The revival of inter-african trade

CAIRO – 19 April 2019: Since the start of the millennium, Africa has witnessed its growth rate increasing to just over 5% between 2001 and 2014, up from 2% in the 1980s and 1990s. Increasing domestic and global demand, public investment on infrastructure, rising prices and a tighter trading partnership between Africa and China (influenced by China’s extreme interest in Africa, as many economic experts have described it), have led to Africa’s economic environment and institutions to pick up at an accelerated pace.

The continent is also still posting good performance in terms of attractiveness for foreign direct investments (FDI) inflows, according to the African Union. Still, the economy is not without its shortcomings.

However, no continent is without its issues. Africa faces a huge challenge with connectivity, which, in part, comes as the result of the number of languages spoken in the continent, and a lack of infrastructure, which comes as a result of lack of funding, and leads to African countries not being able to trade with other countries in the continent. To deal with this issue, the Common Market for Eastern and Southern Africa (COMESA) developed BizNet, an online platform that connects producers in different African countries, has launched three years ago in nine different countries. The BizNet is currently home to 3,000 buyers and sellers. The aim of the platform, according to Gallina Tembo from the CBC, is to connect companies, businesses and actors in different industries in Africa.

BizNet Dissected

According to Sandra Uwera, Chief Executive Officer of COMESA, “Egypt is expanding into the COMESA.” This is because, as Tasara Mazoroni put it, “the COMESA provides African countries with the opportunity for cheaper products and more profit as the products are not subject to duty upon import. Therefore, the free trade agreement between COMESA countries should make originating products cheaper, due to them having less cost.”

Mazorini also points out another two important consequences that will come as a result of BizNet. First, BizNet will provide an “Incentive for foreign direct incentives [FDIs].” Second, it will “increase intra-regional investments and increase small-scale cross border imports and exports,” both of which are expected to reflect positively on Egyptian GDP.

The project, according to experts, aims to increase local sourcing from growth sources. In doing so, the project aims to increase the income of small and medium sized enterprises (SMEs), increase the number of local sourcing by the buyers and to increase access to market and increase the number of contracts signed. The platform also aims to ensure an exchange of expertise occurs and that more ideas are thought of. The platform also serves as a portal for businesses and business personnel to seek information about the industry within which they work in different countries. Through increasing information potential, the platform creates business linkages and connects information-seekers with others who know market specifics and company specifics.

The project’s expected outputs have already started to materialize. SMEs have been trained, and continue to be trained, on HACCP, towards certification level, connect companies and SMEs, ensuring that companies are standing behind SMEs to ensure their growth and build more connected networks and higher output for gross domestic product (GDP).

So far, the project has had great success in all the countries that it has been implemented. It is expected, as per the COMESA and CBC, that the project, especially the BizNet platform, will increase economic development in Egypt significantly and connect it more to the continent.

Inter-trade challenges in Africa

“Africa needs investment. We need to work on ways to transform simple ideas to projects and to reality. Investment is the route for African economic transformation,” Director of Economic Affairs at the African Union Commission René N’Guettia Kouassi, tells Egypt Today. On the challenges facing Africa, Kouassi explains that the biggest challenge facing Africa’s economic development is infrastructure. “We have the challenge of infrastructure; we cannot invest when there is no infrastructure. Infrastructure is one of the conditions for having investment; whether roads, telecommunications or whatever. Africa needs to have infrastructure of all kinds. We also need to have an abundance of low-cost electricity. Africa needs to be more competitive in terms of producing quality goods at a low cost to ensure that our products are attractive; this is how to increase African attractiveness.”

However, infrastructure is not the only problem facing Africa. Of the annual $93 billion that the World Banks estimates needs to be invested in Africa to close the infrastructure gap, only about half is financed, explains Asfour. Confirming this, the Africa Infrastructure Country Diagnostics (AICD) estimates that only about $45 billion are spent annually, leaving a gap of about $48 billion. However, not everyone seems to think that Africa has a financing problem. On the vicious cycle of needing money to make money that many claim exists in Africa, Kouassi explains, “There is money in Africa—there is a lot of money—but we need to find ways to collect funding for the causes that we want to fund. There is a need to raise the fiscal revenue in Africa and mobilize this money into bettering Africa. We need to promote good governance policy, both political and economic; if we do not have it, no foreign direct investment will come to us.”

