TRADE POLICY AND SUSTAINABLE DEVELOPMENT MEETING
Geneva, 6 -- 8 October 2015
TRADE AND TRADE POLICY, GLOBAL VALUE CHAINS AND
REGIONAL INTEGRATION IN AFRICAN COUNTRIES
Session-2
M r. C h a rle s A D J A S I
University of Stellenbosch
Business School
TRADE AND TRADE POLICY, GLOBAL VALUE CHAINS AND REGIONAL
INTEGRATION IN AFRICAN COUNTRIES
UNCTAD
TRADE POLICY AND SUSTAINABLE DEVELOPMENT MEETING
6–8 OCTOBER 2015
ROOM XXIV, PALAIS DES NATIONS, GENEVA
Charles Adjasi.
University of Stellenbosch
Business School
1
Plan
•
•
•
•
•
Trends in Trade and Performance of the Economy
Intra Regional Trade and Cross Border Trade
Challenges of Trade
Focus of Trade Policy for Africa
Cases of traditional and emerging regional trade in
Africa
2
Africa’s Trade
• Africa has seen a rise in trade (albeit its marginal contribution
in world trade)
• Growth in trade dipped in the 80-90s and since picked up
• Largely uniform trend amongst RECs
30
Africa Trade Performance (1963-2011)
90
80
25
20
70
15
60
50
Exports of
goods &
services (% of
GDP)
Trade (% of
GDP)
40
30
20
10
2011
2007
2003
1999
1995
1991
1987
1983
1979
1975
1971
1967
1963
0
Trade growth (Exports)
10
5
0
1950 - 1960
1960 - 1970
1970 - 1980
1980 - 1990
1990 - 2000
2000 - 2010
2010 - 2014
-5
-10
3
Trade Diversification
• Exports in Africa are still concentrated, although trends are changing
• In terms of regional trends EAC more diversified, Least diversified is ECCAS
region
0.9
Trade Concentration/Diversification
0.8
Eastern, Southern and South-Eastern
Asia
0.7
CEMAC (Economic and Monetary
Community of Central Africa)
0.6
COMESA (Common Market for
Eastern and Southern Africa)
EAC (East African Community)
0.5
0.4
ECCAS (Economic Community of
Central African States)
0.3
ECOWAS (Economic Community of
West African States)
0.2
SADC (Southern African Development
Community)
UMA (Arab Maghreb Union)
0.1
WAEMU (West African Economic and
Monetary Union)
0
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
4
Economic Performance
Poverty rates have reduced
but are still very high in
most countries
• Although export growth has been good and
economic growth has picked up since the
90s but there are still strains on current
accounts
15
Africa Trade and Economic Growth (1963-2011)
10
Poverty rate-most recent at National Poverty Lines
5
80
70
0
1963
1966
1969
1972
1975
1978
1981
1984
1987
1990
1993
1996
1999
2002
2005
2008
2011
60
50
40
-5
Poverty rate
30
Exports of goods
and services
(annual %
growth)
External balance
on goods and
services (% of
GDP)
GDP growth
(annual %)
20
-10
10
ALG
BEN
BWA
BFA
CPV
EGY
ETH
GHA
KEN
LSO
LBR
MDG
MLI
MAR
SLE
ZAF
TGO
TUN
UGA
ZMB
0
-15
5
Trade Performance
• The Services Story-Value addition in services sector
Trade % of GDP (average 2006-2011)
70.00
ZMB
60.00
UGA
TUN
50.00
TGO
40.00
services
value
added %
GDP
Trade to
GDP
30.00
20.00
10.00
0.00
SSA
LCN
MAR
MUS
MLI
LBR
LCN
Trade % of GD
LSO
8.00
KEN
7.00
GHA
6.00
5.00
tourismreceipts
% of total
exports
Insurance fin
services %
service exports
4.00
3.00
2.00
1.00
0.00
SLE
SYC
MDG
2005-2008 2009-2012 2005-2008 2009-2012
SSA
ZAF
ETH
EGY
DRC
CPV
BFA
BWA
BEN
2005-2008
2009-2012
2005-2008
2009-2012
SSA
SSA
LCN
LCN
ALG
0
50
100
150
200
6
The Services-Growth nexus
Trade Policy
• Has largely been based on the following:
– Eliminating/reducing procedural barriers to free
trade e.g., import licenses, export taxes, tariff and
NTBs
– Avoiding import bans
– Creating SEZs (EPZs)
– Promoting intra-region trade via REC, CET (REC)
8
Trade tax and fiscal space
A major challenge that
remains is that of high
trade taxes-tariff revenue
is still a core component of
government revenue
Country
ALG
BEN
BWA
DRC
EGY
ETH
GHA
LSO
LBR
MAR
ZAF
TGO
TUN
UGA
Export taxes %
of tax revenue
0.03
0.14
0.01
1.32
0.22
7.22
1.53
1.17
0.76
0.76
0.01
0.47
0.16
0.08
Trade Taxes % of revenue
ZMB
ZAF
UGA
TUN
TGO
SYC
SLE
MUS
MLI
MDG
MAR
LSO
LBR
KEN
GHA
ETH
EGY
DRC
CPV
BWA
BFA
BEN
ALG
Trade Taxes % of
revenue
0
20
40
60
80
9
Intra Regional Trade
