Fortunately, the region now has a solid market within which to develop intra-regional trade and investment. Last year Africa reached the 1 billion population mark with over 60 percent of the population below the age of 30. This means there is a growing labor force as well as the potential to develop a huge consumer market. This is a huge opportunity which I am sure as businesses you are looking to exploit and as governments you hope can spur growth and provide jobs for the population.
If we take a long term trade perspective, Africa is on the right path, but lags behind other regions. Exports from Africa increased significantly and continuously especially in the last 8 years. But they have not kept a pace with trade flows in the rest of the world which roughly tripled between 1990 and 2006. During this same period, intra-regional trade within emerging Asia increased 8 fold. By 2007, intra-regional trade accounted for more than 50 percent of total trade in East Asia.
However, intra regional trade in Africa remains low and accounts for less than 10% of total trade . Between 1999 and 2006, for example, intra-African trade increased by an average of just 14 per cent per year, while trade with the United States and China expanded by 26 per cent and 61 per cent respectively. Despite the low level of intra-African trade at the regional level, in some African countries intraregional trade is significant. Five countries export more than half of their goods within Africa, while another 14 export more than a quarter.
South Africa and Nigeria account for one third of exports within Africa. And while oil and primary commodities dominate external trade, intra-African exports are much more evenly distributed between fuels, non-fuel primary products and manufactured goods. Regional Trade Agreements (RTAs) are contributing to foster intra-regional trade. Intra-group exports for the South African Development Community (SADC) now average about $11 billion annually, while those within the Economic Community of West African States (ECOWAS) have averaged $5.4 billion. Free Trade Agreements such as in the EAC have been established with a view to promote the free movement of goods among its member countries, primarily by dismantling tariffs and customs duties. These numbers could triple with the right policies and incentives.
A look at intra-regional trade in East Asia can help us identify some drivers and policies for Africa. Intra-regional trade in East Asia has increased rapidly and now represents most of the region's total trade. The most prominent manifestation of the intensification of Asian intra-regional trade is "production fragmentation" enabling producers and countries to specialize in particular products along an integrated supply chain. As a result, products and components travel repeatedly across borders before becoming final goods. In East Asia, Japan made a conscious decision to outsource production of component electronic parts to Thailand and Malaysia as part of its overall industrial strategy.
To accelerate intraregional trade three things are needed. First there must be political commitment from the leaders in the region and or sub region to actively pursue and strengthen regional trade agreements. African policymakers should consider regional integration as an integral part of their broader strategic development policies with a view towards greater trade facilitation.
Regional integration cannot deliver on its promise if it is dealt with as an afterthought and not an essential element of the continent's growth agenda. A policy framework for intra-regional coordination must be developed and countries must be willing to commit to this framework. This means the leader must handle issues of multiplicity of membership for example which weakens member-state's commitment to coordinate policies to promote intra-regional trade.