How To promote African intra- trade to unlock agricultural potential in the Continent.

The world is changing both in terms of economic structure, patterns of trade, global governance and the prevailing economic orthodoxy.

It is therefore important that African countries also change their approach to regional trade and integration in order to adapt to this rapidly changing world.

Africa has about 27 per cent of the world’s arable land which could be exploited for expansion of agricultural production, yet many African countries import food and agricultural products from countries outside the continent.

In the period from 2007 to 2011, 37 African countries were net food importers and 22 were net importers of agricultural raw materials, but only about 17 per cent of African world trade in food and live animals took place within the continent.

Furthermore, Africa exported on average only 21 per cent of its food items within the continent(UNITED NATION CONFERENCE ON TRADE AND DEVELOPMENT 2013). In general, out of the nine standard international trade classification categories, Africa realized at least 25 per cent of its world trade regionally in only one product category, namely chemicals and related products (standard international trade classification 5).

These facts, coupled with rising incomes and a growing middle class, suggest that there are opportunities for regional trade in food and agricultural products that are not being exploited by African countries.

Untapped agricultural potential has contributed to persistent poverty and deteriorating food security, resulting in a projected increase in the number of undernourished people from ~240m in 2015 to ~320m by 2025(FEED AFRICA).At the same time, increased food demand and changing consumption habits driven by demographic factors such as population growth and urbanization are leading to rapidly rising net food imports, which are expected to grow from US$ 35 bn in 2015 to over US$ 110 bn by 2025.

These rising imports are indicative of a broader opportunity to transform agriculture construed as a business. The scale of imports demonstrates that demand exists, if a vibrant private agribusiness sector in Africa can be stimulated to service it.

The need for a private sector is due to the fact that The scale of resources required for transformation is significant: the transformation of a selection of 18 value chains will cost an estimated $315-400bn over 2015–2025.

This exceeds — by far — the funds available from the public sector; private sector capital is needed, and there are sufficient funds in African capital markets if they can be appropriately mobilized by the public sector.

With a vibrant play from both sectors ,Transforming the agriculture sector can and should be harnessed towards a vital impact on inclusive growth on the continent. The transformation will require seven set of enablers:

1. Increase productivity by catalyzing the development of effective input distribution systems and reduction in post-harvest waste and loss.

2. Realize the value of increased production by facilitating increased investment into output markets and supporting market incentives.

3. Increase investment into enabling infrastructure, both hard infrastructure (such as roads, energy and water) as well as soft infrastructure (especially ICT, which can have positive effects).

4. Create an enabling agribusiness environment with appropriate policies and regulation.

5. Catalyze flows of capital (especially commercial lending and private investment) to scale agribusinesses.

6. Ensure that transformation delivers on broad-based needs of Africans, by ensuring inclusivity, sustainability and effective nutrition beyond what the market may deliver otherwise.

7. Coordinate activities to kick start transformation, align activities and investments of different actors, and guide initial activities to the point where private sector actors can be crowded in.
(Strategy is closely aligned to commitments towards global food security that came out of the 2009 G8Summit in L’Aquila.)

Transforming commodity value chains and agro-ecological zones could open markets worth US$85bn per annum by 2025, And will have a substantial impact on realizing Sustainable Development Goals on poverty reduction and ending hunger.

In 2015 African countries spent about $63 billion on food imports, largely from outside the continent , The transformation in Intra-African agricultural trade would be the key driver of growth in Africa ,and can be accomplished through the sole removal of tariffs on goods, to increase the value of intra-African trade by between 15% and 25% , which will rise eventually between 2020 to 2040 at a percent between 40 to over 50 percent.

The transformation and proper implementation of intra-African trade Will hereby lead to the the exchange of more manufactured and processed goods ,enable more knowledge transfer and create more value.

For African countries to reap expected gains from intra-African trade , we will need to place the building of productive capacities and domestic entrepreneurship at the heart of the policy agenda for boosting intra-African trade.

The Government would then promote intra-African trade in the context of developmental regionalism, stress the need for a shift from a process and linear approach to integration, which focuses on elimination of trade barriers, to a more development-based approach to integration, which pays as much attention to the building of productive capacities and private sector development as to the elimination of trade barriers.

SOURCE: SCOOP REPORTERS

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