[Column] Ousmane Badiane: Trade is essential for Africa’s prosperity
As African economies continues to develop, trade plays a vital role in raising living standards and improving the lives of their citizens.
Trade has long been an important source of hard currency, enabling the import of needed products to meet local demand.
And it is trade in agricultural products that offers the greatest potential to transform lives, not just boosting farmers’ incomes, but all those along the value chain.
In 2014 the Malabo Declaration committed African leaders to addressing many of the challenges facing African trade and to tripling the level of intra-regional trade by 2025.
The 2018 Africa Agriculture Trade Monitor, the first in a series of annual reports, looks at long-term and emerging trends in Africa’s global, intra-Africa, and intra-regional trade in agricultural products over a period stretching from 1998 to 2013.
Imports and exports both increased dramatically in the past few decades, but imports significantly more so, exceeding exports in early 2000.
Between 1998 and 2013, agricultural exports from African countries have increased three-fold, but imports have grown by more than four times during the same period.
Only Southern Africa showed a trade surplus over the 1998–2013 period. The rapidly increasing trade has been driven by a growing population, rapid urbanisation and rising incomes, in the aftermath of more than two decades of slow economic growth.
In addition to rising quantities, there are signs that African countries are also diversifying their exports.
Although cocoa is still the most traded and cotton and coffee are still important, citrus fruits became the third-most exported product, and frozen fish, tobacco products and oilseeds all entered the top ten for the first time.
There has been less change to imports, with wheat still the most traded and rice and sugar still important, however, palm oil, meat and cigarettes are all new in the top ten.
Agricultural exports to Asia and Europe tend to be high-value products such as cotton, coffee, flowers, fruits, tea, tobacco and fish.
Competitiveness in these markets increased and new export products, such as wool, soybeans, soybean oil, live trees and plants, and cocoa preparations, showed strong gains in competitiveness, suggesting the potential for diversifying exports by expanding trade in these areas.
East African countries were particularly successful at increasing competitiveness in intra-African markets.
Finally, the report highlights real opportunities to increase African trade, most notably by producing higher-value and processed foods for the emerging middle class, and harnessing developments in information and communication technologies to drive agricultural production and facilitate trade.
If they can crack issues around traceability and food safety, high-value agricultural products represent a major opportunity for global exports.
Climate change will continue to challenge agricultural production around the globe, and African nations can gain the advantage with careful management of resources to increase productivity.
Similarly, increased funding for agricultural initiatives that drive productivity, not just at farm level, but along the value chain, for example the improvement of post-harvest storage and transport infrastructure, will allow a huge impact on future trade growth.
But the potential for most impact requires encouraging the participation of smallholder farmers along the value chain, as their incremental surplus will be the driving force for future trade on the continent.
The recent signing of the Continental Free Trade Area agreement bodes well for not only greater intra-African trade but also improved employment, food security, and economic growth.
For that to happen, however, African countries will need to significantly raise competitiveness on global and intra-African markets. Although the report shows an increase in agricultural trade by African countries, its volume fails to reflect the importance if the continent. Africa’s share in global markets is still very low.
At just four per cent, it is below the levels of the 1960s. Port infrastructure and customs efficiency in Africa fall behind the rest of the world, and improvements in these areas, along with increased productivity in the farming sector, would help enhance Africa’s position in global markets. Intra-regional trade has doubled during the period under review from 10 to 20 percent, but it remains low compared to other regions of the world.
There are still significant barriers to cross-border trade, which needs to be removed to allow for greater integration of regional markets. These include poor infrastructure and policy and regulatotry obstacles.
Farmers need access to regional markets in order to raise their incomes. It needs to be understood that trading with neighbouring countries in times of shortfall is an opportunity for farmers to make more money.
In East and West Africa, we are seeing efforts to remove all policy and regulatory obstacles to commodity movement. We have not yet turned the corner, however, as many countries too often still resort to export bans and other interferences in trade with heir neighbours.
Policymakers need to understand that markets – when they work – work for everybody and they work well.
Governments have to accept the idea of regional common markets, where goods need to be allowed to move freely. Intra-regional markets are part of the solution and not part of the problem.
The benefits from improved intra-African trade will reach far beyond farming households. Traditional staples value chains are transforming rapidly across Africa, whether we are talking about millet and cassava, in West Africa, tef and white maize in East Africa.
There tens of thousands of small enterprises from processing to packaging, distribution that are enabling this to happen. They are responding to the rapidly expanding demand by a growing urban middle class, which is not necessarily demanding more caviar and wine as incomes grow but higher quality, processed traditional food staples.
These enterprises need a regulatory environment that allows them to be competitive in local and cross-border markets.
There is a lot that needs to be done to make sure that enterprises can become larger, more profitable businesses that can seize on the opportunities resulting from the rapid increase in demand for more sophisticated foods.
They need to have access to technology to spur product and process innovation as well as access to capital to invest in growing their businesses.
Ousmane Badiane is the International Food Policy Research Institute, IFPRI, Africa Director
