Intra-African trade is key to the provision of impetus for industrialisation and more resilient economic growth, Trade and Industry Minister Dr Rob Davies noted during the South African Chamber of Commerce and Industry’s presidential consultative group meeting in Johannesburg earlier this month.

Economies that continued to diversify their economies during the current global economic downturn were those that looked to their domestic markets for growth, such as India and China, he noted.

Davies highlighted that the challenge African economies faced was that their domestic markets were not large enough to support sustainable economic growth; it was, therefore, important to increase trade with other countries on the continent.

He pointed out that countries in the Tripartite Cooperation – comprising members from the Southern African Development Community, the Common Market for Eastern and Southern Africa, and the East African Community – have a combined population of 700-million people and a gross domestic product (GDP) of about $1-trillion. “On the continent, we [are hitting] 1.3-billion [people] and a GDP of $2.2-trillion,” Davies noted, pointing out that regional trade created a significantly more sizeable market capable of supporting the development of regional value chains.

In order to develop diversified economies based on the emergence of regional value chains, he said it was important to address not only formal trade integration programmes to establish free trade areas but also issues that inhibited intercontinental trade, such as road, rail and power infrastructure.

While regional and continental agreements had been discussed for a number of years, Davies pointed out that they had not progressed as swiftly as initially expected and that more advanced economies, such as that of South Africa, could help jumpstart regional value chains through partnerships with other countries.

He noted that South Africa had been in discussions with Nigeria to supply vehicle kits, which could then be assembled in Nigeria to help facilitate the development of the country’s automotive sector.

“Trade with the African continent, which is our biggest and most secure basis for value-added trade, has to be looked at differently because, as the rest of the continent industrialises, we are not going to be able just to supply finished goods. We are going to have to move into the space of growing international trade in intermediary products.”

He pointed out that, as the centre of railway manufacturing in Africa, South Africa could assist in the development of regional value chains, where components could be manufactured in some countries, while assembly took place in others.

Davies asserted that South Africa had to move towards “a more investment-led trade approach on the African continent”, which would be facilitated by the Department of Trade and Industries’ Trade and Invest Africa initiative.

“We want to increasingly promote a mutually beneficial pattern of trade with Africa in which investments by South African companies will form a critical part of opening up regional value chains.”