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No other Continent Trades Less with Itself than Africa. Thus Hit Hardest with #Brexit

by Milicent Atieno
No other Continent Trades Less with Itself than Africa. Thus Hit Hardest with #Brexit

According to UN’s Economic Report on Africa [pdf], 80% of exports from Africa are shipped overseas to destinations like the EU, USA, and China. Trade within the continent itself; trade between African countries stands at 10% – 12%. A modest figure when compared to trade between countries in Europe (60%) and Asia (40%).

The fact that Africa trades more with outside countries than within itself leaves its member countries highly vulnerable to international economic shocks like the Brexit. Where the United Kingdom (UK) voted to pull out of the European Union economic block.

African Countries trading more with overseas countries than themselves

While the full scale of the Brexit impact is yet to be felt. Experts argue that countries such as Bangladesh, Belize, Fiji, and Kenya, which exports a flowers, garments, tea, coffee, sugar, and bananas to the UK will be severely hit once the tidal waves of Brexit travel out enough.

All these concerns were raised on the sidelines by speakers at the 14th UN Conference on Trade and Development (UNctad). It was also said that for Africa to fight poverty and achieve development, intra-trade between African countries will put the continent on the fast track towards that’s goal. Intra-African trade will also lead to the formed economic blocks being a lucrative investment for prospecting investors. It will also go a long way towards cushioning Africa from world economic development such as the Brexit.

According to the UK-based Overseas Development Institute, post-Brexit events are expected to lead to a slump in the pound with developing countries losing up to $500 million in revenue from exports. The economic shift and adjustment itself will cost the developing countries as much as $4 billion over the next one year.

Why is Africa not Trading with itself?

Intra-trade within African countries stands at 10%. The lack of or insufficient amount of trade between African countries has mainly been attributed to countries having stringent regulations that act as barriers to trade with from neighboring countries.

A senior director of World Bank’s global practice on Trade and Competitiveness Anabel Gonzalez was last year quoted giving an example of a truck supplying goods to supermarkets across borders in southern Africa spending as much as 1,600 documents in licenses and permits.

Gonzalez cited an example where a truck owner reported losing $500 on each day their vehicle was stuck at the border points. All these because of the slow customs procedures. The vehicle owners had to incur an extra $20,000 in a week in an attempt to get an import permit to start distributing meat, milk and other plant-based goods to their stores within the region.

If the residents of San Francisco faced the same charges in crossing the Bay Bridge to Oakland as do residents crossing the Congo River between Kinshasa and Brazzaville, a similar distance. They would pay more than $1,200 for a return trip,” Gonzalez said.

As a result, passenger traffic at this obvious focal point for cross-border exchanges between two Congos is around five times smaller than that between East and West Berlin in 1988.”

More on how the lack of intra-trade deals between African countries, the adverse effect it is having on their economy while exposing them to international economic shocks like Brexit. Click, here.

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