Intra-regional trade in Africa serves as the backbone of economic transformation. East African Community (EAC) member states are increasingly trading with one another and with other African countries. At the same time, they reduced their trade with other continents like Europe, Asia, and other parts of the world, shaping the intra-regional trade in Africa’s dream projected to boost commerce and livelihoods on the continent.
The seven countries in the region (as of 2023) increased their trade with the rest of Africa by $584.6 million to $4.3 billion in the fourth quarter of 2023, a 14 per cent rise compared with a similar period in 2022, according to the latest data by the EAC Secretariat.
Cross-border trade within the region also recorded a 12 per cent rise, from the previous year’s $2.6 billion to $2.9 billion in last year’s Quarter 4, indicating rising trade within the region over the year.
During Quarter 3, intra-EAC trade rose 20 per cent to $3.2 billion, the highest level recorded within the region in over two years. Similarly, trade with the rest of Africa surpassed the $5 billion mark for the first time in two years.
However, the region’s trade with European Union (EU) countries, which traditionally account for about 10 per cent of EAC’s total trade, dropped 14 per cent, from $2.04 billion in the three months to December 2022 to $1.7 billion in the last quarter of 2023.
This is a signal of improving trade integration on the continent. It comes at a time when governments are pushing for increased implementation of the African Continental Free Trade Area, which is projected to lift about 65 million Africans from extreme poverty.
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Trends in the decline of trade between Africa and other continents
Belgium is one of the top EAC partners that saw a sharp decline in its dealings with the region. Its trade dropped by 45 per cent to $188 million in Quarter 4, 2023, from $263 million the previous year.
The United States, the tenth leading trade partner with East Africa, recorded a 19 per cent drop in its business dealings with the region, from $200 million in October-December in 2022 to $161 million last year.
Germany, Italy, and Switzerland saw their trade with the region drop by 12 per cent, 2 per cent, and 23 per cent, respectively. The drop pushed Germany out of the top ten trade partners for the region.
In each of these countries, imports and exports registered a general decline, except in the case of Germany, which bought more East African exports in the period but sold much less of its products in the region.
A similar trend was observed in EAC’s trade with leading Asian producers, Pakistan, Malaysia, China, Vietnam, Indonesia, and Korea.
While imports from China – the leading source for East African countries – improved, exports to the Asian powerhouse slowed by 12 per cent, indicating that regional businesses are finding markets elsewhere.
Exports to Malaysia, the fourth leading market for East African goods, also posted a 17 per cent drop in the period, even though imports rose by 47 per cent.
Improvement of EAC’s intra-Africa trade
Amid the decline in trade with Europe, Asia, and the US, some African countries have emerged as important trade partners for the EAC.
Trade between East Africa and the ECOWAS Commission, for instance, more than tripled to $199.6 million in October-December last year from $61 million in 2022, raising the Commission’s share in EAC’s total trade from 0.3 per cent to 1 per cent.
Similarly, trade with the Southern African Development Community Secretariat (SADC) improved in the period, rising by 40 per cent to $2.7 billion, improving the share of total EAC trade from 9.8 per cent to 12.8 per cent.
South Africa is the continent’s leading trade partner for EAC countries, with the trade between them rising by 26 per cent to hit $838 million, up from $664 million in the last quarter of 2022.
Why there is a surge in EAC’s intra-African trade
John Bosco Kalisa, CEO of the East African Business Council, says the improvement of EAC’s intra-African trade at the expense of Europe, Asia, and the US is a result of the improved political will to eliminate trade barriers within the region and trade more within.
“We learnt a lesson from the global shocks; Covid-19, Russia-Ukraine war, and the MidEast disruptions, which have all impacted our trade and investments,” Mr Kalisa told The EastAfrican.
“One shock absorber is to build regional production capabilities, as well as at national levels, under the auspices of Buy East Africa Build East Africa initiative.”
Mr Kalisa, who heads the regional private sector lobby, argues that governments in the region are concerted in promoting regional value chains and eliminating barriers to trade with one another and with others across the continent.
“That’s why now we can see there is a growth in our trade within the continent, as opposed to our trade with the EU, or China,” he said.
Previously, businesses in the region have been blamed for taking advantage of preferential trade agreements with countries outside the continent rather than free trade agreements within their local regional trading blocs.
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Benefits in Integration and intra-regional Trade in Africa
One of the primary advantages of African Integration and trade is the promotion of economic growth. By eliminating trade barriers, African nations can tap into a larger market. This leads to increased opportunities for businesses, which can thrive in an environment that fosters regional economic cooperation. The creation of a common market has the potential to attract foreign investment and enhance competitiveness on a global scale.
Similarly, it encourages joint efforts in infrastructure development, such as transportation networks, energy grids, and telecommunication systems. Good infrastructure facilitates the movement of goods and enhances connectivity, promoting tourism and cultural exchange. This shared infrastructure can create a more efficient and interconnected Africa, laying the foundation for sustained economic development.
A unified Africa provides a larger labor market, leading to increased employment opportunities for the region’s growing population. Collaboration in education and skill development initiatives can ensure that the workforce is equipped with the right skills and expertise needed for a rapidly evolving global economy.
Climate, political stability, and cross-cultural interactions
Integrated efforts can be more effective in addressing environmental challenges that transcend national borders. African nations can collaborate on initiatives to mitigate climate, protect biodiversity, and promote sustainable resource management. Shared responsibility for environmental conservation can lead to more effective policies and practices that benefit the entire region.
Closer integration fosters political cooperation, reducing the likelihood of conflicts among member states. By promoting mutual understanding and shared governance principles, African Integration contributes to the creation of a stable and peaceful region. Political stability, in turn, attracts investment, encourages tourism, and ensures a conducive environment for social and economic development.
In addition, it encourages the exchange of cultures, traditions, and ideas among member states. This cross-cultural interaction promotes social cohesion and understanding, fostering a sense of unity among Africans. Shared cultural experiences can contribute to the development of a collective East African identity, strengthening bonds among diverse communities.
Conclusion
African Integration and trade unity represent a promising path towards a more prosperous, interconnected, and harmonious region. The benefits extend beyond economic growth to encompass social, political, and environmental dimensions. As African states continue to collaborate and overcome challenges, they stand poised to unlock their full potential and emerge as a beacon of unity and prosperity worldwide.
