UNITED NATIONS CONFERENCE ON TRADE AND DEVELOPMENT EMBARGO The contents of this Report must not be quoted or summarized in the print, broadcast or electronic media before 11 July 2013, 17:00 hours GMT ECONOMIC DEVELOPMENT IN AFRICA REPORT 2013 INTRA-AFRICAN TRADE: UNLOCKING PRIVATE SECTOR DYNAMISM UNITED NATIONS CONFERENCE ON TRADE AND DEVELOPMENTM E N T ECONOMIC DEVELOPMENTVELOPMENTVAELOPMFENT RININ ICA REPORT 2013 INTRA-AFRICAN TRADE: UNLOCKING PRIVATE SECTOR DYNAMISM ii Economic Development in Africa Report 2013 NOTE Symbols of United Nations documents are composed of capital letters combined with figures. Mention of such a symbol indicates a reference to a United Nations document. The designations employed and the presentation of the material in this publication do not imply the expression of any opinion whatsoever on the part of the Secretariat of the United Nations concerning the legal status of any country, territory, city or area, or of its authorities, or concerning the delimitation of its frontiers or boundaries. Material in this publication may be freely quoted or reprinted, but acknowledgement is requested, together with a reference to the document number. A copy of the publication containing the quotation or reprint should be sent to the UNCTAD secretariat. UNCTAD/ALDC/AFRICA/2013 UNITED NATIONS PUBLICATION Sales No. E.13.II.D.2 ISBN 978-92-1-112866-6 eISBN 978-92-1-056143-3 ISSN 1990–5114 Copyright © United Nations, 2013 All rights reserved. “Life is like riding a bicycle, you don't fall off unless you stop pedalling” Proverb from Sierra Leone iv Economic Development in Africa Report 2013 ACKNOWLEDGEMENTS The Economic Development in Africa Report 2013 was prepared by a research team consisting of Patrick Osakwe (team leader), Janvier Nkurunziza and Bineswaree Bolaky. The work was completed under the overall supervision of Taffere Tesfachew, Director, Division for Africa, Least Developed Countries and Special Programmes, UNCTAD. The report benefited from inputs provided by Trudi Hartzenberg and Francis Teal (consultants) and the Division on Investment and Enterprise at UNCTAD. The report also benefited from the comments of the following, who participated in a peer review discussion of a draft of the report: Professor Mwangi S. Kimenyi, Director, Africa Growth Initiative, The Brookings Institution; Mr. Stephen Karingi, Director, Regional Integration, Infrastructure and Trade Division, United Nations Economic Commission for Africa; Ms. Margareta Drzeniek Hanouz, Director, Global Competitiveness and Benchmarking Network, World Economic Forum; Mr. Vinaye Dey Ancharaz, Senior Development Economist, International Centre for Trade and Sustainable Development; Mr. Constantine Bartel, Senior Development Adviser, International Trade Centre; Ms. Caroline Ko, Economist, World Economic Forum and Mr. Bonapas Onguglo, Ms. Amelia Santos-Paulino, Mr. Rolf Traeger, Mr. Mussie Delelegn, Mr. Stefano Inama and Mr. Antipas Touatam of UNCTAD. Further comments were provided by Mr. Shigehisa Kasahara and Ms. Lisa Borgatti of UNCTAD. Statistical assistance was provided by Agnès Collardeau-Angleys and Heather Wicks provided secretarial support. The cover was prepared by Sophie Combette. Charlotte Gray edited the text. The overall layout, graphics and desktop publishing were done by Madasamyraja Rajalingam. CONTENTS v CONTENTS Explanatory notes ................................................................................................ vii Abbreviations................................................................................................. ..... viii INTRODUCTION .................................................................................................................1 CHAPTER 1: THE STATE OF INTRA-AFRICAN TRADE AND INVESTMENT ............................................................................................7 A. Introduction ..................................................................................................8 B. Empirical facts on African trade, intra-African trade and investment ..............8 CHAPTER 2: INTRA-AFRICAN TRADE: DRIVERS, CHALLENGES AND POLICY OPTIONS .......................................................................45 A. Introduction ................................................................................................ 46 B. Regional blocs, trade and growth............................................................... 46 C. Understanding African regional trade performance .....................................50 D. Enhancing implementation of regional trade agreements ............................57 CHAPTER 3: THE PRIVATE SECTOR, ENTERPRISES AND PRODUCTIVITY ......................................................................................63 A. Introduction ................................................................................................64 B. Features of the enterprise structure in Africa ...............................................65 C. Manufacturing firms, exports and productivity ............................................73 D. Strengthening the private sector to boost regional trade ............................. 84 CHAPTER 4: BOOSTING INTRA-AFRICAN TRADE IN THE CONTEXT OF DEVELOPMENTAL REGIONALISM ..........................................95 A. Conceptualizing developmental regionalism ............................................... 96 B. Current regional integration initiatives in Africa: are they conducive to developmental regionalism? ...................................................................98 C. Developmental regionalism in practice: lessons from South-East Asia ......103 D. Fostering developmental regionalism in Africa: key policy tools and drivers ...............................................................................................107 E. Conclusion ...............................................................................................120 vi Economic Development in Africa Report 2013 CHAPTER 5: INTRA-AFRICAN TRADE: UNLOCKING PRIVATE SECTOR DYNAMISM - MAIN FINDINGS AND RECOMMENDATIONS .....................................................................123 A. Introduction .............................................................................................. 124 B. Main findings............................................................................................ 125 C. Messages and recommendations ............................................................ 129 D. Conclusion ...............................................................................................134 NOTES ................................................................................................................136 REFERENCES ...................................................................................................137 BOXES 1. Negotiating trade facilitation measures .......................................................... 53 2. Building capacity for innovation through linkages between universities and industry .................................................................................................. 72 3. Credit bureaux, registries and access to finance in Africa............................... 87 4. Effect of the political shock in Côte d’Ivoire on West African economies ........ 94 5. African regional economic communities and developmental regionalism .....101 6. The tripartite free trade area: a developmental integration paradigm? .......... 110 7. Lessons from experience of special economic zones................................... 114 FIGURES 1. Intra-African trade, 1995–2011...................................................................... 11 2. Top 37 Intra-African agricultural imports, 2007–2011 .....................................30 3. Distribution of intra-African trade by main product category, 1996–2000 and 2007–2011 .....................................................................................................37 4. Share of manufactured goods in intra-African trade and extraregional trade, 1996–2011 ............................................................................................................ 38 5. Main motive for joining regional economic communities ....................................... 47 6. Percentage of firms exporting to Africa and outside Africa ....................................74 7. Percentage of output exported to Africa and outside Africa ..................................76 8. Labour productivity and capital per employee, by firm size ...................................78 9. Productivity across countries and by firm size .......................................................79 10. Tertiary education gross enrolment ratios by region ............................................... 90 CONTENTS vii TABLES 1. Membership of regional communities ............................................................9 2. Shares of regional trading groups in world exports and imports, 1970–2010 ................................................................................................. 12 3 (a). Intraregional exports and imports, 1996–2011 ............................................13 3 (b). Shares of exports and imports (by main destination), 1996–2011 ...............15 4. Intra-trade and GDP by different regional groups ........................................ 17 5. Intra-African trade 1996–2011: distribution of shares .................................20 6. Intra-African exports, five main destinations by country, 2011 .....................22 7. Intra-African