China-built rail helps boost intra-African trade
Trade among African countries has huge potential for sustainable economic development. However, intra-African trade is extremely low, perhaps the lowest among all continents.
Bank data shows that trade among African countries has expanded from 10 percent in 2000 to about 16 percent in 2014, reflecting the continent’s recent economic upturn. The United Nations Comtrade Database of 2016 puts intraAfrica trade at 21.2 percent.
The figure is still low as compared to the European Union’s 61.7 percent, the North American Free Trade Agreement’s 50.3 percent and the Association of Southeast Asian Nations 24.3 percent, which are more developed regions.
Several obstacles keep impeding African countries from trading among themselves. Low manufacturing and value addition capacity is a key limiting factor. Between 2005 and 2015, for instance, intra-African trade in manufacturing dropped from 18 percent to roughly 15 percent, respectively. It is a big concern that in Africa most of its primary exports undergo little or no processing before they are eventually re-exported. Examples include cocoa beans from Ivory Coast and Ghana, and crude oil petroleum products from Nigeria.
But it is regionalism, which calls for a reassessment of the policy of reduction in administrative and transaction costs, and overcoming market segmentation, which are affecting trade within the continent. It requires a scaling-up of infrastructure investment to boost links among and within African countries. Transport and communication infrastructure has been holding back the potential of trade. Even with their wide range of heterogeneous products, African countries still struggle to export to neighboring nations.
Indeed, there is a danger that recent developments such as the creation of African Continental Free Trade Area may fail to strengthen the continent’s appeal as a global trading partner unless the problem of inadequate infrastructure is addressed.
All is not lost though. China is aggressively turning around Africa’s business profile, especially by overhauling its roads and railway system. The roads have become the modern symbols of China-Africa friendship. As in December 2017, Chinese firms had constructed a total of more than 5,200 kilometers of roads in the continent, some of which were still a work-in-progress.
Perhaps it is the mega railway projects that would ultimately position Africa on the global map as home to investments and trade. Kenya’s Standard Gauge Railway symbolically depicts how Africa’s fortunes would turn around with the coming new network of infrastructure.
One year since its inception, the Madaraka Express, as it is famously referred to, has ferried over 1.3 million passengers in 1,142 trips between Mombasa and Nairobi, raking in more than $10 million in revenues. In the same period, 600,000 tons of cargo was hauled between the two cities. Apart from reducing road traffic, the new railway line has increased the quantity and reduced the time taken for goods to reach their destinations, the reason Kenya is extending the railway network to Naivasha and Kisumu in the west. In the long run, the project is poised to link Kenya to Uganda, Rwanda, Democratic Republic of Congo, South Sudan, among other East African countries.
Intra-African trade would no doubt get a boost from the 756-kilometer Ethiopia-Djibouti railway which connects Addis Ababa to Djibouti on the Red Sea and the construction of the 1,344-kilometer Lobito-Luau railway in Angola which links the Atlantic and Indian oceans. It is expected that ultimately, the Lobito-Luau railway would link up with the Angola-Zambia and the Tanzania-Zambia railways.
One of the most ambitious infrastructural projects in Nigerian history, the 1,400-kilometer Lagos-Calabar railway, once completed, will connect the cities of Port Harcourt, Uyo and Aba along the way, thereby catalyzing the movement of goods in the region. Already, Nigerians are feeling the impact of the 186-kilometer Abuja-Kaduna railway which was completed in 2016 as goods can reach the markets in time.
The Forum on China-Africa Cooperation (FOCAC) 2018, which will take place in Beijing in early September, offers these two regions another strategic opportunity to strengthen their relations and deepen infrastructural development in Africa. It should not be lost that FOCAC 2018 ushers in a new era for the Belt and Road initiative and Africa’s development. This being an engagement of equal consultation, planning together and working together, there is no doubt that China and Africa would benefit together.
It is no mean achievement that China, through aid and financing support, has helped build or is building more than 6,200 kilometers of railways across Africa. A more connected Africa would no doubt trade more with itself. It will engage in manufacturing and processing of its raw materials for export.
As the African leaders head to Beijing for the FOCAC, let them keep in mind that they need to provide conducive environment for Chinese firms and workers to operate. These contractors require a working environment that will make them work smoothly. The recent harassment of Chinese workers over a lack of work permit and discrimination needs to be considered seriously.