I.
UNITED NATIONS
E/NX/TIiADE/88/20E C A / w / T a n g i e r / E IX/8
E
!rnrnTIONAL
PFaxAMMmG AM?OPERATIONAL m m
(ECA/I~LPOC) FOR NOR21 AFRICAN i n t h N e e t i n c j of the C o n m i t r e e of Experts
and N i n t h X e e t i n y of the C m c i l of Plenipotentiaries Tangiers (Morocco, 30 January
-
3 February 1989Introduction
1. During t h e colonial period; the major powers imposed economic and commercial policies on most P-frican States which were orientated primarily towards the satisfaction of their own needs for primary products. Thus, the commercial , firms.,. which wore mainly. subsidiaries
:
.of : transnational corporations, exported agricultural and mineral primary products to the mother 11 : . countryvs a n d imported from them finished. products for the satisfactiorl ofi the demands of the minori-ty population, living i n the urban 'ce,ntres. At the same time, the production of major consumer goods necessary for the local population living in rural areas,: which were almost all remote, was 'left to the initiative of isolated national producers deprived of t,echnical and financial resources.
2 . Since independence, most African countries have ta%en measures to change
the situation, but some of them have not yet succeeded in bringing about in-depth changes 'in the product,ion and domestic trade struc-tures which they inherited. It must be s&essed, however, that all the African countries are aware of the absolute necessity of making domestic trade an instrmen-t
-. of socio-economic development. At the second extraordimry session of the Assembly of Iieads of State and Government,. held in Lagos, Nigeria., iil April
1980;
'the Heads of State and Government of the Organiz,ation of. African Unity recommended that particular attention. be give3 tothe
expansion of domestic trade in order to increase its contribution to the socio-economic development of member States. in July 1985, the Eeads of S-tate ard Government of the OAU adopted Africa's Priority Programme for Economic Reco~iery (1986-1990), which emphasized the necessity of developing domestic distribution systems a n d of taking measures to encourage the consumption of locally obtainableproducts. . ~ . .
3. Over the prksent decade, the Economic Commission for Africa has jevelopd and implemented a work p r o g r m e aimed at helping member States to put into effect decisions OD doinestic trade taken by the Heads of State and. Government.
The presen'; report, submitted at the request of the PIULPOCs, is parkof this programme. Its main a i m i s t o formulate, with regard to Afri,can Gbverbmepts, several measures which, when adopt&&, would contribute to t h e improvement of the present conditions of domestic trade. The' report de& fir& with
. production characteristics and the natue of imports destined for domestic trade and then the present situation in the sector, and the &jor problems and obstacles to the de?elopment of' domestic trade and thelegal fra.meworli.
Lastly, it puts forward practical meksires for the development ' o? domestic trade in Africa.
. .
E/ECA/TRADE/88/20 Page 2
CHAPTER I
MAJOR CHARACTERISTICS OF PROEUCTION AND
THE
XATURE OF IWORTS DESTIIJJE YOR D O ~ S T I C TRADEA. Composition, t r e n d s and importance of food crop production
4. Agriculture i s an important a c t i v i t y i n most iifrican c o u n t r i e s . Table 1 shows a l e v c l of p a r t i c i p a t i o n i n t h e s g r r c u i t u r a l s e c t o r of t h e African populat,ion. The l a t e s t a v a i l z b l e f i g u r e s show t h a t i n 1985, over
65
per cent of t h e t o t a l population were activel:; engaged i n a g r i c u l t u r e i n Africa a s a whole.Table 1. Agriculture i n African economies.
Economic a c t i v e
Population Fopulation
-
T o t a l Agriculture T o t a l A.griculture
%
i n Region Year i n m i l l i o n s i n m i l l i o n s a g r i c u l t u r eAfrica 1965 317 233 132 101 76.4
1970 361 257 148 i 10 74.4
1975 413 283
166
118 71.51980 LEO 313 189 13 0 68.7
1985
555
346 214 L ~ O65.5
Source: FAO, Production Yearbook, 1986
, ,
5. Agriculture, t h e r s f o r e , remains t h e mainstay of African economies because i.t employs more than 60 per cent of t h e economically a c t i v e population, provides t h e b u l k of t h e food f o r t h e population and i s an i q o r t a n t source of exports.
The t a b l e a l s o shows t h a t although high* t h e proportion of t h e a c t i v e population engaged i n t h e a g r i c 7 d t u r a l s e c t o r , has continued t o d e c l i n e s i n c e 1965; from 76 per cent i n 1.965 t o 65 per c e i ~ t i n 1985. There a r e s e v e r a l reasons which explain t h i s t r e n d , including t h e r u r a l exodus, an i n c r e a s i n g phenomenon i n most African c o u n t r i e s . Some c o u n t r i e s , however, continue t o show
a
h i g h r a t e of employmenti n
t h e r u r a l s e c t o r , notably Burundi, Rwanda, Burkina Fzso, 1 Comoros, Mozambique, Niger, t h e United Republic of Tanzania and Uganda, which i n 1985, had a l e v s l than 80 per cent of i t s a c t i v e population employed i n a g r i c u l t u r e .6.
A g r i c u l t u r a l producti.on i n African c o w t r i e s has shown pronounced f l u c t u a t i o n s . According t o EX0 d a t a , production r o s e by 1.83 per cent i n 1984, by 7.35 per cent in 1985 and by 3 per cent i n 1986, while t h e a m u a l average cumulative ra.te of growth was 2 . 3 i per cent durj~ng t h e period 1.980- 1986. Moreover, t h e l e v e l s of performnce of t h e a g r i c u l t u r e s e c t o r , wbich ha.ve prevailed d w i n g recent y e a r s , a r e below -the a c t u a l p o t e n t i a l of t h eE/ECA/TRADE/88/20 Page 3
s e c t o r , since a g r i c u l t u r a l production i n t h e continent remains handicapped by various d e t r i m e n t a l f a c t o r s , including t h e degradation of a r a b l e land, t h e i n s u f f i c i e n c y o r l a c k of inpuzs, c l i m a t i c hazards, t h e absence of s u b s t a n t i a l a g r i c u l t u r a l c r e d i t s and t h e i n s u f f i c i e n c y of t e c h n i c a l advice t o t h e farmers. I n f a c t , i n must be remembered t h a t a g r i c u l t u r a l production, e s p e c i a l l y of food crops, i s dn t h e hands of subsistence farmers and t h e exclusivc concentration on t h e productinn of food crops f o r e i t h e r e x t e r n a l o r domestic t r a d e i s r a r e . Furthermore, t h e bulk of food production stems From small farmers using only basic t o o l s and very l i t t l e f e r t i l i z e r . Apart from t>he f a c t that t h e y continue t o favour cash crop production, some African Governments have only s n i a l l numlsers of a g r i c u l t w a l t e c h n i c i a n s cawable of t r a i n i n g farmers l i t t l e experienced i n modern a g r i c u l t u r a l techniques who a r e l a r g e l y women. A l l t h e s e f a c t o r s r e s u l t i n s h o r t - f a l l i n production and of t r a d e .
