Let’s de-risk access to credit for youth and accept that some of them will fail

Thursday November 9 2017

Ms Arancha Gonzalez, Executive Director ITC.

Ms Arancha Gonzalez, Executive Director ITC. PHOTO FILE | NATION 

By VICTOR KIPROP
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The executive director of the International Trade Centre Arancha Gonzalez spoke to The EastAfrican's Victor Kiprop on Africa’s struggle to get a decent return from the global marketplace.

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Many trade policies favour large companies, which make up only 10 per cent of all business enterprises. How can we ensure that they serve the other 90 per cent too?

Part of the answer is with the policies themselves as they need to be deeper and more inclusive to spur the competitiveness of SMEs. Trade agreements should also prioritise levelling the playground for SMEs and include women in trade to ensure better diffusion of the benefits of international trade.

However, the onus doesn’t stop with policies alone as there should be commensurate investments in infrastructure to ensure that traders can move their produce quickly, in skill building, and education to ensure the labour force moves in tandem with the innovations that technological progress churns out. This combination will ensure that growth through trade is more inclusive.

Despite trade agreements and co-operation proving vital to trade, why are some countries are still sceptical about signing such agreements?

Trade agreements create opportunities, but they do not in themselves translate into results. Many countries have amazing trade agreements but they do not have products of the desired quality or even the necessary financing to enable their companies gain access to international markets.

Many countries question the need to enter into such agreements once they see poor returns or sluggish uptake after signing up. However, what they do not ask themselves is whether they did enough to take advantage of the opportunities created by the agreements.

How can East Africa’s Economic Partnership Agreement with the European Union be jump-started?

Going back to the facts and the figures would be very illuminating and sobering for any policy maker. This year, the International Trade Centre has analysed more than 200 trade agreement across the world and we know there is a relationship between good trade agreements and improved trade.

East Africa is endowed with amazing assets especially in agriculture but most of these products do not reach the international markets because they are not produced in sufficient quantity, quality or reliability of supply. The trade agreement is where it all starts; where the opportunities are created. Countries need to more than just sign agreements. There is more to the mix of factors that drive these expressions of intent.

East Africa’s trade deficit against other regions of the world is huge despite signing several trade deals. How can this gap be closed?

East Africa exports many unprocessed or raw goods and commodities to Europe and Asia where they get processed. This means, it is the buyers that add value to East Africa’s goods and then resell them at a premium.

A fragmented market is one of the causes of lower value addition, although on that score, East Africa is getting it right since it is in the process of integrating of its market.

The region, however, still needs to invest more in physical and digital infrastructure and woo more investors to the bloc as a whole rather than to individual countries. East Africa has more to offer in the sum of its parts than each state individually.

Africa’s growth has been hinged on its fast growing youth population, which now accounts for 60 per cent of the continent’s people. What trade opportunities exist for the youth?

Entrepreneurship is their biggest bet. African youths are educated, tech-savvy and are eager to take risks.

However, for entrepreneurship to work, the ecosystem needs to be designed in such a way that it helps the entrepreneurs to thrive. We have to start to de-risking access to credit for these entrepreneurs because if we do not accept the fact that some of them are going to fail then society stands to miss out on a huge opportunity.

We also need to be better at growing from incubators and idea centres to starts-ups, and graduate them from start-ups to small and thence to medium-size enterprises.

Agriculture is a huge income earner for Africa and a major component of East Africa’s export earnings despite most farmers treating farming as a way of life rather than as a business. How does one transit from plain agriculture to agribusiness?

Agriculture has enormous potential but for a long time farming in most parts of the world has remained a subsistence activity, mainly because of the low returns. Consequently, not many people are willing to see it as a full-time money-making activity.

In order to move to agribusiness, it is imperative to make agriculture “look cool” even for the youth, and also ensure that farmers get a better deal. That means cutting out intermediaries and distributing the power to make business decisions between the retailer and the producer.

Bio

Background: Ms González is an expert in international trade issues with 20 years’ experience.

Education: Law degree from the University of Navarra and a postgraduate degree in European Law from the Carlos III University of Madrid.

September 2013-: Executive director of the International Trade Centre, the joint development agency of the UN and the World Trade Organisation. She also co-chairs the World Economic Forum Agenda Council on the Future of Trade and Investment.

2005-2013: Ms González served as chief of staff to World Trade Organisation director-general Pascal Lamy.

2002-2004: She also served as the European Commission spokeswoman for trade and adviser to the EU Trade Commissioner where she conducted negotiations on trade agreements and assisting developing countries in trade development efforts.