Supply Chain and Transport

Africa needs to trade with itself – here’s how

A ship docks at the main port in the Kenyan coastal city of Mombasa, February 25 2013.

Intra-regional trade could boost development and growth in Africa Image: REUTERS/Joseph Okanga

Jacqueline Musiitwa
Senior Climate Finance Advisor, US Agency for International Development (USAID)
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This article is part of: World Economic Forum on Africa

Trade not aid. It’s an idea we hear quite a bit in reference to Africa. Last summer, when Barack Obama addressed the African Union – the first US president to do so – he made sure to bring it up: “So many Africans have told me, we don’t want just aid, we want trade that fuels progress.”

And yet, while trade might be the gateway to development, the statistics in Africa aren’t too impressive, especially when it comes to one of the biggest opportunities for growth: trade among African countries. In 2014 in Europe, for example, 69% of exports were to other countries on the continent. In Asia, that figure stood at 52% and in North America at 50%. Africa had the lowest level of intra-regional trade, at just 18%.

Movement from political will to policy action as far as improving regional cooperation is ongoing but remains slow to materialize. Customs procedures are onerous, visa restrictions are high, while failure to produce value-added goods and to diversify from natural resources and goods different from neighbouring countries continues to stifle trade.

There is one way of boosting intra-regional trade, and with it economic growth and development: technology. But for technology to be able to transform trade in Africa, there are a few important steps we must first take.

Getting the right infrastructure

Infrastructure development is a top developmental priority in Africa, particular in two critical areas: electricity and transport. Access to electricity forms the basis of an industrialized economy and hence trade; yet less than 30% of Africans have access to electricity, compared to about 40% in similar low-income countries from other regions. Unless we can do something to tackle this issue, we have no hope of increasing intra-regional trade in Africa.

     Map of Africa showing the share of population without access to electricity
Image: International Energy Agency

More progress is being made in another area: transport. Africa is huge – far bigger than you’d think from looking at a map. Connecting this vast continent is not without its challenges, but already great investments are being made in major carriage ways and regional railway projects, such as the Standard Gauge Railway that will connect Kenya, Uganda, Rwanda and South Sudan.

That’s good but not good enough. In Africa, 90% of trade happens by sea, which means ports also need to be modernized, expanded and maintained so as to push greater trade volumes, enable government to collect more taxes and curb illegal activities.

Internet for all

It’s not just with electricity access that Africa lags behind. It’s also with one of the most powerful tools for boosting trade, opening up new economic opportunities and fostering innovation and entrepreneurialism: the internet.

Some countries are leading the way – Nigeria, Egypt and Kenya, for example – but most countries on the continent are still far behind when it comes to internet penetration rates. While the global average stands at almost 50%, penetration rates in Africa were just 28.6% at the end of 2015. It’s such a priority issue that the Forum has launched an online conversation, #internetforall.

 Top African countries for internet access

If we were able to connect more people on the continent, the boost to trade could be enormous. Apps such as M Farm, which connects buyers with farmers and enable farmers to sell goods at the correct market value, platforms such as Google’s Africa Connected, which allows entrepreneurs to use Google products to build their businesses, or Konga, an ecommerce platform known as Nigeria’s biggest online mall, are just two examples of how the internet could fuel trade.

But unlocking the power of the internet is about more than giving people a modem and letting them get on with it. The internet can only kickstart intra-regional trade if connection goes hand in hand with improved education and understanding of the numerous possibilities the internet can offer all levels of entrepreneurs.

There’s a long-standing discussion in Africa and beyond about the importance of STEM subjects. That isn’t the issue here. As we’ve seen in other regions, you don’t need a PhD in computer sciences to make the most of everything the internet has to offer. Instead, what matters is giving people opportunities to learn, create and innovate through affordable and consistent internet access, thereby fostering an entrepreneurial ecosystem. Africans need to go from being consumers of online content to being mass producers of it.

Governments must promote competition in the telecommunications sector, harmonize regional laws to ensure digital payments can be made across borders, and facilitate the movement, release and clearance of goods across borders. Technological solutions such as drones might be one way to go.

Trade that fuels progress

We know all too well the opportunities trade can offer for development and growth. Africa is in a unique position in that it has the chance to trade with an untapped market: itself. Nobody is saying that will be easy. But technology will go a long way to making this ambition a reality.

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Related topics:
Supply Chain and TransportFourth Industrial RevolutionTrade and InvestmentAfrica
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