Table 2. Growth r a t e s of a g r i c u l t u r a l production by subregion.
Subregion
-
1984 1985 1986 1980-1986Developing Africa 1.83 7.35 3.00 2.31
North Africa -1.01 10.03 2.95 2.73
West Africa 7.41 8.84 1.05 2.50
Central Africa 3.06 4.25 2.43 1.40
Great Lake Countries -2.22 3.62 2.65 2.30
Eazt and Southern Africa -0.04 5.11 5.18 -1.12
-
I f
Source: E-xponentjal growth r a t e s " , FA0 computer p r i n t o u t s , Rome,
5
-
December 1985, E/ECA/CM. l3/3, p.07.
7. No a n a l y s i s of domestic t r a d e i s p o s s i b l e without t h e make-up of t h a t t r a d e being c l e a r . The foliowing paragraphs w j l l attempt t o define t h e major a g r i c u l t u r a l products involved i n domestic t r a d e i n Africa. These may be defined from an a n a l y s i s of t h e data published by FA0
&/.
1) A g r i c u l t u r a l food products
8.
The y i e l d s of t h e major crops grown i n t h e d i f f e r e n t subregions of t h e continent a r e determined VJ t h e p r e v a i l i n g conditions: i n other words, food production i n Africa i s s u b j e c t t o f l u c m a t i o n s caused l a r g e l y by c l i m a t i c1/ Source: FA0 Production Yearbook, volume 39.
-
E/ECA/TFZADE/88/20 Page
4
hazards and furthermore, eovernment a c t i o n i s such a s t o influence both t h e range and volume of a g r i c u l t u r a l food products. According t o a r e c e n t ECA r e p o r t ,
z/
i n many African c o u n t r i e s , a g r i c u l t x r a l food production g r e a t l y iinprovedi n
1985 mainly due t o t h e good c l i m a t i c conditions which t h e region enjoyed. The main food crops grown i n t h e subregions w i l l be defined i n subsequent paragraphs.9.
I n West Arrica, t h e r e a r e t h r e e major a g r i c u l t u r a l product groups:( a ) Paddy rice-producing c o u n t r i e s : Cote d
'
I v o i r e , Guinea, Guinea-Bissau, L i b e r i a , Nigeria and S i s r r a Leone, which i n 1985 together accounted f o r 35 per cent of t o t a l African r i c e production, a s a g a i n s t 30 per cent between 1979 and 1981;z/
( b ) Root and t u b e r producers: Benin, Cote d s I v o i r e , Ghana and Nigeria, which i n 1985 together harvested over
44
per cent of t o t a l African production;&/
( c ) Cereal producers: Benin, Burkina Faso, Cote d q I v o i r e , Mali, Niger, Senegal, Chad and Togo, whose t o t a l harvest was over 20 m i l l i o n t o n s i n 1985;
51
This r e l a t i v e importance of West Africa i n a g r i c u l t u r a l food production does not imply t h a t a l l t h e c o n s t i t u e n t c o u n t r i e s r e g u l a r l y experience production growth. For example, t h e production of r o o t s and t u b e r s i n Ghana f e l l t o 3,823 t o n s i n 1985, from 5,693 t o n s i n 1984.
10. The p r o f i l e of food production f o r Eastern and Southern Africa can a l s o be determined from t h e FA0 Production Yearbook. The c o u n t r i e s making up t h e subregion a r e e s s e n t i a l l y c e r e a l producers (maize, wheat, m i l l e t , sorghum and paddy r i c e ) , but t h e y a l s o grow some legumes and t u b e r s . Ethiopia i s
I
one of t h e major c e r e a l producers, growing mainly maize and sorghum. Others a r e Kenya and Malawi, growing maize, Uganda and Zambia, which produce sorghum, maize and whsat, and Madagascar, where rice-growing underpins t h e Malagasy econcmy. The p r i n c i p a l producers of legumes a r e Ethiopia, Kenya, Malawi, Tanzania and Uganda. Roots and t u b e r s a r e grown i n Madagascar, M a l a w i , Mozambique, t h e United Republic of Tanzania and Uganda. With t h e exception of Malawi, where production of r o o t s and t u b e r s i s l i m i t e d t o t h e sweet p o t a t o , a l l t h e other c o u n t r i e s grow manioc. Madagascar a l s o grows sweet potatoes.I
11. The main food crops grown i n Central Africa a r e r o o t s and t u b e r s . Of t h e s e it must be noted t h a t manioc occupies t h e prime p o s i t i o n i n t h e
2 / Study of Economic and S o c i a l Conditions i n Africa, 1985-1986,
E / E C A ~ C M . 13/3.
3/ Source: Calculated from d a t a published i n t h e FA0 Production Yearbook, volume 39.
E/ECA/TRADE/88/20 Page
5
agriculture of Cameroon and Zaire. Cereals are grorm mainly in the member , States of the Econo&c Community of the Great. Lakes Countries
(CEPGL).
i2. In liorth Africa, grain is the basis of agricultural food production (wheat, maize and sorghum) and some fruits (dates, lemons and olives) are grown mainly
in Algeria, E g y p t , Morocco and the Sudan. Small amounts of legumes are produced, as well 's sugarbeet which
is
grom in Algeria, Emt, Morocco and Tunisia.( 2 ) Other food crops
13. A consideration of the food crops figuring in African domestic trade is incomplete without the inclusion of livestock and fishing products, which form important elements in food consumption. Livestock rearing occupies an important place in the African econorqy. In most countries stock-rearing is on traditional lines and the main animals involved are cattle, pigs, sheep, goats and poultry. Thus, according to the
FA0
statistics,6,'
almost all African countries produce meat, with the principal producers being Egypt, Ethiopia, Kenya, Madagascar, Morocco, Nigeria and the United Republic of Tanzania, which together accounted for82
per cent of the total volume of meat production.According to the same source, however, growth rate were low during the period under consideration, which may be accounted for by a nurnber of factors essentially of an institutional, tech.nica1 or physical character according to the country concerned.
