Economic Development in Africa Report

1990-5122 (online)
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The Economic Development in Africa report analyses major aspects of Africa´s development problems and policy issues of interest to African countries. It makes policy recommendations for action by African countries themselves and by the international community to overcome the development challenges that the continent faces.
Also available in French, Chinese
Economic Development in Africa Report 2013

Economic Development in Africa Report 2013

Inter-African Trade - Unlocking Private Sector Dynamism You do not have access to this content

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31 Dec 2013
9789210561433 (PDF)

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This report argues that for African countries to reap developmental gains from intra-African trade and regional integration, they need to place the building of productive capacities and domestic entrepreneurship at the heart of the policy agenda for boosting intra-regional trade. It also analyzes the range of strategies and complementary policies that will be needed, besides trade policies, to ensure that regional integration enhances African enterprise development and economic development in general. It explores, among others, the role of national and regional industrial policy and the scope for developing regional development corridors. Lessons are drawn from other developmental regional experiences.
Also available in French
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  • Introduction
    Intra-African trade has enormous potential to create employment, catalyse investment and foster growth in Africa. Since gaining political independence in the 1960s, African Governments have made several efforts to exploit this potential of trade for development, the most recent being the renewed political commitment by African leaders at the African Union summit in January 2012 to boosting intra- African trade and to fast tracking the establishment of a continental free-trade area. By most accounts, African countries have not made significant progress in boosting regional trade. Over the period from 2007 to 2011, the average share of intra-African exports in total merchandise exports in Africa was 11 per cent compared with 50 per cent in developing Asia, 21 per cent in Latin America and the Caribbean and 70 per cent in Europe. Furthermore, available evidence indicates that the continent’s actual level of trade is also below potential, given its level of development and factor endowments.
  • The state of Intra-African trade and investment
    An understanding of the scale, trends and composition of intra-African trade is crucial for the effective design and implementation of policies to boost that trade. This chapter provides an overview of the scale, trends and composition of intra- African trade for the period from 1996 to 2011. Due to data limitations on services and capital, the analysis focuses mainly on trade in goods. In addition, emphasis is laid on developments within the eight regional economic communities considered by the African Union as the building blocks of the future African Economic Community (AEC) as laid out in the Abuja Treaty. Table 1 shows the affiliation of each African country to the eight recognized regional economic communities and affiliation to various other regional communities. As is evident in the table, overlapping memberships of regional economic communities is a characteristic feature of the African regional integration process. Interestingly, Algeria, Cape Verde and Mozambique are the only African countries that are members of only one regional community.
  • Intra-African trade: drivers, challenges and policy options
    The empirical facts and analyses of African trade and investment presented in chapter 1 indicate that there has been a significant increase in the growth of intra- African trade over the past two decades but that the level is still very low compared to the levels observed on other continents. They also suggest that actual intra- African trade is low relative to potential trade, indicating that there are unexploited opportunities for regional trade, particularly in the agriculture and manufacturing sectors. The continent has an abundant supply of natural and human resources, which could form the basis for an expansion of agricultural production and trade. For example, with 733 million hectares of arable land, Africa has about 27 per cent of the world’s arable land while Asia has 628 million hectares and Latin America 570 million hectares (Juma, 2011). However, many countries on the continent are now net importers of food and agricultural products, as shown in chapter 1, and are food insecure. Reversing this worrying trend will be vital to boosting intra-African trade.
  • The private sector, enterprises and productivity
    Africa has a rich and long history of attempts to promote trade through regional economic cooperation. However, the focus of regional trade initiatives on the continent has been more on the elimination of trade barriers and less on the development of productive capacities, particularly in manufacturing and agrorelated industries. While lifting tariff and non-tariff barriers to intra-African trade is important, policymakers must also foster entrepreneurship and address supplyside constraints inhibiting the ability of the private sector to produce and export. Elimination of tariffs across countries will not have any significant impact on intra- African trade if market imperfections on the input side (for example in credit, labour and capital markets) are not adequately dealt with. In this regard, there is a need for sustained measures to boost productive capacity to enable African countries to meet regional demand that may be created by eliminating barriers to regional trade. If this is not done there is a risk that domestic firms will be unable to take advantage of the market access opportunities created by regional integration, leaving ample space for foreign firms to capture most of the benefits from the process, with dire consequences for domestic enterprise and industrial development.
  • Boosting Intra-African trade in the context of developmental regionalism
    This chapter begins with the recognition that boosting intra-African trade cannot be done in isolation. To be successful and have maximum impact, it has to be part of an overall strategy to promote private sector development and regional integration in Africa. In this context, the chapter considers the basic tenets for promoting private sector development and boosting intra-African trade within the framework of developmental regional integration. It explores the defining features and scope of developmental regionalism and compares it to the predominant paradigm of market-led regional integration that is characterized by a specific focus on the reduction of tariffs and the elimination of other border measures that inhibit cross-border trade in Africa. A brief review of African integration reveals that, although there are elements of a developmental integration agenda in some subregions, a comprehensive, coherent developmental integration agenda has yet to be developed and implemented.
  • Intra-African trade: unlocking private sector dynamism - main findings and recommendations
    At the African Union summit held in January 2012, African leaders renewed their political commitment to boosting intra-African trade within the context of regional economic integration. The rationale for this renewed commitment ranges from the need to promote sustained growth and economic transformation to insulation of African economies from external shocks and seizing the growing opportunities for regional trade created by the recent economic growth in Africa and the rise of the middle class. In this context, increasing intra-African trade is regarded by African leaders as an important vehicle to boost growth, create jobs and promote economic development on the continent.
  • Notes and references
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