Infrastructure and Africa’s Trade

Saturday letter2

The 2019 African Export Import Bank Annual Meetings took place in the beautiful city of Moscow, in the Russian Federation with the theme: Transforming Africa’s Trade. The words of Prof. Ha-Joon Chang resonated with me at the Afreximbank annual meetings where he stated that, “We must reject the idea of a level playing field between developed and developing countries. Free trade is only

beneficial between countries with the same level of development’’ – Hence, making the African Continental Free Trade Agreement important.

Free trade comes with its own idiosyncrasies and often times in the short run brings benefits to most countries but in the long run bad for the economic backward developing countries and impedes productivity. This supports the infant industries argument: a classic theory in international trade states that new industries require protection from international competitors until they become mature, stable, and are able to compete competitively. The infant industry argument is commonly used to justify domestic trade protectionism. An infant industry is in its early stages of development, a newly established industry. Therefore, infant industries lack the experience to compete effectively against established competitors abroad. An infant industry is characterized by a lack of efficiency, competitiveness, and a high vulnerability to sudden market changes. Hence the need to be protected.

The key constraint to the African continental free trade is infrastructure. It is easier to transport oneself from one country in Europe to another and that cannot be said for Africa. Africa partakes with 2.5% of global trade despite accounting for 16% of the global population. The need to properly improve the infrastructure in the aviation sector, rail and road networks is crucial in the implementation of the African continental free trade.

The Russian Federation, taking center stage and partnering with Africa through the African Export Import Bank and seeking partnership in also providing the infrastructure that will aid the continental free trade agreement is commendable. Power and sufficient transport networks must be improved upon to sufficiently harness the benefits of the free trade agreement. I do look towards a prosperous Africa, in which economic and social development is sustained and not a continent which continues to remain stagnant amidst vast abundance of natural resources and technological advancement.

Folawiyo Kareem Olajoku, PhD,

FKO Investments and Research, Lagos