In line with the infrastructure issue, there also seems to be a connectivity issue caused by lack of solid and sufficient infrastructure, leaving countries unable to carry out business to their full potential. In previous statements, Sherif Al-Gabaly, Head of the Federation of Egyptian Industries, said, “Egypt is the strongest industrial country in Africa.” As per Al-Gabaly, Egypt has great potential and the capacity to fulfil the import needs of African countries. However, there are two issues that stand in the way of African development; connectivity and industrial integration between countries. There needs to be a better connectivity system between African countries, as well as within the countries. Al-Gabaly gave the example of the highway being built from Egypt to South Africa, suggesting that more projects like this needs to be carried out. He added that COMESA Business Council should help ensuring the industrial integration between countries.

The bottom line remains for Harrison that Africa has a problem of poverty and underdevelopment, despite having significant natural resources and a young population; an overarching message that was discussed throughout the forum. “The continent continues to be characterized by all the features of underdevelopment, including a low level of human development, industrialisation, manufacturing and productivity as well as dependence on the primary sector. Africa’s private sector, on the other hand, is specifically characterized by small size and informality, weak linkages, low level of competitiveness and lack of innovation; however, it’s important to note that not all is groom,” says the Commissioner. It is time to invest in human capital and the population, is his key message.

The AU’s vision, “an integrated, prosperous and peaceful Africa, driven by its own citizens and representing a dynamic force in the global arena,” can only be realized with the full participation of all stakeholders and with people becoming key players in the equation.

CBC Intervention

Given the fact that Africa’s population will overtake those of China and India combined by 2060, as it is expected to reach 2.7 billion, the opportunity has not come to connect together and work together for a prosperous future.

This presents a great opportunity for investors to capitalize on a market characterized by a growing middle class of consumers of manufactured goods, set to reach 1.1 billion in 2016, an increase from 355 million in 2010. The population of those living in poverty is set to decrease, with the portion of the population living on less that $1.25 per day expected to decline to 33.3% in 2016 from 2010’s 44%. The signing of the Continental Free Trade Area (CFTA) by African Member States has led to an increasing interest in infrastructure investment, which is both directly and indirectly correlated with faster development, and is set to create attractive economic zones within Africa. Although intra-African cross-border investments have increased over the past decade, they still only account for 19% of total investments to Africa, and 12% of Africa’s total foreign investment, compared to 33% in Asia, according to Amany Asfour, Chairperson of the COMESA Business Council and World President of the International Federation of Business and Professional Women (BPW).

CBC is the recognized Business Member Organization (BMO) of the COMESA. It represents the private sector interests at the highest levels of the decision-making process and continuously pushes for positive change.

The CEO of the CBC told Egypt Today, “The CBC the only formally recognized business organization in the region. It is the only business council who are mandated to sit, discuss and influence the business decisions of the private sector.” The CBC organization does not merely observe, it also acts and influences positive change, she explained.

The private sector, Uwera pointed out, is the “backbone” of every economy, and an economy such as Egypt’s stands to benefit much from its expansion into the COMESA, something that the CBC has witnessed over the past few years. “Egypt is expanding into the COMESA,” stated Uwera during her opening speech.

Agreeing with Uwera on Egypt’s great power in the continent and the huge profits it stands to make from expanding into the COMESA countries, Sherif al-Gabaly, head of the Federation of Egyptian Industries, said, “Egypt is the strongest industrial country in Africa.” As per Gabaly, Egypt has a great potential and has the capacity to fill in the import needs of the African countries. There is a need to cooperate more with African counties to increase business with them, explained Gabaly.

As it stands, the participation of Egyptian industries in the COMESA countries has numerous benefits; for example, the Egyptian exports to COMESA states have no added duty charges or fees, in addition the Egyptian businesses will pay less costs in deals made with the COMESA states, as logistical and shipping costs are less; however, the products will be sold at prices equal to or higher than their usual prices.