Friday, 24 August 2007

Let’s all march East, and trade


China and India are emerging economic giants whose economies are among the fastest growing in the world. Both countries’ appetite for Africa’s commodities, especially raw materials, is unprecedented.

On the other hand, a rise in economic growth in a number of African countries is increasing the demand for Asian manufactured goods.

These trends may be disturbing to Africa’s commerce with the European Union and the United States in which trade flows have been stimulated largely by preferential arrangements.

Anyway, a lot of good has happened to Africa. For instance between 1996-2005, about 34 per cent of the continent’s population resided in countries where growth was 4.5 per cent or higher. Indeed, there is an emerging class of African economic “success stories.”

However, trade in most of Africa remains poor owing to the continent’s small, landlocked countries and high geographic segmentation. South Africa and Nigeria account for 55 per cent of the continent’s economic activity, while 18 countries have 36 per cent of Africa’s population.

AFRICA’S PHYSICAL and human geography is something to reckon with. For instance, it has more countries per square kilometre than any developing region, with each country sharing borders with, on average, four to five neighbours.

THE RESULT is that except in South Africa and Nigeria, other African countries offer small and shallow markets, hence making it costly to trade with the rest of the world. Moreover, we have little opportunity to penetrate the Chinese market because of our low capacity to produce high quality goods.

The good news is that over the past 15 years, trade flows between Africa and Asia have increased rapidly making Asia Africa’s third most important destination after the EU and the US. To sustain this, we need to develop strategies to leverage the current export explosion to create opportunities for long term-term economic benefits.

Indeed, if our countries are to enhance their global economic performance in Asia and beyond, we need to do more than just liberalise our trade policies.

Oscar Kimanuka is a commentator on social and economic issues based in Kigali

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