Intra-African trade: The road less travelled
JACOB ZUMA turned 71 last week. South Africa’s president certainly gets around for a man of his age. On Monday he was in Algeria. On Tuesday he visited Abuja, Nigeria’s capital, for talks with President Goodluck Jonathan. Nigeria is poised to overtake South Africa as the continent's largest economy. To counter its relative decline, South Africa is looking to strengthen trade links with the rest of Africa, which is why the continent-trotting Mr Zuma was in Gaborone, Botswana’s capital, last Friday for a summit of the South African Customs Union (SACU).
If only goods moved around Africa with as much urgency as Mr Zuma. SACU was established in 1910, making it the world’s oldest surviving customs union and some 40 years senior to Europe’s trade bloc. But despite this head start, intra-African trade links are pitifully weak. The bulk of the region’s trade is with Europe and America: only 12% is with other African countries, according to research by Ecobank, a Togo-based bank. By comparison 60% of Europe’s trade is with its own continent. The same is true in Asia. In North America the figure is 40%.
Africa’s trade looks all the more meagre given that many of its countries are landlocked; so much of what crosses its internal borders is on its way to or from other continents. In southern Africa for instance, food, fuel and manufactured goods enter the continent at South Africa’s ports and are re-exported by road to Zimbabwe, Zambia and Congo. Copper, cobalt and gold go in the other direction. The pattern in North America, by contrast, is more of a finely graded exchange of components and finished goods. Car parts whiz back and forth across the US-Canada border. Firms on either side can specialise and become more efficient.
Poor infrastructure is one reason for Africa’s sclerotic trade. The continent’s multiple trade agreements are another hindrance. Africa has 14 different trading blocs with overlapping members. Most countries belong to at least two blocs. Many belong to three. Yet traders find a way around such barriers. Staples such as sorghum and cassava (a plant with a carbohydrate-rich root) do not show up in the figures but are traded informally. Many other goods move across borders but elude the customs inspectors who record official trade flows.
The Ecobank researchers give two examples of informal trade routes that are well established. Somali traders based in the Eastleigh area of Kenya’s capital, Nairobi, (known as “Little Mogadishu”) import rice, sugar and consumer goods into Dubai, tax-free, and then distribute them around east Africa. There is a similar dodge in west Africa. Imports are shipped into Benin and Togo and spirited across borders to consumers in neighbouring Ghana and Nigeria. Such networks mean there is more trade going on within Africa than is acknowledged. But it is not as nearly as much as it could be.