In
fact, the difficulties experienced in livestock production are due to the disadvantageous effects of drought, %he different diseases which affect the African stock, the numerical insufficiency of research stations and the low level of investment in control measures against disease and parasites, in the provision of water holes and an uasture improvement.Fishing activities, ullich are far below the levels they should attain, supply products to the local market, for export and for family consumption. Fishing in Afrjca takes two mair, forms: industrial fishing and traditional fishing.
Industrialized fishing is practised by companies having access to modern equipaent for large scale fishing, preservation and treatment; production js usually for ex3ort. Traditional fishing is carried out in the lakes, rivers and lagoons by individual fishermen using nylon nets? or perhaps a canoe.
It goes without saying that as long as this ac~ivity is carried out with rudimentary equipment, occasionally in far-off areas, that increasing fish production will be difficult and for the foreseeable future, will be destined for the day-to-day supply of the local market.
B.
The make-up of industrial production involved in domestic trade1L. Ignoring mineral production, which is not of direct interest to the study, since it is orientated towards markets in developed countries, various aspects of industrial production in African countries show similar characteristics.
It must be noted at the outset, that political independence has not yet brought
6/
FA0 Production Yearbook, vo1.ume39.
-
E/ECA/TRADE/88/20 Page 6
about radical changes in indus.tri.al. production structures. Extractive industries remain dominant and are in the hands of foreign companies; the transnationals. Furthermore, the external processing of primary agricultural.
produce involves foreign populations who in return, flood the African qrket with finished industrial products. The extractive industries constitute a pole o f development. In fact, however, the development or expansion .of agglomerations centred around these activities causes disparities between zhe rural and urban areas. The foreign investor is lit,tle concerned with decentralizing his industrial operations; rather he takes full advantage of existing infrastructures to increase his immediate profit. Moreover, the heavy concentration of revenue in roreign hands does not contribute positively to economic growth processes because of the exodus of capital. As a res@t3 the majority of the indigenous population remains tied to agricultural activities and takes little part in industry. The types of industry which have developed since independence and which are involved in domestic trade are iight or consumer industries. The pre-eminence of consumer-based industry in Africa reflects the situation prevailing immediately after independence.
i"Ios3 African countries began their economic development from a weak industrial bases. Even today the 'proportion of consumer-based industry remains considerable. According to an ECA pblication, I/ in 1985 the share of these industries in the total value added of the manufacturing sector was 68.4 per cent, in Nigeria, 62.8 per cent in Ca.mcoon, 79.4 per cent in Ethiopia, 41.4
per cent in Kenya, 66 per cent in Zambia and 53.4 per cent in Zimbabwe. Food product industries, drinks, tobacco, textiles and leather were most important manufacturing industries in 1985. In Zimbabwe, local. food processing made up 25 per cent of industrial. production; in the Gambia, groundnut and fish processing accounted for 75 per cent of value added in the industrial sector.
Even so, however, t'neir gro7,th is
rick ii:line
w i t hincreases in demand. The growth in the import of consumer goods is due to various factors: (i) the limited supply of some indispensable inputs to manufacturing, such as packaging, colouring matter and preservatives of a11 types; (ii) the under-use of factories in comparison with installed capacity and poor managenent; to which must be added; (iii) the inadequate technological opttons and the often disadvantageous terms for the transfer of technology. All these, together with other factors such as the concentration of industrial production units in urban areas, the high 'cost of supplying agricultural primary products to m a 1 areas and the under-utilization of industrial capscity, lead to an increase in production costs which raise prices to the consumer and depress domestic demand.
7/ Study of Economic and Social Conditions in Africa, 1985-1986,
E/EcA~CM. 13/3.
C. Imports of consumer goods
15. The import of consumer goods i s usually a response t o t h e d e s i r e t o f i n d s u b s t i t u t e s f o r i n s u f f i c i e n t n a t i o n a l production, I n r e c e n t years, African c o u n t r i e s , with few exceptions, have r e g i s t e r e d food d e f i c i t s , e s p e c i a l l y of c e r e a l s , showing t h a t t h e r e i s an u n f u l f i l l e d l o c a l demand. Faced with stagnation i n t h e i n t e r n a l supply of consumer goods, Africa must pay high p r i c e s f o r food imports and count upon a i d from developed c o u n t r i e s . The underproduction of foodstuffs, t h e food h a b i t s of l o c a l populations and t r a d e p o l i c i e s a l l determine t h e type and amounts of imported consumer goods. Trade i n manufactured goods, including consumer goods, i n African c o u n t r i e s r e p r e s e n t s a d e f i c i t i n t h e t r a d e balance. The s i z e of t h i s d e f i c i t i s shown i n t h e following t a b l e .
Table 3. Trade i n maniifactured goods i n African c o u n t r i e s ( i n m i l l i o n s of
$IJS
Exports Iinport s Trade balance
1981 1985 1981 1985 1981 1985
North Africa 2102 2140 24884 22893 -22782 -20753
West Africa 937 573 21240 12911 20277 -12338
Central Africa 657 822 3226 3147 -2569 -2325
Eastern and Southern Africa 2428 2095 8008 6177 -5580 -4082
T o t a l
6161
5630 57358 45128 -51197 -39498Source: ECA s e c r e t a r i a t , E/ECA/CM.13/3.
E/ECA/TRADE/1;8/2XL Page
8
CENPTER
TI
CURRENT DOKESTIC TRADE
16. Domestic trade may be defined as the sum total of activities intended to ensure the exchange of goods and services between the producer and any given consumer. Its role is to establish a direct link between two economic agents. This function can only be fulfilled if certain facilities are present.
Thus methods of communication and transport, finance and sufficient commercial operatives are ipdispensable to the smooth operation of domestic trade. The ccrrent trading conditions found generally in Africa must, therefore, be analysed.
A. Econonic operatives involved in domestic trade
17. First, it should be noted that domestic trade stems both from the private sector in countries with a. market economy asd from the state sector in those with a centrally planned economy. In the private sector, there are three major types of commercial operative: (i) individual operatives (nationals and foreigners) ; (ii) marketing co-operatives; and ( iii) parastatals.
Traditional indigenous traders are involved in selling local agricultural produce and pome imported consumer goods. Foreign commercial companies, mainly subsidiaries of transnationals corporations, are engaged in import export;
wholesale trading, from bases in urban centres. Marketing co-operatives, set up by nationals of t,he country concerned are engaged in trade in agricultural produce. Following the realization that the supply of products was often scattered, the public authorities took measures to encourage the grouping of traders, but t'ne degree of development of this co-operative movement varies from country to country. The distrjbution of some goods, whether local or imported, particularly those for immediate consumption, is limited to parastatal organizations. Since independence, some cormtries have experienced an expansion in the numbers of middlemen, usually national traders, operating between the producer or importer and the final consumer and also a specialization of local traders in particular fields.
