Guest Contributor | Aug 30, 2019 | 0
The future is intra-African trade
Martin Inkumbi discusses the developmental importance of intra-African trade
Readers in the field of the pre-colonial history of Africa will be quick to confirm that the continent had a rich tradition of trade between its people. This was not limited just to goods, but also applied to the transfer of knowledge.
Colonial trade altered the tradition in several ways. Most notably, borders placed limitations on the ability of different areas to trade with one another and transfer knowledge. A new set of needs and wants was also introduced, Western goods, which fundamentally altered the ability of different groupings to satisfy requirements of trading partners. The cost of the colonial system was large scale extraction of resources.
Although the second half of the Twentieth century liberated Africa from colonial administrative rule, it did not produce major strides in restoring intra-African trade. During the last decade of the Twentieth Century, the concept of free trade areas began to be mooted, particularly in SADC and COMESA. This is a source of hope for restoration of trade. However the global crises dictate that productivity is needed, and Africa is one of the countries earmarked as an offset area for the goods which should notionally alleviate the crisis.
Once again, Africa is faced with the prospect of goods in return for the export of raw materials. This requires countries to reconsider their stances towards trade. In terms of international and intra-African trade, African nations can get more value for trade goods which have been further refined and manufactured on the continent. The refinement and manufacturing processes can have a multiplier effect on development and GDP by putting in place secondary and tertiary sectors.
However in order for African nations to gain full value from their primary, secondary and tertiary sectors, and the various countries have to begin to focus on trade among themselves, either as members of economic blocs or between individual nations. There are three reasons why this is critical.
Firstly, starting from the back foot, very few African nations do not have the entire gamut of industry, nor do they have the capacity to immediately put in place the spectrum of industries across all sectors. By using complementary capacity in other countries, African nations can find synergies and value that do not come at a high cost. This also spreads the risk of developing sectors.
Secondly, transfer of knowledge takes place between African countries. Transfer of knowledge is particularly important as learning from the successes (and failures) of other industries reduces the possibility of failure entailed in developing and applying new knowledge.
Thirdly, this type of trade provides markets for excess productivity which cannot be consumed locally. Although there is an argument in this regard for international trade, the shorter trade corridors of trade within blocs and between neighbours produce greater economies of scale.
Obviously Namibia can benefit from trade within SADC and with its neighbours, but it faces challenges, particularly the small population and limited pool of knowledge and experience required to develop industry.
However the strengths which were discussed immediately after Independence still apply. The most notable benefit can be found in Namibia’s location. It gives unrivalled access to central SADC, as well as SADC countries on the western seaboard of the development community. It also has the primary resources which can fuel development of secondary and tertiary sectors in the long term.
Exceptional work has been done to develop trade corridors; however it is now important to begin focusing on intra-African trade in addition to the infrastructure.
The potential for international trade is a comfort, and should in no way be discounted as a route to prosperity, however in the long term, trade based on the needs and wants of SADC will be a valuable component of and driver for local investments.
As the basis for trade develops, so to will factors such as local capital investments which generate local employment and improve local economic indicators. With this in mind, the Development Bank of Namibia finances local equity in industry geared to trade as well as local trade initiatives.