people are facing the highest levels of severe food insecurity with the larger percentage of the affected being women smallholder farmers. With climate change casting a long shadow over Africa's food security, shifting seasonality, erratic rainfall patterns, and rising extreme weather events like droughts and floods disrupt livelihoods and threaten agricultural production.

At the back of all these, is a heightened food insecurity in Africa severely fueled by local trade-related barriers, which hinder food movement from excess production areas to nearby consumer regional markets in food deficit. All these point to the non-negligible fact that enabling regional trade will aid in unlocking Africa’s food trade potential, accessibility to ready and larger markets, and boosting income for farmers.

Challenges to Intra-African Trade

The complex web of regional economic communities with overlapping memberships is riddling the continent with inconsistencies, especially trade policies such as export and import bans, tariffs and restrictive quotas, and differing food safety regulations. Compared to the average 2.5% protection rate faced by African exporters in international markets, intra-African trade encounters a significantly higher barrier of 8.7%. Furthermore, cumbersome customs procedures further deter cross-border trade. Delays at African customs posts can reach twelve days in Sub-Saharan Africa, exceeding any other region globally. Streamlining trade policies and simplifying customs procedures are crucial for stimulating intra-African food trade.

On the supply side, low agricultural productivity Inadequate policy frameworks, limited investment in production capacity, lack of insurance, and restricted access to agricultural inputs for farmers limit food availability for intra-Africa trade. Additionally, high transportation costs due to poor infrastructure and a lack of storage facilities make it difficult to move surplus food to areas with high demand. Investments in infrastructure and post-harvest storage solutions are necessary to facilitate the efficient movement of agricultural products across borders.

Intra-African trade is also affected by the low execution of beneficial policy frameworks. An example is the 2014 Malabo Declaration which encouraged the tripling of intra-Africa trade in agricultural commodities and services by 2025. This initiative called for establishing a continental free trade area under the Comprehensive Africa Agriculture Development Programme (CAADP). Despite the declaration's promising initiatives, the intra-African food trade increase remained abysmally low and disappointing.

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A possible way forward

Encouraging intra-African trade will foster the development of adaptable supply chains that cater to local conditions which in turn reduces Africa's exposure to external disruptions that could cripple its supply networks. Strengthening agricultural support systems, promoting mechanization and innovative technologies, and ensuring a reliable supply chain is essential for boosting production and trade . With supply improved, focus then turns to optimizing the ease and efficiency of underlying trade systems.

The African Continental Free Trade Area (AfCFTA) is currently looking to transform the regional market on the continent and is a welcome change for many countries within Africa. Going beyond just the reduction of tariffs, it establishes a comprehensive framework for trade across various sectors, with the ultimate goal of boosting Africa's agricultural sector, food security, and overall economic competitiveness. This initiative seeks to work through the encouragement of essential investments in production and marketing infrastructure, a simplified and harmonized trade regime, especially for cross-border agricultural trade, which can balance food prices, and improve food availability by redistributing food from areas with excess supply to areas with shortage and overall promote a fair trade system for rural and small/medium farmers.

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AfCFTA's role in promoting Intra-Africa Food Trade

Today, the African Continental Free Trade Area (AfCFTA) stands as the largest free trade area in the world, both in terms of the number of countries it brings together and the vast consumer market it represents, with 1.4 billion people. The UNCTAD forecasts, that implementing the provisions of AfCFTA could boost regional trade by about [33% and reduce the continent’s trade deficit by 51%](Today, the African Continental Free Trade Area (AfCFTA) stands as the largest free trade area in the world, both in terms of the number of countries it brings together and the vast consumer market it represents, with 1.4 billion people. The UNCTAD forecasts, that implementing the provisions of AfCFTA could boost regional trade by about 33% and reduce the continent’s trade deficit by 51%. The AfCFTA is focusing on reshaping the agricultural intra-African trade landscape by eliminating intra-Africa trade tariffs on food products, harmonizing food standards across the continent, facilitating measures in Sanitary and Phytosanitary (SPS), explaining the role of services, transport, and digital trade, unpacking complementary measures to AfCFTA like the development of an efficient and cost-effective Africa-wide payment system, making use of technology such as the Pan-African Payment and Settlement System (PAPSS).). The AfCFTA is focusing on reshaping the agricultural intra-African trade landscape by eliminating intra-Africa trade tariffs on food products, harmonizing food standards across the continent, facilitating measures in Sanitary and Phytosanitary (SPS), explaining the role of services, transport, and digital trade, unpacking complementary measures to AfCFTA like the development of an efficient and cost-effective Africa-wide payment system, making use of technology such as the Pan-African Payment and Settlement System (PAPSS).

Overall, by dismantling trade barriers, fostering regional collaboration, and promoting innovation, AfCFTA has the potential to transform Africa's food systems. Increased intra-African food trade can improve food security, empower, and encourage, smallholder farmers' participation in regional food markets and value chains, establish regional staple food programs, and create a more resilient agricultural sector across the continent.

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