To
deterIsine the role of the middleman, the markets in which they operate must be analysed.B.
Distribution ( 1) Organization18. Distribution may be defined as being a commercial function aimed towards putting at the disposition of consumers or users goods obtained either locally or by import. Distribution systems may be analysed in two ways:
(a)
By
method of distribution, according to the type of activity, ' i.e., wholesale trade, retail trade and co-operatives;(b) By the tools available to the distributor, such as transport, warehousing and stockpiling.
E/ECA/TRADE/86/20 Page 9
( i ) Tzholesale t r a d e
19.
The wholesaler i s no*, involved i n d i r e c t s a l e s t o t h e consumer o r u s e r , but r a t h e r t o ar. intermediary who m y be a r e t a i l e r o r a small-scale wholesaler.Since t h i s business involves enormous investment i n material., t r a n s p o r t equipment, warehousing and srjock, it i s c a r r i e d out by fbreign commercial companies s i t u a t e d i n urban c e n t r e s owned o r mznaged i n Africa by n a t i o n a l s from, f o r example, Greece, t h e Lebanon and t h e Indian sub-continent. They a r e mainly concerned with imported or l o c a l l y manufactured goods. I n d i v i 5 u a l t r a d e r s may a l s o be involved i n t h i s type of business, but they a r e hampered by a l a c k of adequate f i n a n c i a l means. Tne sbsence of wholesale t r a d e ir.
t h e main a r e a s of production and consunrption lengthens t h e d i s t r i b u t i o n c i r c u i t s because of t h e increase i n t h e number of intermediaries and causes an i n c r e a s e i n p r i c e s , p r e j u d i c i a l t o +,he f i n a l consumer.
( i i ) R e t a i l t r a d e
20. R e t a i l e r s o b t a i n t h e i r supplies from n a t i o n a l and foreign wholesalers and s e l l t o t h e cocsuqer. I t I t . p o s s i b l e , however, t h a t t h e wholesalers o r manufaczurers have developed t h e i r own r e t a i l d i s t r i b u t i o n systems, a s i n t h e case of s o f t and a l c o h o l i c beverage manufa.cturers i n most African S t a t e s . Equally, some r e t a i l e r s a r e involved i n t h e small-scale wholesale t r a d e . Most a c t i v i t y t a k e s place i n r u r a l a r e a s , which a r e o f t e n poorly served and t h i s has l e d t h e public a u t h o r i t i e s t o e x e r c i s e s t r i c t c o n t r o l s i n t h e i n t e r e s t of t h e consumer.
.
( i i i ) Intervention. by n a t i o n a l a u t h o r i t i e s
21. The measures undertaken by African S t a t e s f a l l within t h e framework of t h e i r respecti.ve economic systems. Thus, some have created d i r e c t c o n t r o l mechanisms over d i s t r i b u t i o n , while o t h e r s have attempted t o f a c i l i t a t e t h e commercial a c t i v i t i e s of p r i v a t e agents. I n matters of i n s t i t u t i o n a l support, most African c o u n t r i e s have s e t up a u t h o r i t i e s 'such a s m i n i s t r i e s o r departments, charged. with t h e d i r e c t i o n and r e g u l a t i o n of domestic t r a d e .
, . hgny countries have r e v i s e d - t h e i r laws governing domestic t r a d e i n order t o reorganize and improve domestic d i s t r i b u t i o n c i i - c u i t s . For example, i n 1984 Niger enacted new l e g i s l a t i o n t o reorganize t h e ' domestic t r a d e sector'. Since 1975 t h e Ethiopian Goverrqent has t o t a l l y ' c o n t r o l l e d access t o t r a d i n g by i n d i v i d u a l s ,and public s e c t o r involvement i n d i s t r i b u t i o n , African Governments u s u a l l y r e g u l a t e e n t r y by f o r e i g n e r s i n t o . comme-rce and i n t o wholesaling by s e t t i n g maximum stocking l e v e l s d : . I n .Et,hiopia, - t h e maximum c a p i t a l allowed per e n t e r p r i s e i s $US 100,000 o r $US 150,000,
&/
depending on whether t r a d i n g i s r e t a i l o r wholesale and l i c e n c e s a r e necessary i f t h e c a p i t a l involved8/
S t r u c t u r e of domestic t r a d e : Suumry r e p o r t on f i v e African c o u n t r i e s (Cameroon, Ethiopia, Niger, Senegal and S i e r r a Leone),-
E / E C A / T R A D E / ~ ~ , page 11.E/ECA/TBADE/88/20 Page 10
i s more t h a n $US 500. I n most c o u n t r i e s , however, t h e r e i s no o v e r a l l r e g u l a t i o n on t h e t o t a l number of wholesalers and r e t a i l e r s . On p r i c e c o n t r o l , t h e p r i c i n g p o l i c i e s t o t h e producer adopted by various African Governments mainly a f f e c t a g r i c u l t w a l products, sometimes t o t h e advantage o f i n d u s t r i a l crops a t t h e expense of food drops and without any consultat,ion with t h e growers concerned.
I n most c o u n t r i e s , p r i c e s of l o c a l l y manufactured products must o f t e n be approved before being o f f e r e d f o r s a l e , an a c t i o n which i s accompanied by p r i c e c o n t r o l measures determined by t h e a d m i n i s t r a t i v e powers t h a t be. When, t h e r e i s , a shortage, however, c o n t r o l s a r e not enforced which means t h a t t h e y a.re i n e f f j - c l e n t
.
( 2 ) D i s t r i b ~ t i o n f a c i l i t i e s
22. This s e c t i o n w i l l attempt t o analyse t h e f a c i l i t i e s a x a i l a b l e t o t h e d i s t r i b u t o r s of goods i n Africa and w i l l consider t h e methods of t r a n s p o r t i n use i n t h e region and t h e f a c i l i t i e s f o r warehousing and stocking.
! a ) Transport
*,3. Transport i s indispensable t o d e l i v e r t h e product of t'ne producer or i ~ q p o r t e r to t h e consuner. The means of i.nterna1 t r a n s p o r t used i n Arrica include roads, railways, lakes, r i v e r s and a i r . Road t r a n s p o r t i s t h e method most f r e q u e n t l y usea, but it must be noted t'nat because t h e roads v e r e b u i l t p r i m a r i l y t o l i n k t h e l a r g e urban c e n t r e s , much of each coimtry remains i s o l a t z d and i n a c c e s s i b l e and t h a t t h e road system i s not usable during t h e r a i n y season.
