Challenges hampering Intra-Africa trade

The African Export-Import Bank's 24th Annual General Meeting in Kigali served as a platform to advance the African trade agenda. A key focus of the meeting was identifying obstacles impeding intra-African trade, which currently stands at a mere 15%. In an exclusive interview with CNBC Africa, Professor Emmanuel Nnadozie, Executive Secretary of the Africa Capacity Building Foundation, shed light on the barriers hindering regional trade within Africa. One of the primary challenges highlighted by Professor Nnadozie is the low level of intra-African trade, which hovers around 10-15% compared to other regions where trade levels reach 30-50%. This disparity underscores the untapped potential for African countries to increase trading activities within the continent. Institutional challenges, such as differing rules and regulations across nations, pose a significant hurdle for businesses looking to engage in cross-border trade. Additionally, the lack of diversification in the types of goods produced by African countries further complicates intra-African trade. The prevalence of similar products limits the scope for inter-country trade, with exceptions arising only in cases of unique demands or shortages in specific nations. Another key barrier to intra-African trade highlighted by Professor Nnadozie is the multiplicity of currencies and financial regulations. The issue of varying exchange rates and currency convertibility complicates transactions and adds layers of complexity to cross-border trade. The presence of numerous currencies across African countries introduces uncertainties and risks, deterring potential traders from engaging in intra-African commerce. The establishment of regional blocs and economic unions was designed to address these barriers and streamline trade processes by eliminating tariffs and non-tariff obstacles. However, challenges persist in fully realizing the benefits of regional integration due to existing barriers. Regarding the impact of GDP per capita on intra-African trade, Professor Nnadozie acknowledged the correlation between higher income levels and increased purchasing power. While higher GDP per capita can boost market size and trade volumes, he pointed out that Africa's relatively low GDP per capita has not prevented the continent from importing essential commodities, such as food, on a massive scale. Despite economic limitations, African countries continue to import goods that could be locally produced, indicating a potential for expanding intra-African trade in various sectors. The manufacturing industry presents a significant opportunity for enhancing regional trade, with the example of Nigeria's untapped potential in producing and exporting petroleum products within the West African region. Policy inconsistencies and political factors often impede countries from fully leveraging their comparative advantages and participating more actively in intra-African trade. In his concluding remarks, Professor Nnadozie reflected on Tanzania's recent policy decision to halt the export of gold and copper to promote local industries. While supporting the notion of countries implementing industrial policies to enhance economic growth, he emphasized the importance of evidence-based strategies and visionary leadership in driving successful trade initiatives. Tanzania's approach, though potentially beneficial, must be guided by a clear understanding of the country's competitive advantages and alignment with global value chains. Moving forward, strategic and well-informed policies coupled with decisive leadership will be crucial in unlocking the economic potential of African nations and fostering vibrant intra-African trade relationships.