Economic blocs boost cross-border trade

Everyday huge trucks loaded with all kinds of goods traverse the highways and entry border points as a sign of increased cross-border trade in southern Africa.

Other than that, 25.4 per cent of cargo rolls down the region’s railway networks from seafront harbours to the dry ports of landlocked countries.

This cross-border trade is on the increase, but may not reach breaking point just as yet because of various economic factors, not least the global downturn which is haunting the economies of many countries and tends to relegate the general intra-regional trade.

Partly, the increase in trade in southern Africa can be attributed to the rise in non-traditional exports by almost 3.8 per cent annually in the past 10 years for most of the countries.

But also the creation of regional free trade zones for member countries of both the Southern African Development Community (SADC) and Common Market for Eastern and Southern Africa (Comesa) has assisted the rise in cross-border trade.

While five years ago trade within the SADC bloc reached about $40 billion (compared with $120 billion with industrialised countries) the figure is expected to close at about $48.2 billion this year, but would have been higher without the shocks from the world recession.

At the same time invisible trade of unofficial cross-border vendors who use private service vehicles and bush paths is also on the increase except the region loses close to $1.2 billion every year in unpaid taxes and duties.

Comesa with a much higher membership than SADC estimates cross-border trade to be almost twice the $40 billion recorded in the 2004/2005 financial year.

According to economic analysts at the secretariats of the two trade blocs in Gaborone, Botswana and Lusaka in Zambia, business would have done much better had member countries of SADC and Comesa followed the trade protocols which they signed.

But this has not been the case as many countries in the region continue to be protectionist, imposing high tariffs on vulnerable goods which they also produce.

It is this fear of undue competition which is stunting trade among member states and fuels smuggling.

Partly to blame is the colonial legacy where most of the countries in the region produce almost the same type of goods for export both to the traditional and non-traditional markets.

Although member countries realise competition is healthy for any kind of business dealing, they like to hedge their manufacturing sectors on the excuse that others do not want to operate on quid pro quo terms.

This in 1990 caused a lot of furore and finger-pointing among member countries who accused such countries as South Africa, Zimbabwe, Mozambique and others of being involved in unfair trade practices because of their unnecessary control of imports from the region.

Only recently Zambia accused the Democratic Republic of Congo of not doing much to facilitate the free flow of exports to that country.

For example non-traditional exports are being subjected to undue procedures that are inimical in supporting cross-border trade for the two mineral-rich neighbouring countries.

Felix Mutati, Zambia’s minister for trade is still optimistic that the ongoing bilateral trade agreement discussions going on with DR Congo will soon free up the market for Zambian goods.

“We are hopeful of coming to terms with the neighbouring country,” he said.

However, there is hope as many countries in the region now want to work together to achieve free trade through Customs Union.

What is killing cross-border trade at the moment is congestion at most border entry points.

For example lengthy delays, onerous Customs requirements, corruption and other problems tend to impact negatively on the free flow of goods.

A lot of complaints have been raised on this issue but then not much is being done to address it.

Only a few countries like Zambia, Botswana, Zimbabwe and Malawi are working towards the establishment of one-stop border points to assist trade flows.

This is needful as almost 50 per cent of countries in the region are landlocked giving them the urgency to improve both their transport systems and border posts to cut down on traffic delays and haulage costs.

Currently, trucks take three to five days to get through various border crossings at a cost of not less than $1,000 per truck, per day.

Further still, delays on any trainload with vital exports results in the loss of not less than $1,600 per week.

Other than that transport costs in the region are quite high at more than 75 per cent compared to those in industrialised countries.

But then it is alarming for a region that is already marginalised in world trade.

It is for this reason that it is costing 15-20 percent higher for South African goods to reach their market destinations in the COMESA and SADC regions.

Since South Africa is undoubtedly the engine of cross-border trade in Southern Africa in comparison with the northern corridor any transportation bottlenecks tend to hinder trade.

So are restrictions on axle load to protect roads where most of the countries in the region limit it to 15-18 tons compared with 26 tons in South Africa.

This means trucks on southbound routes will most of the time run empty thereby increasing haulage costs.

In the light of all this and much more cross-border trade while on the increase in Southern Africa is facing a lot of structural problems, not least lack of political will to make trade in the region more efficient, competitive, cheaper and faster.

But this can only be achieved if the major trading blocs-SADC and COMESA and the East African Community (EAC) speed up their unification to allow the harmonisation of free trade.

Endowed with plenty land, abundant natural resources, booming mining sector, growing agriculture and manufacturing industries Southern Africa has all what it takes to increase its cross-border trade business to the higher heights than is the case at the moment.

Not only that its estimated population of about 517 million offers a robust market potential for goods produced, imported and exported in the region.