Intra-African trade potential

This section covers Africa’s potential to supply its import needs from its own sources in the different project categories. Its data are based on average trade flows between 1995 and 2006 in terms of Africa’s exports to the world (including to Africa) and its imports from the rest of the world.

Table 4.12 shows that between 1995 and 2006, Africa exported on average about US$15 billion worth of goods in the basic food category against imports of about US$21 billion. This information suggests that Africa registered negative terms of trade in this product category. Matching Africa’s exports to the rest of the world against its imports from the world in this category also suggests a certain deficit in basic foods or lack of self-sufficiency in this product category (see box 4.2 on efforts to improve the situation). Similar tendencies occur in terms of manufactured goods, machinery, transportation equipment and chemical products.

However, the continent appears to be well-endowed in the categories relating to beverages and tobacco, and ores, metals and precious stones. It also appears to have a huge endowment in the fuels product category, where its world exports exceed its imports by a significant margin. This implies that Africa is more than capable of supplying its import needs in fuel.

Table 4.12

Africa’s world exports and imports: Average trade figures in US$, 1995-2006

Product Categories Exports to World Imports from

World Difference

Basic food 14,875,274 21,052,701 -6,177,427

Beverages and tobacco 1,934,175 1,653,717 280,458

Ores, metals, precious stones 19,304,114 3,931,312 15,372,801

Fuels 81,278,815 17,188,542 64,090,273

Manufactured goods 19,442,801 34,861,887 -15,419,085

Chemical products 6,829,963 16,684,141 -9,854,178

Machinery and transport equipment 9,685,665 53,868,421 -44,182,756

Product total 153,350,808 149,240,722 4,110,086

Source: Compiled from UNCTAD Handbook 2008

Box 4.2

Strengthening agricultural production and intra-African trade in strategic agricultural commodities through regional value chains

Africa was a net exporter until the mid-1960s. Since then, African agriculture has failed to keep up with the increasing food demands of its rapidly growing population or to generate employ-ment and income opportunities to reduce poverty significantly.

Africa’s rural landscape is still marked by smallholder subsistence farms, low technology and weak, knowledge-based agricultural production systems, owing to the lack of develop-ment or appropriate technology and the extreme paucity in basic support infrastructure. Input and product markets are incomplete, and have weak infrastructure and information and com-munication support services. They are poorly integrated at all levels. Private investment in farming systems and market chains is inhibited by the lack of sustainable financial structures that could respond to the needs and demands of rural communities.

Agricultural productivity in Africa is vital to attaining food security. Agriculture represents 70 per cent of the continent’s full-time employment, 33 per cent of its GDP and 40 per cent of its export earnings. Thus it is also a key engine of economic growth. Yet for more than two decades, it has suf-fered from a lack of consistency in the degree and the course of priority given to the development of the sector. African agriculture is today one of the most undercapitalized in the world.

On the output side, it is estimated that about 20 to 25 per cent of Africa’s agricultural pro-duction is marketed, and only 10 to 15 per cent of total agricultural propro-duction is processed.

This contrasts with the region’s sizeable and increasingly effective demand for imported proc-essed food and agricultural products from outside of the continent. Rapid population growth and urbanization (with 50 to 60 per cent of the total population projected to live in cities by 2025) contribute to increasing the resulting import bill, as the gap between aggregate domestic (regional) production and demand translates into the demand for processed food and agricul-tural products that fit the evolving urban consumption patterns.

These challenges are compounded by the very nature of the African agricultural market, which is extremely fragmented along subregional, national and even subnational borders, resulting in segmented markets too to small to ensure the profitability of optimal-scale private investment in the different stages of the commodity chains described above. Paradoxically, while being largely closed to each other, these markets are increasingly open to trade with the outside world.

Thus the gap between national/subregional domestic production and increasing regional demand tends to be filled by imports from non-African sources. Conversely, the fragmented national food and agriculture systems strive to produce for exports aimed primarily at interna-tional markets. Worse, agricultural subsidies and support measures of key trading partners of Africa typically encourage the continent’s imports and hinder its exports. Charity should begin at home: With an annual food and agricultural import bill of US$ 33 billion, the biggest chal-lenge that Africa probably faces in the area of market access is in granting its own (domestic) food and agricultural systems full access to the intra-African market.

