UNCTAD – Africa ‘ignores its trade deals’

Cars and trucks at the South African border at Musina, Limpopo, queue to cross into Zimbabwe. The Unctad report says there are traditional transport routes in Africa - Photo: Motshwari Mofokeng.

Cars and trucks at the South African border at Musina, Limpopo, queue to cross into Zimbabwe. The Unctad report says there are traditional transport routes in Africa – Photo: Motshwari Mofokeng.

An official in the UN Conference on Trade and Development (Unctad), complains that Africa’s leaders repeatedly sign trade agreements and fail to implement them. Launching the organisation’s 2013 Africa development report in Johannesburg, Patrick Osakwe said leaders should set more realistic targets and “do more serious research” on the viability of the agreements.

Intra-African trade represents only about 11 percent of Africa’s total trade with the world, despite official commitments to improve the flows. Osakwe cited the case of the regional industrial policy adopted by the Economic Community of West African States in June 2010, which “has yet to be fully implemented”.

In June 2011 President Jacob Zuma announced talks on a 26-nation free trade agreement between three existing trading blocs, including the Southern African Development Community, of which South Africa is a member. Experts greeted the proposal with scepticism, noting a long history of leaders signing commitments to free trade or regional integration, but failing to follow through.

The Unctad report, which was launched simultaneously in Geneva and in centres in Africa, said development should be seen in a regional context: co-operation among countries in a broader range of areas than just trade and trade facilitation. It should include investment, research and development, and regional infrastructure development.

The report cited the Maputo Development Corridor linking Gauteng to the port of Maputo as “a successful, true transport corridor that has unlocked landlocked provinces in one of the most highly industrialised and productive regions of southern Africa”.

It said: “There are currently more than 20 corridors in operation in Africa but most tend to be traditional transport corridors. There is a need to move beyond that and to create industrial development corridors as well.

The report focused on intra-African trade and urged governments to unlock the private sector’s potential so that they could successfully diversify their economies. Most African countries are heavily dependent on commodities to grow their economies.

Africa accounts for only 1 percent of global manufacturing, and manufacturing represents only about 10 percent of African gross domestic product, compared with 35 percent for east Asia and the Pacific, and 16 percent for Latin America and the Caribbean.

The share of manufacturing in intra-African trade fell from about 54 percent between 1996 and 2000 to 43 percent between 2007 and 2011, as the value of commodity exports soared.

The report identified a major challenge to expanding the manufacturing sector. The average manufacturing company in sub-Saharan Africa has 47 employees, compared with 171 in Malaysia, 195 in Vietnam and 393 in Thailand. The small size of the operations prevents businesses from achieving economies of scale.

Other barriers were weak linkages between small and large firms, a high share of informal firms, low levels of export competitiveness and a lack of innovation capability. Transport costs were also prohibitive. “In central Africa, transporting 1 ton of goods from Douala in Cameroon to N’Djamena in Chad costs $0.11 (R1.10) per kilometre, more than twice the cost in western Europe and more than five times the cost in Pakistan.” Source: www.iol.co.za

FDI – Nigeria First in Africa for a Second Year

TCredit - Photobuckethe United Nations Conference on Trade and Development (UNTAD) yesterday ranked Nigeria Africa’s number one destination for Foreign Direct Investment (FDI) in Africa for the second time in two years. The latest UNCTAD report, entitled, “Global Value Chains: Investment and Trade for Development”, put Nigeria’s FDI inflows at $7.03billion while South Africa recorded $4.572bn; Ghana, $3.295bn; Egypt, $2.798bn and Angola, 6.898bn; among others.

According to the report, FDI inflows to African countries went up by five per cent to $50bn in 2012, though global FDI declined by 18 per cent. The report noted that most of the FDIs into Africa mainly driven by the extractive industry, but said there was an increase in investments in consumer-oriented manufacturing and services.

Global FDI fell by 18 per cent to $1.35 trillion in 2012. This sharp decline was in stark contrast to other key economic indicators such as GDP, international trade and employment, which all registered positive growth at the global level,” which was attributed to economic fragility and policy uncertainty in a number of major economies, giving rise to caution among investors.

It added that developing countries take the lead in 2012 for the first time ever, accounting for 52 per cent of global FDI flows. This is partly because the biggest fall in FDI inflows occurred in developed countries, which now account for only 42 per cent of global flows. In 2011, Nigeria was ranked Africa’s biggest destination for FDI, with total inflows of $8.92bn, South Africa followed with $5.81bn, while Ghana received $3.22bn. Source: AllAfrica.com