Friday August 8 2014

Look to Africa, not abroad for growth

The three-day US-Africa Leaders’ Summit that ended in Washington, USA, on Wednesday throws a new challenge to Africa. First, this response from USA echoes similar summits held in China and Europe to underscore the great potential of a new Africa emerging.

Moreover, the initiative could be said to be a direct reaction to China’s presence and solid investments in infrastructure in Africa. This is why the $33b (Shs86 trillion) commitments to investments in Africa to boost energy and infrastructure are a bonus.

More important for the African leaders should be President Obama’s message that the key to unlocking the next era of African growth will be in Africa. But his real wake-up call is that Africa should look inwards for key solutions to its economic growth, especially by boosting intra-African trade.
But African leaders must take caution here, too.
The USA’s offer also comes with strings attached.

First, this lump sum may not benefit several of Africa’s 54 nations. Second, US’s efforts to expand its trade with Africa, as Mr Obama conceded, also help boost tens of thousands of American jobs.

Third, USA, unlike China, is not going to drop its demands for good governance, and respect for human rights as preconditions for good investments, something most African leaders detest.

But African leaders must enforce Obama’s message that markets with the greatest potential are often right next door, and not Europe, America and Asia.

Now, it is up to regional trade blocks as the East African Community (EAC) and Common Market for Eastern and Southern Africa (Comesa) to open up trade barriers. For instance, non-tariff barriers as roadblocks, issues of standards, weigh bridges and bad roads still slacken business transactions in these regions.

Luckily, EAC has a head start on building capacity to trade, strengthening regional markets, making borders more efficient, and modernising customs system.

So Obama’s call must re-energise efforts by EAC leaders to enforce, among other measures, the Single Customs Territory (SCT). This SCT enables cargo to be cleared quickly at ports of entry, speeds up transit of goods at borders and enables goods reach destinations in the region in less than one week, unlike the 18 to 30 days in the past.

The deal for the Standard Gauge Railways between China and five East African Community member states is already a huge positive step. Likewise, the plan by EAC to have all phone users on same network charged a uniform cross-border call rate by 2015 builds more capacity to trade.
Overall, African leaders should look to Africa, not abroad for greater trade.
The US pledge should enhance only trade options, and bargaining power.