The level of intra-African trade has grown from USD 45.9 billion in 1995 to USD 130.1 billion in 2011. This was indicated in the 2013 African Economic Report subtitled “Intra-African Trade: Unlocking Private Sector Dynamism.” The report also underlines that the share of intra-African trade that reached USD 130.1 billion in 2011, represents 11.3 percent of African trade with the world, suggesting that although eliminating trade barriers is significant, it will not succeed if it is not accompanied by government’s effort.
Africa has about 27 percent of the world’s arable land which can be used to expand agricultural productivity and yet many African countries import food and agricultural products from countries outside of the continent. The report recommends the countries to improve their industries’ capacities so as to be able to provide the goods that are sought out in regional trade.
Unlocking the potential of private firms is also put as one way of boosting trade within the continent. For this to happen, the distinct feature of Africa’s enterprise structure that inhabit regional trade needs to be addressed properly. For example. African firms tend to be very small, which makes it difficult for them to become competitive.
The average size of a manufacturing firm in Sub Saharan Africa is 47 employees; the number is very small compared to Malaysia 171, Vietnam 195, Thailand 393 and 977 in China. The report further states that there is also a weak inter-firm linkage in the continent. Intense competition arising from global economy integration has created the need for large firms to establish business linkages with Small and Medium Enterprises (SMEs) by integrating them into the supply chain. Such linkage enables large firms reduce input costs, increase productivity and enable them to focus on their competence.
Linkage between SMEs and large firms also helps the latter to get experience and transfer technology so that they develop and expand creating employment in the economy.
Improving the competitiveness of domestic firms is also underlined as critical to promote intra-African trade. With the continent currently accounting for only 4 percent of world trade, due to its low global competitiveness, efforts should be made to improve the number significantly.
Firms that survive and become successful on the international market tend to be those that are innovative, that respond to new opportunities, and to the extent of the rapid change of the market. This has seen as severely lacking in African firms and, the report alerts that they cannot afford to ignore or escape the fundamental changes in the global economy.