Africa Should Remove Barriers to Trade to Maximise Economic Growth

Cape Times (South Africa), July 17, 2012 | Go to article overview

Africa Should Remove Barriers to Trade to Maximise Economic Growth


It is, as the saying goes, an interesting time to be in Africa. According to a recent report by the management consultants McKinsey and Company, the continent's Gross Domestic Product (GDP) is set to grow from $1.6 trillion (R13 trillion) - roughly the same as Brazil or Russia) to $2.6 trillion (larger than the United Kingdom and slightly smaller than France).

By the end of this decade, Africa will have 128 million households with discretionary incomes to spend on consumer products. The amount they will spend on such products is estimated to grow from over $860 billion today to $1.4 trillion by 2020. The question is: how are well-positioned regional trade blocs like the Southern African Development Community (SADC) to take advantage of emerging growth patterns?

In order to lift its people out of poverty, the African continent needs sustained high levels of growth. To grow and prosper, we must increasingly trade with one another, to mutual benefit, and to do this our governments must both facilitate and remove barriers to trade. However, inter-African trade is a mere 4 percent of our overall quantum, a dismal colonial pattern that our governments, with one or two exceptions, have failed to reverse.

We have also failed to invest in infrastructure and in a continent-wide logistical architecture. South Africa, for example, has accrued an infrastructure backlog of R1.5 trillion over the past 15 years. The impact of this on logistics is monumental. Without adequate rail infrastructure, goods increasingly have to be transported by road, resulting in costs being held hostage to increased fuel and administration prices. The global norm is that transport contributes 40 percent to logistics costs. In South Africa it is 53.2 percent. At this rate, we are pricing ourselves out of the market.

What is to be done?

Beyond more assertive and focused national efforts, a regional approach is required. At the SADC Parliamentary Forum meeting held in Maputo from July 9-12 we discussed the creation of a vigorous regional parliament which would help to advance the cause of regional integration, development and growth. What is required is that the 14 SADC member governments: (1) Radically simplify the procedures required to export and import goods and services. (2) Push to increase infrastructure investment to 10 percent of GDP to deal with backlogs. (3) Eliminate wasteful expenditure through tighter fiscal governance.

The DA's 8 percent growth and jobs plan includes the following proposals which the SADC would do well to support:

l Increase infrastructure investment. Press governments to meet the benchmark of spending 10 percent of GDP on infrastructure. By building and maintaining the vital infrastructure on which an economy depends (such as roads, rail, ports, pipelines, hospitals and schools) these investments will lay the foundation for future growth. A combination of state, privatisation proceeds and private capital investments should be secured to finance infrastructure development.

l Renew the freight rail fleet. Initiate a process of renewing countries' entire freight rail fleets to expand capacity and enhance the efficiency, reliability and competitiveness of transporting goods around the country and to trading partners. …

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