Thus t h e movement, of availabie goods, e s p e c i a , l l y from r u r a l a r e z s t o n a t i o n a l markets i s hampered. Up-to-date t r a n s p o r t com&fiies using adequate m a n s of t r a n s p o r t a r e e s t a b l i s h e d i n t h e urban and r e g i o n a l centres. I n t h e r u r a l a r e a s , t r a n s p o r t depends on human porterage and t h e use of animal. t r a c t i o n which means t h a t produce can only be so1.d i n t h e n e a r e s t v i l l a g e markeis.
Considerable posi-tive e f f o r t s have been undertaken i n c o u n t r i e s such a s Kenya, Zimbabwe and Ethiopia t o develop r u r a l access roads, so a s t o improw a c c e s s i b i l i t y and spread t h e e f f e c t s of socio-economic develo$ment. E a i l t r a n s p o r t i s g e n e r a l l y used f o r heavy merchandise over long d i s t a n c e s . . In f a c t , t h e r a i l network r e m i n s much t h e same a s i n t h e c o l o n i a l e r a , being used t o t r a n s p o r t primary a g r i c u l t u r a l and mining products t o t h e t o k s , p o r t s and a i r p o r t s , with t h e . r e s u l t t h a t it plays a secondary r o l e i n t h e domestic d i s t r i b u t i o n of goods. I n s p i t e . of S t a t e i n t e r v e n t i o n Ln t h e s e c t o r , based cm n a t i o n a l r a i h r a y companies, t h e r a i l network has d e v c l o p e a very slowly a n d some. cow?.i;ries h a w no railway. Inland waterway t r a n s p o r t includes t h . a t by r i v e r and l a k e . Several r i v e r s i n Africa: t h e Niger, t h e Zaire, t h f Nile, t h e Zambezi, e t c . , u n f o r t u n a t e l y have poor navigation conditions because of t h e i r r e g u l a r i t y of flow. Given t h e equipment i n use on t h e r i v e r s , p a r t i c u l a r l y t h e canoe, t,hFs means of t r a n s p o r t cannot become ?,n important
method
i n t h e domestic d i s t r i b u t i o n of goods i n Africa. I n c o n t , r a s t , some lakes and ri.vers a r e used f o r international. .trade from t h e c o u n t r i e s concerned, a s f o r example, Lakc Tanganyika, t ' n e Congo/%aire system and t h e Oubangu-i.Maritime t r a n s p o r t which usually serves e x t e r n a l t r a d e from Ai'rican c o u n t r i e s i s n o t ; r e a l l y of i n t e r e s t i n terms of domestic t r a d e , except t o tlie exrent th3t e x i s t i n g port i n s t a l l a t i o n s an6 f a c i l i t i e s a s s i s t t b e import of consumer goods d e s t i n e d f o r t h e l o c a l population. In. s g i t e of t h e e x i s t e n c e of a i r p o r t s i n many African c o u n t r i e s , a i r t r a n s p o r t i s r a r e l y used f o r 2omestic t r a d e
E/ECA/TRADE/88/20 Page 11
because it is thought expensive. It could nevertheless assist countries where distances are great an@ could open up interior regions by making some necessary goods available, such as perishable agricultural products and drugs.
(b) Facilities for warehousing and stockpiling
24.
State warehouses are sct up in production areas when there is state interven~ion in the marketing of agricultural food products or of other foods such as fish products. Peasants do not enjoy the same facilities. Their products are usually piled uj~ in make-shift stores, in the corners of housesor
even in the open air at the mercy of the elements, a factor which aggravates post-harvest losses. Sometimes the agriculturalists themselves finance collective barns. The distribut,ors use warehouses concentrated in port areas, for imports, or in the production areas, for goods mnufactured locally. With regard to stockpiling facilities, most African countries have some grain silos sited particularly in urban areas and belonging usually to public organizations involved in grain marketing. Pllblic intervention of this nature, however, has not reached sufficient proportions to ensure food security; fwthermore it is noticeable that African Governments favour investment in stockpiling activities in urban areas rather than in the countryside.C. Financial mechanisms in domestic trade
25. Among the measures facilitating trade, finance occupies the prime position.
The difference forms of finance will be considered. The expedient used by the state to finance domestic trade is that of public investment programmes.
In the agricultural sector, the state has often planned and financed projects aimed at food self-sufficiency, The share of investment on agricultural export projects4 however, is prejudicial to the other food products which are directly concerned in domestic tracle. In the ind~~strial sector, in most African countries, investment seems to have taken into consideration the needs of t,he domestic market, for exau.ple in the financing of agro-food and textile industries. The state no longer limits its interveztion to financing sectors producing goods destined for the domestic trade sector, it also helps the agriculturalists a.nd small traders. After realizing that these groups had difficulty in securing commercial loans, the state has set up agricultural credit institutions, such as the agricultural credit banks, to provide for the urgent financial needs of agri.cultura.lists and it has tried to encourage national economic development banks to grant loans to the small farmers end traders.
2 Commercial loans: private banks and their activities
26. It is genwally agreed that by nature, the banking system does not stimulate the development of domestic trade in Africa. The private banks which operate in most African countries are the subsidiaries of parent companies situated in the metropolitan countries. As a result, they are only interested in financing export and import operations which are often run by foreigners and a few nationals of sufficient financial means. Sometimes the private banking sector grants credit to parastatal corporations engaged in agricultural
E/ECA/TRAZ/68/20 Page 12
marketing. They a r e o f t e n granted seasonal bridging loans. A s mentioned 8 above, t h e s t a t e does h e l p small farmers and t r a d e r s t o finance t h e i r operations.- This moup has l i m l t e d access t o commercial loans because t h e guarantees demnded by t h e p r i v a t e bankine; i n s t i t - u t i o n s a r e g r e a t e r than t h o s e vhich could be demanded f o r such a c t i v i t i e s . Moreover, p r i v a t e commercial k n k s i n p r i n c i p l e only grant very s h o r t term loans which a r e not adaptable t o seasonal v a r i a t i o n s i n production. Faced with t h i s s i t u a t i o n , some commercial operators self-finance t h e i r a c t i v i t i e s o r have recourse t o other
i l
informal sources of finance, such a s t o n t i n e s i ' . According t o information received i n ECA, 60 per cent of people engaged i n commerce i n S i e r r a Leone self-financed t h e s e t t i n g ug of t h e i r e n t e r p r i s e s . The majority of Cameroon small businessmen have recourse t o "tontines", whjle i n Senegal commercial banks a r e involved i n e x t e r n a l t r a d e and t h e National Development Bank lends only 2 per cent, of c r e d i t t o t h e commercial sect&. Commercial loans i n Ethiopia a r e granted a s a p r i o r i t y T O co-operatives,