The Resolution of the Abuja Food Security Summit* identifies nine continental strategic commodities (rice, legumes, maize, cotton, oil palm, beef, dairy, poultry and fisheries products) and some regional strategic commodities (cassava, sorghum and millet). For such selected strategic commodities, building a Common African Market (CAM) that transcends national and subregional borders would offer an appropriate economic space for private investments at the level of regional economies of scale that would ensure profitability. Hence, for those strategic food/agricultural commodity chains, market integration must encompass the global regional market: a single, common African market.

The emergence and development of vibrant, private regional agro-industrial sectors capa-ble of adding maximum value to and raising the competitiveness of agricultural commodities is lagging because of delays in establishing enabling policy and institutional environments. As a result, food-surplus areas face difficulties in supplying food-deficit ones regionally, and the growing urban demand for food and agricultural products tends to be mostly met by imports from outside of the continent.

UNECA, in the Comprehensive Africa Agriculture Development Program (CAADP) frame-work, has launched an initiative to develop and promote strategic commodity regional value chains in Africa. Its mission is to enable effective public-private partnerships to play a signifi-cant role in developing a vibrant agribusiness sector capable of capturing untapped opportuni-ties such as economies of scale, intra-regional complementariopportuni-ties and trade, and economies of transactions in cross-border investment.

Well-functioning value chains in selected food and agricultural sub-sectors will contribute significantly to improved access to markets. To remain competitive in global trade, the small and medium enterprises (SMEs) must be integrated in the global value chain as suppliers or major players. The SCRVC approach takes a systematic view to improve the market perform-ance of a subsector by analyzing the various functions and processes and the different actors involved. In a highly competitive business environment, organizing the stakeholders to plan and implement activities that address the constraints of a particular subsector becomes imperative.

Value chains are instruments to improve quality and productivity as well as the cost efficiency of subsectors. Promoting value chains spurs economic development and creates linkages and interaction among stakeholders, thus combining entrepreneurial development at the micro-level with institutional change at all micro-levels.

* Resolution of the Abuja Food Security Summit (FS/Res (I)), Summit on Food Security in Africa, Decem-ber 4-7, 2006, Abuja, Nigeria. http://www.africaunion.org/root/au/Conferences/Past/2006/DecemDecem-ber/REA/

summit/doc/Abuja_Res_Final_Eng_tracked.doc

In the next section, we examine the scope of each country’s potential trade within Africa in the context of table 4.12. annex 4.5 provides the information on the indi-vidual countries. Its matrix is explained as follows:

Column 1 presents the country’s exports to Africa;

•

Column 2 presents the country’s exports to the world;

•

Column 3 presents Africa’s share in the country’s total exports;

•

Column 4 presents Africa’s imports from the world;

•

Column 5 contains calculations indicating each country’s potential to export

• to the African region, given the country’s global export capacity measured in terms of its total exports to the world;

Column 6 is the same as column 5 in percentage terms; and

•

Column 7 also contains calculations to match the country’s exports to the

• world against Africa’s imports from the world, to show the country’s capabil-ity to meet Africa’s import needs in that particular product category.

As annex 4.5 indicates, there is great potential for African countries to export their products to the rest of Africa should they choose to do so. The reason that Africa

is not a favorite export destination for the countries is likely due to several factors including poor infrastructure, communication and trade bottlenecks.

Only a few countries had Africa’s share in their total export trade equal or exceed 40 per cent on average between 1995 and 2006: Benin (41 per cent), Burkina Faso (49 per cent), Djibouti (43 per cent), Kenya (49 per cent), Mali (57 per cent), the Niger (65 per cent), Senegal (40 per cent), Sierra Leone (85 per cent) and Togo (44 per cent. Nevertheless, they represented only 10 per cent of the total value of exports to Africa. Disregarding Kenya’s exports to Africa, they constituted only about five percent.

Indeed, in value terms, the leading exporters to Africa were South Africa (27 per cent), Nigeria (11 per cent), Côte d’Ivoire (8 per cent), Swaziland (6 per cent) and Kenya (6 per cent). Together they constitute about 58 per cent of the value of the total exports to Africa by African countries.