More reforms will boost intra-regional trade

Friday, February 22, 2019

The signing of the African Continental Free Trade Area (AfCFTA) Agreement by the overwhelming majority of African countries is a historic step towards rationalising Africa’s regional trade arrangements to deepen economic integration and draw on economies of scale and development of regional value chains to accelerate the process of structural transformation of African economies. As a flagship project of the African Union Agenda 2063: The Africa We Want, the AfCFTA will bring together 55 African countries with a combined population of more than 1.2 billion people and a combined gross domestic product (GDP) exceeding US$2.5 trillion, making the continent the largest free trade area created since the formation of the World Trade Organisation (WTO).

A lot has been done by the region to foster trade across the East African Community (EAC) bloc. The number of non-tariff barriers (NTBs) has been reduced to just a handful and traders can also now clear merchandise once, at the point of entry. On top of that, there are now very few roadblocks and weighbridges across the bloc.

It is efforts like these that have led to a significant reduction in cost of transporting containers from Mombasa to Kigali; from $6,500 in 2011 to about $4,800 currently. This has saved the country about $7 million and boosted trade within the region.

However, despite the gains, more needs to be done to further facilitate intra-regional trade and movement of people.

According to a new report by the TradeMark East Africa, EAC governments must address the remaining NTBs, including technical issues like standards, logistics and police roadblocks, red tape and lack of automation in intra-regional trade processes, to spur trade.

The Rwanda Trade Programme Evaluation report, released on Monday, also faults inefficiencies along transport routes, especially at sea ports and border posts for the high transport and freight costs in EAC. These bottlenecks affect intra-EAC trade that is currently at just 17 per cent, a small figure considering the bloc boasts of a 160 million people market.

Therefore, to further enhance trade in the region, Rwanda and other EAC countries should make targeted investments and policy reforms to help eliminate the remaining trade barriers. Already, Rwanda has announced it will undertake more business reforms.

Some of them seek to improve and promote intra-regional trade, but in order to achieve the objective, partnerships between the public and private sectors should play an instrumental role, enabling the region to significantly reduce the cost of doing business to improve its competitiveness and attract more investments.

A Guest Editorial