CHAPTER 111
PRINCIPAL Pi3OBLEME AND OBSTACLES TO THE DEVELOPMENT OF DOESTIC TRADE
27. The problems and o b s t a c l e s which impcde domestic t r a d e i n Africa must be analysed.
A. Supply st,ructure: p r o d u c t i m and imports
28. The importance of a g r i c u l t u r e i n t h e economies of African c o u n t r i e s has a l r e a d y been shown and equally t h e s h o r t f a l l of food production destined f o r African domestic t r a d e has a l s o been mentioned. Several comon s a l i e n t p o i n t s can p r h a p s explain t h i s l a t t e r phenomenon. The f i r s t f a c t o r stems from t h e very n a t u r e of African a g r i c u l t u r a l economies. It w i l l r e c a l l e d t h a t t h e f i r s t o b j e c t i v e of t h e c o l o n i a l systems was t o develop export crops t o s a t i s f y t h e needs of t h e c o l o n i a l powers. Since independence, AfYican c o u n t r i e s have not r a d i c a l l y changed t h e production s t r u c t u r e s i n h e r i t e d from t h e c o l o n i a l e r a ; cash cropping has continued t o be favoured by c a i l i n g upon new f a c t o r s of production i n order t o i n c r e a s e t h e r e c e i p t s of f o r e i g n exchange necessary t o pay f o r imports and f o r the implementation of development p r o j e c t s . Foreign exchange and e x t e r n a l support, however, have always been i n s u f f i c i e n t , so much so t h a t t h e volume of investment i n t h e a g r i c u l t u r a l s e c t o r has not y e t shown any s u b s t a n t i a l increase. Indeed, according t o an ECA p u b l i c a t i o n , 91 ''the resources a l l o c d t e d g e n e r a l l y proved inadequate and t h e l e v e l of
-
domestic o f f i c l a l investment i n t h e a g r i c u l t u r a l s e c t o r remained f a r below t h e 20-25 per cent of to-cal such expenditure recommended i n APPER". This p o l i c y has had t h e e f f e c t of r e l e g a t i n g t h e development of food products t o f u l f i l t h e domestic demand of t h e l o c a l populations i n t o second place. Another f a c t o r explaining t h e s h o r t f a l l of food p o d u c t i o n s-cems from t h e a g r i c u l t u r a l produxtive system operating i n most African c o u n t r i e s . Land i s c u l t i v a t e d by small farmers using rudimentary production t o o l s and l i t t l e f e r t i l i z e r . This ardnous work means t h a t t h e farmer has t o be content with subsistence h a r v e s t s and t h e occasionbl market,aUe s u r p l u s , with the r e s u l t t h a t they a r e progressively discouraged from a g r i c u l t u r a l work. The r u r a l exodus i n c r e a s e s . Moreover, a considerable proportion of t h e r u r a l population uses t h e b a r t e r system, which neans t h a t t h e exchznge s e c t o r o r t h e African r u r a l economy i n t e g r a t e s with d i f f i c u l t y i n t o t h e modern monetary s e c t o r . The peasant a l s o has other problems; he o f t e n cannot f i n d out f o r himself whetner markezs e x i s t f o r h i s products o r t h e e f f e c t i v e p o t e n t i a l demand f o r h i s goods. This l a c k of adequate organization in t h e marketing of consumer goods influences t h e volume of goods exchanged i n t h e domestic s e c t o r .9/ Survey of Economic and S o c i a l Conditions i n Africa, 1985-1986, E / E c A % M . ~ ~ / ~ , p. 90, para. 235.
E/ECR/TBADZ/88/20 Page 14
B.
Level of demand2 9 . It has been shown that food production is not necessarily a function
of demand and, that external support in terms of imports and food aid are palliatives for this insufficiency. Two major factors determine demand both for local products and for imported goods; namely inc0m.e levels and the food habits of the 'consumer. Economic dualism, which characterizes African economies, is found even at the level. of local consumption. There are clear differences in a.verage bl~ying power and food habits between urban and rural areas. These differences are such as to impede inter-zonal and inter-district transfers. The scale and structure of the markets, especially in the rural areas, is evolving very slowly. Indeed, several years after independence, local and inter-district exchanges 'rerain feeble and are concerned essentially with agricultural food products obtained locally and a few manufactured consumer goods; such as soap, fertilizers and clothes. In some countries a change in consumer habits has been noticed in favour of certain imported goods, such as rice and other cereals. In the rural areas, part of the marketable surplus is sent to nearby urban centres. Demand is more diversified and larger in the urban centres, where there is a greater range of incomes, variety of consumption habits and a denser distributionsystem. In the regular markets of urban centres are found the major proportion of locally manufactured.or imported products and a few raw products fron the rural areas.
C.
30.
Preceding sections have examined t.he organization of domestic trade as a function of the economic systems existing in African countries. It has been shown that the number and type of economic operators functioning in the sector depended precisely on. the economic system. In market economies within Africa, the national authorities intervened to regulate t'ne functions of each category of operator in the national commercial. system. Some governments, however, do not take the regulatory measures necessary with the result that there is no clear division between wholesaler, small-scale wholesaler and retailer.In other countries, many commercial operators. combine ali three functions which leads to speculation vithin the distribution sector causing a rise in prices prejudicial to the consumer. Some governments take no initiative L LO
encourage the grouping together of traders with the result that there are few professional trading organizations, in strict collaboration wLth the national, authorities, could take cohereat and concerted action to set up an organized distribution system. In most African countries, the chambers of commerce, agriculture and industry are rerely involved with aspects such as promotion of domestic trade. Lastly, ftom the Institutional point of view, the organizations charged with developing domestic trade do not have sufficient trained management. and personnel.
D. Distribution facilities
31. In terms of stockpiling, the facilities that exist are generally feeble.
Food production varies from year tn year depending on cli~natic conditions and because appropriate measures are not taken early enough to avoid excess production losses. Since most stockpiling installations are sited in
towns,
usually the capital, this means that there are post-harvest losses from areas far from the storage areas. Moreover, storage fecilities are often constructedC/ECA/TWE/8b/20 Page 15
by p b l c organizations which a r e sometimes s u b j e c t t o f i n a n c i a l problercs.
