It is time for value chain development, say Afreximbank, experts
Economic integration of African countries, which would lead to the much-sought development, has been hinged on the immediate support for building of value chains across growth sectors.
The observation is rather opposed to the current status of African economies known for huge bilateral and multilateral transactions with countries outside the continent, solely on commodities that are not processed.
Leading the call at the 24th yearly general meeting of the African Export-Import Bank (Afreximbank) in Kigali, Rwanda, the country’s Minister of Finance and Economic Planning, Claver Gatete, reiterated that building regional value chains have the potential to generate enormous benefits for the continent’s economies.
“The creation of regional value chains in Africa along several product lines could ease the integration of African economies into global value chains.
“In this context, on-going efforts to deepen regional economic blocks within Africa offers tremendous opportunities to draw on economies of scale to transcend the natural and environmental constraints imposed by geography,” Gatete told the Afreximbank Advisory Group on Trade Finance and Export Development in Africa.
He noted that although African trade had witnessed remarkable growth, especially over the last two decades, rising from $210 billion in 1996 to $1.2 trillion in 2015, its share of global trade had barely changed, remaining at about 15 per cent, compared to 67 per cent in Europe, 53 per cent in Developing Asia, and about 37 per cent in America.
He commended Afreximbank’s support to Rwanda’s economic transformation, noting that the bank had provided direct financing, amounting to $155 million in support of development projects.
But Afreximbank’s Executive Vice President, Finance, Administration and Banking Services, Denys Denya, said the resounding success achieved by some countries in Asia, in particular China and Korea, and the critical role played by intra-regional trade in their development. This, he said, presented Africa with valuable lessons for positioning intra-African trade as a key pillar for economic growth, and sustainable development.
Noting the challenge posed to Africa by small size of the economies and market fragmentation, he argued that connecting the host of small and disconnected markets through deepening of intra-African trade and economic integration would create an environment where firms gained access to hitherto non-existent larger markets.
He affirmed that Africa’s progress toward economic development and structural transformation had been hindered by over-reliance on export of natural resources, primary commodities and a deficit of export diversification, which limited the ability of countries to effectively develop regional value chains to enhance their integration into global value chains.
Also, Afreximbank’s Chief Economist, Dr. Hippolyte Fofack, explained that the bank’s fifth strategic plan, under its “Impact 2021: Africa Transformed,” is designed to address the challenges facing African countries on their path to development.
Its first two pillars – Promoting Intra-African Trade, and Industrialisation and Export Development, would support the economic diversification and trade openness, which had been identified as the key to attaining and sustaining growth.
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