Our nations are at their most productive when they are
discussion economic issues.
Last week Uganda hosted the 16th Common market
for East & Southern Africa (COMESA) summit.
COMESA came into existence in 1993, succeeding the
Preferential Trade Area (PTA), as an attempt by member states to increase trade
within the region that now stretches from Zimbabwe to Libya.
The region has a population of about 500 million and an
economy of $700b a huge market by any measure.
However if the continent’s statistics are anything to go by
– only a tenth of the continents trade is done with itself.
As most of the region’s exports are raw materials, this
means that a lot of the value in processing, marketing, distribution and other
intermediary services – as much as 90% of the value, is being captured off the
continent.
As President Yoweri Museveni likes to say, we are donating
jobs to the west.
The challenge is that the individual economies of the region
are too small to sustain huge concerns, manufacturing or otherwise, while the
barriers to trade between our own countries do not make it feasible to situate
plants in one country and feed them from the region.
What a framework like COMESA can make happen is to create
those exploitable economies of scale so that the huge investments needed to maximize
the value of our natural resources can be situated on the continent.
Think about it if Uganda’s 100+ districts had border
restrictions how difficult and therefore expensive it would be to move people,
goods and services around the region.
The cattle keepers of the western Uganda can grow their
herds to their hearts’ delight because they know that they can transport them
to butchers in Mbarara on to Kampala and now to Southern Sudan, with little
added expense beyond transport costs.
Now imagine how your costs would skyrocket to get our cow
from Ntungamo to Kampala. The added costs, which would be loaded onto the final
price, would not only depress consumer demand but would also discourage
production. This would mean fewer cow herds, veterinary doctors, butchers,
transporters and all along the value chain of the beef industry.
Similarly by retaining barriers to trade on the continent we
are stifling production and the development of local industry.
The more immediate benefit is job creation but also
associated industries will spring up and locally specific innovation will take
root.
The analogy of the body and blood circulation maybe more apt.
Poor diet (policies) and inadequate exercise (poor
implementation) causes the build up of cholesterol (artificial impediments) in
our blood vessels. This restricts the flow of blood starving parts of the body
of blood. When the buildup is too much then the engine of circulation the heart
(producers) begins to overstrain and eventually gives up and the body dies.
To stick with the analogy, the whole body cannot be well if
circulation is restricted to one part of the body.
But beyond administrative barriers there are such non-tariff
barriers as poor infrastructure. It makes no sense for Kenya to have the finest
four-lane highways crisscrossing it when Uganda’s roads are potholed and
rutted.
At the beginning of this month African Development bank
president Donald Kaberuka said it is estimated Africa needs to invest $100b a
year on its roads to bring coverage to an acceptable level in the near future.
The scope of these projects are such that they can’t be done
by individual states and a common market framework would make these investments
much easier to make.
The point is that a large part of our poverty as nations and
peoples is that we do not do enough trade among ourselves. We don’t trade among
ourselves because we cling to artificial political boundaries imposed on us by
historical accident. This inadequate trade also
provides little incentive for increased production, which means we
continue to wallow in our poverty.
