Africa must do business with itself - Standard Bank economist
This is the lowest level in the world, despite trade reforms, better macroeconomic management, investments in infrastructure and more constructive trade partnerships. In comparison, about 40% of trade in North America happens within the region, while in Western Europe intra-regional trade stands at about 60%.
Pre-occupied with off-shore partnerships
To illustrate Africa's marginal relevance to the continent's economy, Stevens says while China's exports to Africa have increased 12-fold since 2001 and each of the other BRIC countries by four-and-half times, Africa's exports to other states on the continent have only doubled.
Stevens' paper comes as individual African economies and many of Africa's leading companies (often from South Africa) are being accused of being pre-occupied with off-shore partnerships.
He notes that the general absence of manufacturing industries and poor infrastructure on the continent remain among the major obstacles to African economies doing business with each other. The lack of finished goods production means that Africa is still reliant on imports from overseas, while poor infrastructure constrains intra-Africa trade. Africa has the highest transport costs in the world, almost double the world average, because of poor infrastructure.
"In many ways Africa is reaping the rewards of reforms, better macroeconomic management, investments in infrastructure, more constructive trade partnerships and other proactive initiatives. However, the lingering worry pertains to the dearth of Africa's own production and a long standing habit to look to foreign markets.
"A host of internal deficiencies - particularly in the form of infrastructure shortfalls and skills deficiencies - mean that the expected growth in African markets is largely inaccessible to African producers. Africa needs to invest around US$100 billion a year to upgrade, maintain and expand roads, railways, ports and other core infrastructure," says Stevens.
Promoting intra-African trade
He says promoting intra-African trade should become a top priority for African economies in recognition that the African market of about one billion consumers can be a powerful engine for growth and employment.
"Africa offers a more level playing field for African exporters to find a market for their goods. Twice as many African nations imported more than US$1 billion from other African nations in 2010, than those that exported that amount," says Stevens.
"Deepening domestic manufacturing capabilities will spur intra-African trade and investment. But fragmentation and natural resource dependence is difficult to overcome. The most pressing obstacles are human capital bottlenecks and physical infrastructure constraints."
