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Identifying Africa’s economic strength within the continent

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Global demand for African oil and precious metals has fueled a continental surge in exports, helping some of the world’s poorest countries rebound from the 2009 economic shock.

African countries also stand to benefit from trade deals with donors and development agencies. Seeking to boost “south-south” trade, the Asian Development Bank (ADB) and its African counterpart, the AfDB, launched a programme on 27 June, 2011, to provide investment loan guarantees to nations that are locked out of international financial markets.

The arrangement came on the heels of commitments by the European Union to strengthen its approach to reducing poverty in Africa, including more development aid and efforts to diversify trade beyond the minerals, petroleum and a handful of agricultural products that account for the bulk of African exports.

But such efforts could undercut development of what may be Africa’s most important market – Africa.

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Despite its rapidly growing marketplace of 1 billion people – 856 million of who live in sub-Saharan Africa – regional commerce is almost an afterthought. From 2000-2007, exchanges between African states accounted for just 8.5 percent of overall trade, according to the United Nations’ Economic Commission for Africa (ECA).

The imbalance highlights what analysts say is a bias toward external trade at the expense of African integration.

“The way that Africa was constructed historically was that all roads led out of Africa,” says Dawda Jobarteh, acting director of the Africa Progress Panel (APP), a Swiss organisation that monitors development on the continent. He says connecting Africa to itself “would have benefits to both trade and economic growth, and hopefully equitable growth.”

African governments continue to compete for overseas trade and investment deals, but their outward vision is beginning to shift, perhaps aided by a few success stories.

One success has been the continent’s mobile telecommunications revolution, which has spawned side industries such as mobile banking and empowered non-traditional entrepreneurs, including growing numbers of women and young people.

There have also been gains in transportation through regional highway interconnections, ports and a dramatic growth in the airline industry. Jobarteh’s organisation reports that inter-African flights grew by 49 percent from January 2005 to January 2011, helping unite a continent that only a few years ago had a spotty and notoriously unreliable airline service.

Meanwhile, African exports have risen in the past decade and are rebounding after falling 32.4 percent in 2009. Africa’s merchandise trade jumped 24 percent in 2010 and accounted for 3.2 percent of world trade, up from 2.1 percent in 2000, when a growth spurt ended a three-decade slump, according to a joint ECA-Organisation for Economic Cooperation and Development (OECD) report.

The EU is Africa’s biggest trading partner, accounting for 35 percent of imports and exports in 2010, with China and the United States competing for second.

The trade is largely one-sided. Africa’s main exports are petroleum and precious metals while the continent imports the technology and equipment that nurture economies, including mobile phones.

Leaders of the 53-nation African Union (AU) have approved an “action plan” to promote regional commerce and provide a more inviting manufacturing climate. The AU plan calls for the free movement of people and commerce, and multinational cooperation to address the sub-continent’s pitiful infrastructure.

“There is a concerted effort at the moment to try to harmonise the systems and structures, and reduce the travel time and the fees and the soft corruption elements of it as well,” Jobarteh told IPS in an interview.

But the challenges are nonetheless daunting.

Economic and trade growth remain below pre-crisis levels, and even when statistics paint a positive image, the vast majority of Africans rarely benefit. A decade of economic improvement “has not been translated into commensurate reductions in unemployment and poverty,” according to the 2011 ECA- AU Economic Report on Africa.

With notable exceptions, many African countries offer uninviting climates for investment because of bureaucracy, protectionism, mercurial politics and poor infrastructure. Transport, infrastructure and banking for the most part remain rudimentary.

Rob Davies, South Africa’s trade minister, told IPS in a recent interview that Africa needs more balance, saying that it “cannot continue to live on the basis of a commodity boom, nor anticipate that it will carry on forever. We have to develop more value-added activity.”

Fed by the commodity boom and weak governance, corruption also hampers development.

“We can talk as much as we like about investment into Africa, but unless we staunch the flow of illicit capital coming out the other side, we’re always going to running to keep up and Africa’s going to be running to keep up,” Diarmid O’Sullivan, Europe adviser for the corruption-fighting organisation Global Witness, and former Transparency International campaign director, told a recent forum on Africa’s growth potential in Brussels.

The British-based organisation urges African countries to be more transparent in their mineral and oil concessions and wants European regulators get tough on banks that facilitate illicit payments.

Stephen N. Karingi, one of the authors of the ECA-AU economic report, says Africa can become stronger globally by first building success at home. He says developing continental trade, and improving regional infrastructure and services, will better prepare Africans to compete in international markets while improving quality of life at home.

“These are the things that will enable Africa to be able to implement its industrialization strategies,” Karingi told IPS in a telephone interview.

For now, African nations with rich petroleum and mineral reserves will enjoy a windfall of export profits to foreign markets. But longer-term gains may be found closer to home, in both trade and development cooperation. If that happens, Africans could one day be manufacturing the mobile phones and other products they must now import from Europe, Asia and other markets.

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