The z o l l e c t i v e barns whi.ch axe e s t a b l i s h e d i n t h e r i r a l a r e a s by t h e peasants t o m i t i g a t e a l a c k of public f a c i l i t i e s do n o t measure up t o d e s i r a b l e seca-ity c r i t e r i a . In preceding s e c t i o n s it. was s t a t e d t h a t road .transport was t h e method roost commonly used f o r domestic 'trade, but t h e major problems of t h i s means of t r m s p o r t were not &eteta.iled. The s t c t e and s t r u c t u r e of t h e road network influences t h e provision of goods and s e r v i c e s . The expansion of
thd
road network demands consiclerable f i n a n c i d in:restmenl: v'hich, ,,in- almost a l l Ai'rican c o u n t r i e s , could not be covered from l o c a l resources s i n c e most e f f o r t i s concentrated on t h e r e h a b i l i t a t i o n and periodic and, continued a a i a t e n a n c e of t h e e x i s t i n g network and on tie l a y i n g out of roads i n newly developing w b a c c e n t r e s . A s a r e s u l t , r u r a l a r e a s a r e i s o l a t e d which handicaps t h e clevelopment of domestic t r a d e . Ifloreover, r u r a l a r e a s may be. i n a c c e s s i b l e because of t h e impassability of rcads i n t h e wet, season and even normally, it i s d i ? f i c u l t f o r heav:ly laden l o r r i e s t o reach some a r e a s because of poor access road maic-tenance. This leads t o a l o s s of p a r t of t h e n a t i o n a l p?oduction. Transport d i f f i c u l t i e s a r e a t t h e b a s i s of t r a n s p o r t c o s t increases and consequent cohswner p r i c e r i s e s and of t h e i.ncrease i n t h e number of middlemen involved Ln di s t r l b u t i o n .%. Financing domestic trade
32. 'The d e p o s i t s i n o f f i c i a l . c r e d i t i n s t i t u t i o c s a r e not only a v a i l a b l e for- t h e development of t h e r u r a l a r e a s . Loan conciitions, t h e s u b s t a n t i a l guarnntces deman6 and t h e admi.nistrative f o r m a l i t i e s required do not a t t r a c t a g r i c u l t u r a l i s t s t o request financing of t h e i r a c t i v i t i e s . Thus, it i s t h e c i v i l servants and small savers who p r o f i t from t h e a v a i l a b i l i t y of loans.
Furt,hermors, most a c t i v i t i e s by African development banks, which a r e d i c t a t s d by ,donors or by go~errxnents,~ a r e a l s o not n e c e s s a r i l j involved i n r u r a l development. Toe banking system established by t h e c o l o n i a l powers i s wary of financing food production and domestic d i s t r i b u t i o n , r a t h e r loan p o l i c y i s o r i e n t a t e d tovards financing imports and exports. Vnder such c i r c u m t a n c e s , t h e o b j e c t i v e of t h e banks i s not t o secure d e p o s i t s from t h e sulbsistence s e c t o r n o r t o u t i l i z e t h e s e a v a i l a b l e resources f o r t h e development of t h e s e c t o r . It i s t h u s important t o c r e a t e l o c a l biznks more o r i e n t a t e d towards productive r u r a l investment and t h e d i s t r i b u t i o n of t h e goods which r e s u l t , This implies e f f e c t i v e p i t r t i c i p a t i o n by t h e peasants i n t h e . monetary economy of t h e country and surplus revenues a v a i l a b l e f o r savings.
E/SCA/TRN~E/~~/~O Page
15
THE
ROLE OF DOMESTIC TMDE I N TNE ECOIiOMIC DEVELOPMENT OF P;FRICANSTATE
33. Although development i s impeded by numerous obstacles
,
some of riaich k g e a l r e a d y been consi.dered, domestic t r a d e i s nevertheless a n importan'c sector' i n African economies. Tne r o l e t h a t it can play i n t h e economLc development of t h e country w l l l be b r i e f i y considered.A. Influence on i n t e r n a l development processes
---
34. Domestic t r d d e i s oft.en c o t classed b:- Afi"2.ca.n cou'iltri-es a s being a v i t a l s e c t o r because it does not d i ~ e c t i y hrring i n foreign cmrency. It must be remembered, however, t h a t iris developineni may be a v a l i d influence n t h e development o f s e v e r a l c o u t r i e s . Ey definition, t h e domestic t r a d e of a
country includes t h e t o t a l i t y of comercieJ a . c t i v i t i e s involved in t h e excha.fige of' goods w i t h i n a given t e r r i t o r y ; t h a t i s , fro= pr:o2uction :o consumption.
I n o t h e r words, domestic trad-e make?, a . ~ r t i l a b h -the Locally produced or imported goods t o t h e user or consimer, Because i-t provides o u t i e t s f o r availab1.e goods within %be n a t i o n a l area., it plays a p a r t i n t h e growth of n a t i o n a l production. It a l s o has another r o l e i t h a t of fzclPLtating t h e d i s t r i b ~ r t i o n of n a t i o n a l revenwe and 3.t Fnflcences 21e cievelopaent pioczss by giving employment t o a 3irt of t h e n a t i o n a l popuia.tion. 'jell-rrrganized domestic
!
t r a d e a l s o re3uces t'ne d i s p a r i t i - e s e x i s t i n g betijeer urban scd r w a l a r e a s , by a'ckracting investme& iriLo more i.solated. a r e a s . The e f f e c t s of domestic t r a d e on t h e developueilt, pz-ocess should. lead nzti.oc.al a u ~ h o r i t i e s t o gfwi
more attenJLior! t o i t s expansion,B.
--
E f f e c t on Afrlcan e x t e r n a l t r z d e-
35. The present orga.nizat.ion or" domestic drsde i n Africa d a t e s from t?i€
coLoniai e r a and i s .the reason f o r t h e r?ea.gness of tkie s e c t o r , I n s t e a d of' developing domestic maiikets, t h e ex-colonial. pavers estabiislied a producti;.n and d i s t r i b u t i o n systeifi aimed. z t s a t i s P y i n g ;oetrapo:.itan needs : This s i t u a t i o n has not b a s i c a l l y changed. The development, of 6.omestl.c iradc., howe-rer, can both i ~ r t e n s i f y and d i v e r s i f y Yne s-Lr-LC-Lure and Z e s t i n z i i o n s of e x t e r a a i t r a d e from African corn-tries. A:Yiean e.xports
er-c.
m.iz1.y p r i i r y products; Becaus:~o r t h e l a c k of r a t i o n a l organization of $om?stic t r a Z e p m ~ r k e t a b l e s ~ r p l u s e s a s a r u l e a r e l i m i t e d , -mpredict~able and i r r e g u l a r . Farmers tend t o prcdv.ce only enough --to satj.sfy t h e i r om1 needs :s1&sistencej arii t h e r e f o r e , s e l l . wr:r i t 1 I n c o n t r a s t t,o export organizations, t h e ~ m - k e t i r ; ~ organization of products produced l o c a l l y i s very inefficient^ 3rga:anize'; c o l l e c t i o n and.
d i s t r i b l u t i o n can h e l p both t,he l o c a i and interns-::;onel ';.ow of goous avails-ble domestically. XationaL a u t h o r i t i e s kave an :mpor-tant r o l e t o pJ.ay- iil outl.ining p r i o r i t y a c t i o n aimed a t developing dsmestic t.ra.ric: i n s x h a way a s t o i;icreas,e i t s c o n t r i b u t i o n t o t h e i n t e r n a l ecocomic development, precess and -to ra:.se exterrial t r a d e leiiels. Tne al>ernat,ive 2rrengemeaTIs vhich naiional. powers could i n i t i a t e t o develop domes-ti.c t r a d e r . r i l l be considered i:~. t,he follovlr!,~
chapter.
