Africa locks itself out of a potential $1 trillion continental business by refusing to trade with itself. By SEGUN ORUAME
Open borders and higher inter-boundaries trade have remained the dream of many African leaders. But the reality is that Africa is closer to the outside world outside of the continent than it is closer to itself. While Africa trade with the rest of the world in billions of dollars yearly; it does a pitiable volume with itself across the dozens of state borders that separate political entities shutting out great potential that the World Bank estimates to be in trillion dollars annually.
To address these problems within the ECOWAS (Economic Community of West African States) sub-region, the Borderless Alliance, a non-profit organization was launched in March 2010 to carryout advocacy campaign against trade barriers in West African interstate borders. It is a private sector-led multi-stakeholder campaign to increase trade across West Africa, bring in more jobs and improve the well being of the over 220 million people that occupy the ECOWAS space.
In mid April 2011, the Borderless Alliance held a membership drive forum in Lagos to raise the stake for participation and advocacy among the business community in Nigeria. The Lagos meet is a preparatory meeting for another one in May to hold in Abidjan. The Alliance, legally registered in 2011 is a “collaboration of private companies to promote and facilitate regional trade and reduce transport costs and delay across West Africa.”
Coming at a time when African leaders are more vehemently calling for a continental free trade area by 2017 to boost trade within the continent, the Alliance is bound to get ready support from governments keener on opening their borders to improve trade. As a new World Bank report shows, “African countries are losing out on billions of dollars in potential trade earnings every year because of high trade barriers with neighboring countries, and that it is easier for Africa to trade with the rest of the world than with itself.”
According to the new report ‘De-Fragmenting Africa: Deepening Regional Trade Integration in Goods and Services,’ regional fragmentation could become even more costly for the continent with new World Bank forecasts suggesting that economic slowdown in the Eurozone could shave Africa’s growth by up to 1.3 percentage points this year. The report notes: “while uncertainty surrounds the global economy and stagnation is likely to continue in traditional markets in Europe and North America, enormous opportunities for cross-border trade within Africa in food products, basic manufactures and services remain unexploited.”
Agreeing with the driving theme of the Borderless Alliance, the reports says Africa inability to trade with itself “deprives the continent of new sources of economic growth, new jobs, and sharply falling poverty, factors which accompanied significant trade integration in East Asia and other regions. The cross-border production networks that have spurred economic dynamism in other regions, especially East Asia, have yet to materialize in Africa.”
Seeming efforts to address the problems at inter-governments level have brought little or no results.The ECOWAS in 1990 launched what is known as ECOWAS Trade Liberalization Scheme (ETLS) on industrial products. The Scheme was designed to ensure free movement of goods and services across the West African borders; expand the window for intra-ECOWAS exports, create more jobs, reduce poverty and improve foreign exchange earnings. But its actualization has remained unrealistic, dogged by lack of commitment by the various governments to fulfilling the protocol and incessant cases of bribery as well as harassments that discourage free movement and trade among the citizens of the community.
As Obiageli “Oby” Ezekwesili, the World Bank’s Vice President for Africa, and a former Nigerian Minister of Extractive Industries, puts it: “It is clear that Africa is not reaching its potential for regional trade, despite the fact that its benefits are enormous they create larger markets, help countries diversify their economies, reduce costs, improve productivity and help reduce poverty. Yet trade and non-trade barriers remain significant and fall most heavily and disproportionately on poor traders, most of whom are women. African leaders must now back aspiration with action and work together to align the policies, institutions and investments needed to unblock these barriers and to create a dynamic regional market on a scale worthy of Africa s one billion people and its roughly $2 trillion economy.”
What Borderless Alliance seeks to do within the ECOWAS region is to mobilize private sector-led advocacy to get governments to act and fully actualize the protocol on trade and free movements. It appears to have achieved some level of success in partnership with some of its members like the Accra-based USAID West Africa Trade Hub. A survey report conducted in 2011 by West Africa Road Governance Initiative and monitored by Trade Hub notes: “It is encouraging to know that with exception of Senegal the number of controls has reduced in the whole region. The decline in Côte d’Ivoire is spectacular. This is due to the political crisis the country experienced and the fact that no data could be collected on imports.
“Apart from Côte d’Ivoire, the most important decline observed is in Togo and thus consolidates its position of “best student” in the region thanks to effort made by Customs. During the caravan organized by the Trade Hub in March 2011, Customs officers announced the closure of checkpoints in Kante, North Dapaong and South Cinkanse. This decision was indeed effective. Also a significant reduction in the rate of controls in Mango and South Tsevie must be noted.”
Whether Africa can open its borders to the benefits of borderless trade rests on Africa itself. “Imagine the benefits of allowing African doctors, nurses, teacher, engineers and lawyers to practice anywhere in the continent, but responsibility for making this happen lies with countries first and foremost. The final prize is clear: helping Africans trade goods and services with each other. Few contributions carry more development power than that,” says Marcelo Giugale, the World Bank s Africa Director for Poverty Reduction and Economic Management.
Changes are needed in three areas
“To escape the current straightjacket of trade fragmentation,” the World Bank report says that African leaders need to pursue changes in three key areas. They include:
“1. Improving cross-border trade, especially by small poor traders, many of whom are women, by simplifying border procedures, limiting the number of agencies at the border and increasing the professionalism of officials, supporting traders associations, improving the flow of information on market opportunities, and assisting in the spread of new technologies such as cross-border mobile banking that improve access to finance.
