African governments should give more support to entrepreneurs to help boost regional trade flows, to allow businesses to benefit from growing consumer demand and insulate the continent from global financial crises, a UN study said on Thursday.
In a break with past recommendations on African trade, the United Nations Conference on Trade and Development (UNCTAD) said boosting regional trade would require solutions that do more than simply remove trade barriers.
While trade with the rest of the world has grown quickly, inter-Africa trade — at $130.1 billion in 2011, up from $60 billion in the 1990s — has halved to represent just 11 per cent of the total.
By comparison, half of Asia’s trade is with its neighbours while intra-European trade accounts for 70 per cent of the total.
The UNCTAD study showed that Africa’s oil-exporting countries such as Libya, Angola and the Republic of Congo were especially dependent on trade with non-African markets, exporting less than 5 per cent of their merchandise to the rest of the continent.
But the group said expanding regional trade would help cushion the continent from outside risks and foster growth.
A World Bank report showed that consumer spending accounted for more than 60 per cent of Sub-Saharan Africa’s buoyant economic growth. This is helping to account for high growth rates estimated at between 5-6 per cent for Sub-Saharan Africa.
“The report recommends to try to build capacity through entrepreneurship development. There needs to be a mechanism between the state and the private sector,” UNCTAD secretary general Supachai Panitchpakdi told reporters. This could help address the problem of the so-called “missing middle” whereby African companies rarely graduate from small businesses to mid-size or large firms. Thin regional trade also makes Africa vulnerable to external financial crises and overly reliant on expensive imports of items such as food even though UNCTAD data show it is has 27 per cent of the world’s arable land.
High custom fees and transport restrictions mean that it is often cheaper for African countries to import raw materials such as cotton from Asia, even though many are available from neighbours.
—Reuters
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