E/EcA/TRADE/88/20 Page 17
CHAF'TER V
ALTERNATIVE PATTERNS FOR THE DEVEMPMENT OF DOMESTIC TRADE
t 36.
The drawing up of nas1,er plans for domestic trade development presupposes an appreciation of all the problems which handicap the growth of the sector.
The present chapter, therefore, will propose solutions to the obstacles which have already been defined. The recommendations which are not exhaustive, deal with the legal framework, the structure of domestic trade, facilitation measures and the integration of urban and rural markets.
A. Legal framewvrk: legislative and institutional measures
37.
The propositions put forward with regard to the public authorities, involve several measures which should be adopted to smooth out present irregularities in the sector. Domestic trade can only make a valid contribution to economic development in any country if it is controlled, which implies a better organization of the commercial operatives engaged in the sector. It has benen shown before, that the personnel structure is complex and that the role of the different operatives is often not clearly defined by national authorities.
Thus, several measures are proposed:
( a )
The creation of a governmental institution such as a department responsible for promoting domestic trade;
(b) The strict regulation of the conditions of access to commercial dealings, particularly at the wholesale level, 5~hich would have the advantage of reducing the risks of breakdown in the goods distribution system;
(c) The clear definition of the function of each type of commercial operative, which would allow a rationalization of distribution networks, taking into particular account the needs of people living in remote areas.
B. Structure and mechanism
38. The reorganization of the structure and mechanisms of domestic trade should involve an adjustment of supply and demand in the domestic market.
To remedy the present imbalance, it is important that African governments should continue to adopt measures to diversify both agricultural and industrial production. Private investment, particularly in rural areas, should be encouraged. In order to make the rural sector more dynamic, the process of grouping cultivators into co-operatives should be encouraged which would be lent the necessary facilities. Equally, the rural areas must be industrialized, not so much by setting up large industrial complexes but more by encouraging private investment in agro-industries. The expansion of ago-industry in rural areas demands that national authorities take a series of measures, such as the direction of investors, the granting of investment loans on soft-term conditions, the adoption of protective measures for' production units, etc.
The main problems of financing the domestic trade sector have been dealt with
previously. The development of domestic trade involves the need to finance
investment and working capital. 'The lack of specialized banks to finance
domestic trade aggravates the situation. Thus, it would be useful to examine
E/EcA/TRADE/~~/~~
Page
18
the possibilities of creating a national bank specialising in financing domestic trade or at least of reinforcing the structure of commercial loan sections of development financing institutjons and of other commercial banks operating in the coun-cry.
If
would aiso be desirable to increase domestic savings, particularly in rural areas, in order to increase the possibilities of granting 3loans.
C. Facilitatior,
39.
Arq
proposal to improve the facilitation of domestic trade must concentrate on the transport problem, given its essential na-cTwe. Any solution must lead to:(a) The opening up of isolated areas in order that remote consumers may be reached;
(b)
A
lowering in txnsport costs.In this aspect, it is necessary io co-ordinate the development objectives of the productive sectors of the economy with those of transport; to create additional infrastructures of local importance to ensure the provision of local markets for the most remote populations; to maintain the existing networks and to regulate tariffs in order to safeguard the interests of the user and to protect the consumer.
40.
Existing facilities for warehousing, stockpiling, and cold storage are concentrated in urban areas which facilitates the distribution of goods inI
these centres.I?
the rural areas, the best organized. sectors are the collection and warehousEng of export products. It is necessary, therefore,I
I that African governments continue their efforts to endow the rural areas wit'n storage facilities. This involves a co-ordination of policies aimed at increasing production end opening up the rural areas with those of investing in stockpiling installations in order to make sure t h t perishable products are not lost.
D.
Integration of urban and rural marketslil. The action by national authorities must be orientated essentially towards drawing up fair and beneficial pricing policies for local goods in order to increase the income and b-wing power of the cultivators and balance as much as possible, the domestic terms of trade. This policy presupposes the establishment and strengthening of price controls on manufactured and/or imported goods at all stages of distribution. The regdating of profit margins must take into account both the interests of the consumer and the fair remuneration of the distributive sector in order to avoid a breakdown in the distribution network, which would be prejudicial to the consumer. These actions would also be supported by an increase in the infrastructures of the rural areas.
E/ECA/TRlDE/88/20 Page
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42, The dualism in African economies means that 'the bulk of rural. population cultivates subsistence prcducts and operates on a barter system. Tne market sector in the rural economy is essentialiy orientated towards the cultivation and export of produce to tlle former colonial powers. Large commercial companies ,, continue to dominate .vital sectors of the economy namely agriculture, industry and mlcing in African countries. Even the tertiary sector (banks and trade) is directed by these same economic agents. It has been shown that little attension has been given to .the development of domestic trade. The supply of products for local markets does not satisfy domestic demand. Considerable imports, particularly of foodstuffs, are necessary to fill this gap. The organization of distribution which is concentrated and best organized in urban centres is inadequate and. in fact, is controlled by foreign comnercial operators. Indigenous businessmen are involved in marginal activities in the national economy; unable to secure major investment they are excluded from industry and remain limited to purely commercial enterprises. They are, flu-themore, in competition with the foreigners who continue in effect to run monopolies, particularly in the import sector and find it easy to secure considerable banking facilities. In spite of the setting up of national financial institutions, the credit sector serving agriculturalists and small traders remains inadequate. Other obstacles impede the growth of domestic trade in Africa. These are the absence of an adequate road network particularly in the rural areas, the lack of rvarehousing and preservation facilities and the insufficiency of government support measures for the development of r u a l trade. All these impediments vere examined earlier in the study and they have led to the drawing up of proposals to improve the existing arrmgements of domestic trade. Particular emphasis has been placed on the role of national authorities in improving current domestic trading conditions. The proposed measures are aimed at the major objective of increasing the participation of domestic trade in the socio-economic development of the continent.
