Intra-African Trade, Macroeconomic Conditions and Competitiveness in Africa

Abstract

More than ever before, trade and regional integration have become two important arguments in the development equation of most modern states and, probably, explains the current rise in regional integration around the world. However, regional integration will not produce optimal benefits in the absence of favourable macroeconomic conditions and substantial internal trade among the integrating members. This paper employs descriptive statistics and econometric techniques to analyze the competitiveness of the continent by studying the impact of relevant intra-African trade indices on the competitiveness of Africa, based on a panel dataset spanning 2000 to 2016. The results show considerable variations in both inter- and intra-regional trade performance and competitiveness among African regional groupings and nations. Intra-African trade, especially in exports, over the study period, was consistently low. While the South Africa region had the highest intra-regional trade in imports, East Africa region had the highest level of inter-regional imports. West Africa, with Nigeria’s dominance, had the highest level of intra-regional exports, while South Africa had the highest inter-regional exports at country level. For the Regional Economic Communities (RECs), SADC reported the highest intra-African import trades, while SACU reported the highest inter-regional imports. SADC has the highest intra-African exports, while COMESA has the highest inter-regional exports. African Competitiveness Index (ACI) ranking puts the East Africa Region on top, and South Africa as the most competitive African economy. Using panel data covering 2012 to 2016 for 20 African economies, ACI was regressed on a 7-variable model, including intra-regional imports and exports, inflation rate, nominal exchange rate, gross capital formation, and the growth rate of GDP. The results were mixed but plausible. All the variables were correctly signed and significant in different regions, reflecting the huge structural and policy disparities among the regions. Continued transformation of African economies with emphasis on both physical and financial infrastructure, and human capital development will enhance intra-African trade and regional competitiveness.

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