2. Removing a range of non-tariff barriers to trade, such as restrictive rules of origin, import and export bans, and onerous and costly import and export licensing procedures
3. Reforming regulations and immigration rules that limit the substantial potential for cross-border trade and investment in services.”
Private sector’s voice is essential to improve regional trade
By NWAKAEGO ALAJEMBA
Borderless Alliance is gearing up to tackle ECOWAS non functional Free Trade Scheme as it steps up its drive for membership in Nigeria with a Lagos forum designed to create awareness on its activities and expand the membership list from within the Nigerian business community.
Worried by the increasing cases of trade obstacles within the ECOWAS borders including unnecessary restrictions, bribery, pointless delay of goods; and the total failure of the Free Trade/Trade Liberalisation Scheme, the Borderless Alliance, born March 2010, hopes to galvanise support against the hurdles that are militating against free trade and movements.
Borderless Alliance’s missions include bringing to light trade inefficiencies throughout the region. Through the works of its partners, it carries out research to find what are the most paralyzing obstacles to producers, traders, buyers and investors within the ECOWAS region. The findings are published and the data are used to pressure decision makers to implement policies in favour of free trade to ultimately develop the economies of the ECOWAS countries. Borderless Alliance is already in partnership with ECOWAS, West African Economic and Monetary Union (UEMOA), World Bank, West Africa Trade Hub, USAID and the EU.
In the Lagos forum, organized by Borderless Alliance in association with NEXIM Bank, the Alliance urged the private sector in Nigeria to support the vision and equally become members. At the event, Mr. Ziad Hamoui Interim president of the Borderless Alliance Executive Committee stated that the private sector’s voice is essential to implementing the changes necessary to improve regional trade. He stressed the need to dialogue to the highest level by getting different governments involved in order to do business across the borders..
For Dr. Sola Afolabi, Director, Business Environment, USAID West Africa Trade Hub, participation of Nigerian stakeholders is critical to the success of any effort to improve regional trade. His words: “Nigerian companies have the experience and know-how in competing in international markets. We need their input to make regional trade work. The discussions with people in authority will bring about the flow of business across the borders.”
Present at the forum were the stakeholders that include Nigerian Custom Services, represented by the Deputy Comptroller of Customs (Nigerian National Facilitation Committee) Mr. Taju Olanrewaju. Representative of NEXIM Nigerian Export – Import Bank, Hope Yongo, representative of COBAT, National Association of Nigerian Traders (NANTS),Association of Nigerian Licensed Customs Agents (ANLCA National), Global Scan, Manufacturers Association of Nigeria (MAN),Women in Cross-Border Trade, Ecobank, and participants from other private sector companies as well as the media.
Many participants cited their challenges in doing business across the borders. They range from unnecessary delays, harassments by immigration officers and other security personnel, and excessive charges, and undue levies resulting in prolonged delays and low profit thus effectively making inter-boundary trade unattractive. Many participants said it was much more easy for them to export their raw materials and other goods to Europe, America and even China than moving it across West Africa. For one participant, the potential benefits of trading across borders are routinely erased by the unnecessary hurdles and the “Borderless Alliance may hold the key to unlocking West Africa’s economic potential.”
A cashew trader cited how stressful and unprofitable it had become to move cashew nuts from Cote d Ivoire to Ghana because of massive road blocks and check points, all collecting bribes and delaying the trucks. “Borderless Alliance needs to be encouraged,” he said while claiming with several other participants that Nigeria borders are the worst of all borders, with customs, immigration, Joint Nigeria-Benin Anti-Crime Border Patrol, National Drug Law Enforcement Agency and Veterinary Quarantine Service, and several illegal road blocks effectively delaying the movement of goods and services, and sometimes making a journey of less than one day to take several days and weeks.
NEXIM Bank stated that it designed ECOWAS Trade Support Facilities as part of assistance to deepen export and import trade financing within the Africa region. While giving insights into the effect of corruption and other hurdles at the borders, the bank said a lot of people were afraid of taking loans made available for their businesses because they were afraid that the rampant extortions and at the borders will ultimately erase their profits. They would rather sell their goods to the Chinese than borrow money to service intra ECOWAS business deals.
One of the highpoints of the forum is the promotion of free flow of business informationwithin and across West African borders to break trade barriers. The Alliance has so far worked with the West Africa Trade Hub and Road Governance Initiative in reducing the number of checkpoints in some West African borders, mainly, Côte d’Ivoire, Togo, Burkina Faso, Mali and Ghana. The report of a survey conducted in 2011 by West Africa Road Governance Initiative and monitored by Trade Hub stated that in Burkina Faso the Road Governance initiative recommends the reduction of delays at Dakola and the removal of Customs checkpoints between Ouagadougou and Togo and Ghana borders. The checkpoints in Togo borders reduced drastically. In Mali, delays at Kayes, Kati, and at checkpoints between Bamako and the Burkina Faso borders are prohibitive. But there has been a significant reduction in the rate of controls in Mango and South Tsevie while the positive trends in Senegal have been reversed first quarter of 2012 owing to the increasing presence of Police and Gendarmerie resulting in a higher rate of controls
in urban centres such as Missira, Botou, Goudiry, Kirene, or Maka Kahone. Nigeria fared worst in the estimation of many participants. With about the highest numbers of checkpoints, one participant described Nigerians as “people that lack the idea of regional integration and growth; people with lack of communication and willingness to cooperate.” With the Borderless Alliance aiming to end all these, Africa could be on its way to achievinga continental free trade area by 2017 starting from West Africa.
Africa locks itself out of a potential $1 trillion continental business by refusing to trade with itself. By SEGUN ORUAME