• Intra regional trade is growing but lags behind that of East and South Asia
• Led mostly be EAC & SADC
• Upward trend since late 2000s
60
Intra Regional Trade
Eastern, Southern and SouthEastern Asia
CEMAC
50
COMESA
40
EAC
ECCAS
30
ECOWAS
20
SADC
WAEMU
10
AMU (Arab Maghreb Union)
Africa
0
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
10
Intra Regional Trade
• However-Complexity (spaghetti bowl problem) and associated trading
costs (uncoordinated policies, regulations etc)
Source: Acharya et al. (2011)
• Recent developments-Tripartite Free Trade Area agreement
COMESA, EAC and SADC, will help reduce this complexity and TC
• Prospects for CFTA
11
Informal Cross Border Trade
ICBT in Africa-43% of GDP, almost equivalent to the formal trade sector (Lesser &. MoiséLeeman, 2009).
ICBT in Africa is very profitable. Uganda's ICBT to its five neighbouring countries an estimated
US$231.7 million, (around 86% of official export flows to these countries (Omiti, 2009; Lesser
&. Moisé-Leeman (2009).
ICBT a long standing traditional historical local and social economy trade W/A trade in livestock
•
•
Thousands heads
•
,300
Niger
Mali
,100
Burkina Faso
Chad
-,100
Togo
-,300
Benin
Ghana
-,500
Source: FAO Stat
Nigeria
Source: FAOStat
12
ICBT
• Major CBT towns in West Africa (NB there are minor ones as well)
13
Africa’s Trade in the Global Value Chain
(draws largely from AEO 2014)
• Africa’s integration into global value chains is comparable to other regions
• Southern & North Africa lead integration of African regions into global
value chains
•
Trends in GVC integration (2011)
120
Africa REC and GVC (2011)
100
0.70
0.60
0.50
0.40
0.30
0.20
0.10
0.00
Forward
integration
Value added exports (USD Billion)
Share of total value added exports
0.80
Forward
integration
80
Backward
integration
60
40
20
0
Southern
Africa
North
Africa
West
Africa
East
Africa
Central
Africa
Indian
Ocean
14
Growth of global value chain integration, 1995-2011
0.60
0.50
Share of foreign value added
in exports
India
China
Africa
East Asia w/o China
South Asia w/o India
0.40
0.30
0.20
0.10
2011 Backward integration
LSO
AGO
BWA
ZAF
MWI
MRT
SLE
BFA
NER
STP
LBR
GAB
BEN
GMB
Forward
integration
MAR
EGY
SDS
Europe
0.00
MUS
Backward
integration
UGA
KEN
ERI
Oceania
Africa
COG
RWA
CAF
North America
1995 Backward integration
Middle East
Latin America
Southeast Asia
Russia and Central Asia
-0.5
0
0.5
Growth 1995-2011
1
1.5
• Africa has increased its backward integration a
sign of value addition to exports & deep
integration into GVC
• Lesotho & Mauritius have led in this direction
15
Forward integration
0.60
Backward integration
0.50
,20
USD mns
,15
0.40
,10
0.30
0.20
,5
0.10
0.00
0.14
0.12
0.10
0.08
0.06
0.04
0.02
0.00
1200 000
1000 000
800 000
600 000
400 000
200 000
0
Share of foreign African value added in total exported value added (left axis)
Foreign African value added in exports (right axis)
16
Amount of foreign African value added in
African exports ('000 USD; 2011)
,0
Finance
Metal
Other manufacturing
Construction
Elec. and machinery
Recycling
Transport equipment
Utilities
Int. trade
Maintenance
Food and beverages
Oil and chemical
Transport
Education and health
Wood and paper
Telecom
Wholesale
Hospitality
Retail
Fishing
Textile and apparel
Mining
Agriculture
• Manufacturing
(automotive) leads global
and regional value chain
• Finance leads regional &
GVC participation rates in
services
,25
0.70
Share of foreign African value added in African
exports (2011)
Share of total value added exports
Regional value chain
integration by sector, 2011
0.80
Some Challenges of Trade
High Trade Transactions Costs
(USD per 20MT truck of general merchandize)
•
•
•
•
•
Poor institutions and
infrastructure
Lack of policy convergence
Road blocks, red tape and slow
custom clearances
CEO of Massmart interview with
Fin 24 in 2009 “[When] we
supply goods into Lagos, it
might take 12 weeks on the
water, [but it can take] 14
weeks to clear”
Restrictive free movement.
