By Monday Ukoha
Boosting Intra African Trade through SAATM and AfCFTA
Africa does not trade much with itself. While African export economy is tilted and focused on Europe, Asia and North America, trade between countries of the continent has lagged. This is not to discountenance the informal trade between countries.
Historically, and seen by some as one of the outcomes of its colonial past, the level of trade between African countries has been dismally low when compared to the level of intraregional trade in other regions of the world. African economies have been export-oriented towards the international market. Consequently, compared to other regions, intra African trade is very low. Only about 17% of African trade is conducted within Africa, vis-a-viz 59% for Asia and 68% for Europe.
This low level of trade has also been attributed to African states being producers of largely identical primary goods / raw materials. Furthermore, it has been alluded to that African exports to other African countries may not attract the same premium pricing in the international market hence the motivation to sell to markets where the price margin makes economic sense.
Whatever may be the reason or whichever school of thought one may belong to, it is indisputable that the continent needs to trade more with itself in order to lift its peoples out of poverty, and increase social and economic exchanges.
SAATM And AfCFTA
To achieve the economic and social integration of Africa, the Single African Air Transport Market (SAATM) and the African Continental Free Trade Area (AfCFTA) have been identified as linchpin projects by the African Union in its Agenda 2063, which also includes free movement of persons within the continent.
SAATM and AfCFTA reinforce each other; they are complementary. Growing the volume and value of intraAfrican trade requires an efficient air transport system. For instance, 16 countries in Africa are landlocked. And for these, air transport represents a fast and reliable means to transport fresh cargo to these countries and avoid the transit nations. An efficient and interconnected air transport system under SAATM will ensure this access. It is generally agreed that inefficient transport infrastructure will hamper the actualisation of the benefits of the AfCFTA for African states. The drive to implement the Single African Air Transport Market- SAATM is therefore critical.
On the other hand, AfCFTA by seeking to remove physical and non-physical barriers to intra African trade, will result in sizeable trade exchanges between African countries which will boost passenger and cargo numbers for the air transport industry. Experts have noted that Africa under the AfCFTA regime would trade more with each other in order to enjoy the benefits of the free trade area. For instance, according the Economic Commission for Africa – ECA, “Implementing AfCFTA would double the number of tonnes transported by air from 2.3 to 4.5 million”.
Furthermore, air freight “demand for intra African trade by air is” is projected to grow to “30% by 2030 and 250 aircrafts and huge investments in Airports if, AfCFTA is fully implemented.”
No doubt, a considerable scope exists for African countries to trade with one another. The AfCFTA Secretariat has identified four key areas where African states could trade with one another including agro processing, pharmaceuticals, logistics and automotive. In a report by the Brooking Institute, the authors noted: “As the region’s population grows and gets richer, the demand for food, especially high-value crops and livestock products, will continue to grow. Indeed, rapidly rising demand for food within Africa provides considerable untapped potential for intra-African trade. The proportion of African countries’ food imports originating from other African countries is currently very low, consistently averaging about 20 percent over the past several decades”. South Africa is said to account for over a third of this intra-African food trade.
The report further notes that “Effective implementation of the African Continental Free Trade Agreement will be an important step in enabling African farmers and agribusinesses to increasingly meet the region’s growing demand for food.” The report notes however that to compete effectively against low-cost imports from the international market, Africa “requires investments in agricultural R&D and extension services. African states will also have to reduce the costs of trade, by removing tariff and nontariff barriers, streamlining customs procedures and improve regional transport links in order to realize the full potential of the AfCFTA.”
More Understanding and Awareness
Where the understanding of SAATM and its objects in Africa is high, this cannot be said for the AfCFTA. The obvious reason being that it is a recent phenomenon for Africa.
AfCFTA, touted as the largest Free Trade Area in the world in terms of participating states, has been hailed as a bold mechanism to pull Africa out of poverty and enhance the economic development of the continent. But for a section of the business community, the AfCFTA could be an opportunity for dumping cheaper foreign-made goods through African neighbours. More awareness is therefore required to bridge the information gap of AfCFTA and draw awareness on the mitigation clauses against dumping. Furthermore, more African businesses will tap into the AfCFTA if they understand the benefits and how it can positively affect their businesses.
Value Addition is Critical
To benefit from AfCFTA, African countries must reimagine their participation in the production process by transitioning from primary producers. Efforts must be made to transform primary products into semi-finished forms, if not finished product. This would expand the band for demand of African goods and services from other African countries.
Inefficient air connectivity has stood against economic development of Africa over the years. The new impetus for a liberalized African air transport industry being driven under the SAATM PIP is welcome. SAATM and AfCFTA represent step change in African integration. The benefits are known. What is not obvious, is whether African countries can muster the political will and reap from these benefits.