Ed Mabaya and Ariana Constant
A crisis like the COVID-19 pandemic disrupts our daily lives, our work, and the industries we depend on—especially food production. In a time when the global community is grappling with the threat of a recession, increasing natural disasters, and ongoing public health challenges, it is critical that all industries work to identify and embrace ways to be more resilient. In Africa, a key component to increasing resilience is increasing intra-regional trade.
Agricultural commodities account for most global imports. Africa’s food import bill currently stands at around $75 billion and is expected to reach $110 billion by 2025. Capitalizing on regional trade would mean that these food imports could be produced on the continent, thereby creating wealth and jobs for Africans. However, increasing regional trade in Africa won’t be without challenges.
Intra-African exports amount to 16.6% of total trade— far behind other regions. In part, this is a result of the European colonization across Africa in the 19th and 20th centuries. While today African countries are now independent, the colonial legacy lingers in the transport infrastructure. Most prominently, the railways that are still operational were primarily developed to facilitate the extraction of raw materials from Africa, rather than to promote trade within the continent. To date, trade between Africa and Europe still heavily reflects these colonial ties.
Moreover, a recent study conducted by AKADEMIA263, ReSAKSS, and IFPRI estimates that the average duties on intra-regional trade for non-agricultural goods are about 7%, and 15% for agricultural goods. The study also concluded that non-tariff barriers are an even greater impediment to agricultural trade due to the fact that the cost of time at the border, paperwork, and red tape amount to between 50% and 90% of the costs of import and export in Africa. Yet, the potential for digitizing agricultural value chains in Africa is very promising. For a continent that revolutionized mobile phone payment systems, there should be no excuse for using illegible forms and carbon copies at the borders to process import and export transactions. Regional trade in Africa must go digital.
Unless these challenges are addressed, increased regional trade in Africa will remain a pipe dream. Luckily, there is strong political willpower to increase trade within Africa. The African Continental Free Trade Agreement, signed last year, promises to create an integrated African market with a total GDP of over $3 trillion. Unfortunately, roll out of this ambitious trade agreement has been delayed because of the COVID-19 pandemic. More importantly, the barriers to entry for regional trade are relatively low compared to export to other continents. This means that smaller players such as SMEs and smallholder farmers can participate and benefit.
In Malawi, the Clinton Foundation and Africa Improved Foods (AIF) work with farming communities engaged in the regional trade of soybean. The market in Rwanda needed high-quality soybean in large quantities and producers in Malawi were able to meet that demand. Over the last two seasons, AIF has purchased nearly 2,800 MT of soybeans, paying nearly $1.2 million to producing farmers. The price AIF paid was 26% higher than local trader prices within Malawi, per a recent evaluation by Wageningen University & Research (WUR) in the Netherlands.
This partnership did not come without challenges, including border closures, climate change impacting projected yields, side-selling, and COVID-19. Through this, we’ve recognized that the resilience of trade, supply chains, and stakeholder relationships is paramount to the long-term success of intra-African trade. It is critical that other markets realize the capacity of farming communities to produce the quality and quantities of commodities they are often desperately looking for. It is through working directly with these communities that we should see their potential unlocked.
A key lesson from the pandemic—among other crises—is that shorter food value chains are more resilient to shocks than longer global supply chains. Thus, the push for increased regional trade in agricultural goods is very much consistent with the push to “build back better” with more resilient—and regional—food systems.
To view our recent conversation at the 2020 Concordia Africa Initiative, Strengthening Intra-African Agricultural Trade, click here.
Dr. Ed Mabaya is a Senior Research Associate in the Department of Global Development at Cornell University. Ariana Constant is Director of the Clinton Development Initiative, an initiative of the Clinton Foundation.