Africans need visas to get into
at least two thirds of other
African countries.
Transfer Cost Category
Nigeria
Cameroon
450
644
Unofficial customs payments at border
262
191
Other unofficial payments at border
461
2,738
Unofficial payments behind border
1,478
Current official customs payments at border
2,745
Payments if simplified customs procedures were applied
- 75,800 - 113,700
Potential charges if full tariff assessment were applied
Country
Burkina Faso
Time to cross
border (hours)
25.36
the
Time waited to pick up freight
once inside the port (hours)
23.38
Ghana
30.33
24.71
Cameroon
26.55
12.38
Chad
11.65
12.38
Uganda
15.25
11.75
Kenya
8.18
5.93
Zambia
26.5
16.55
Source: adapted from Teravaninthorn and Raballand (2009)
17
Road blocks and trade transactions cost-e.g. from W/A
•
Number of roadblocks per 100 km (2011)
0
0.5
1
1.5
2
2.5
Mali
Nigeria
Ghana
Senegal
Burkina Faso
Cote d'Ivoire
Togo
Coste (2014)
Traffic congestion at the Malaba Border Post between Kenya and Uganda. ©
TradeMark East Africa - See more at: http://www.tradeforum.org/article/Tradefacilitation-to-bring-billions-in-exports-to-East-Africa/#sthash.ns4bUurj.dpuf
Frequency of Road Controls and Costs Associated
Corridor
Distnace
(km)
Ekok - Mamfe - Bamenda
Abonshie - Kombo - Bamenda
Maga - Limani
Boukoula -Guider
Demsa - Garoua
Onitsha - Mfum
250
220
150
80
45
320
No. of
Control
Points
12
11
13
7
4
25
Average Cost
per Truck (USD)
633
581
521
290
676
461
Size of
Truck
20 MT
20 MT
40 MT
40 MT
40 MT
20 MT
Source: World Bank 2013
18
New Trade Policy for Africa?
• More emphasis on enhancing trade for sustainable
development
1. Local economics- social & traditional economy
2. Formalize ICBT,
3. Harmonize regulations border procedures and policies to
strengthen REC & enhance intra-African trade
4. Promote services sector
5. FDI linked for linkages such as
1.
2.
3.
4.
Infrastructure
GVC
Technology and learning by doing
Employment and welfare development for local economy
• These will result in deep participation in GVC
19
Cases of traditional local economy industries
for trade
• W/A- leather and beef Mali/Niger; fabrication and automotive
design Suame-Ghana
• S/A-traditional economy of wool and mohair manufacturingblankets and clothing), trout fish in Lesotho, automotive, citrus,
grape and wine-SA
• E/A- textile industry-Ethiopia, logistics-Kenya
• N/A-automotive-Morocco (citrus, fruits, textiles-Zara)/Egypt
20
Emerging Trade in services
• Shoprite
• Massmart
SABMiller
sourcing agricultural input from smallholder farmers in
order to include them in our supply chain. Success in
Uganda, Tanzania and Zambia, now in Ghana, Nigeria
etc
21
Emerging Intra Regional Trade/FDI
Trade in Services Pan African Banks
22
Emerging Trends
DANGOTE Group
• Dangote Group:
–
–
–
–
–
–
–
–
–
–
–
• MTN Group
Cement Sugar Salt Flour & Semolina
Pasta & Noodles
Tomato Paste
Vegetable Oil Refinery
Packaging Materials
Logistics
Real Estate
Food & Beverages
• Pan-Africa Operations in Cement
–
–
–
–
–
–
–
South Africa
Senegal
Zambia
Tanzania
Ethiopia
Republic of Congo
Gabon
23
To Conclude
• Trade policy in Africa
– Local trade & social economics
– Natural partners
– Harmonize policies and regulations to enhance Intra
Regional Trade
– Services sector
– FDI related
• Thank you
24