09 Aug The Secrets to Intra-Africa Trade Actually Working
Oh, and the not so small role Diasporans and Multinationals are playing.
Editor’s Note: As part of the inaugural Student Entrepreneurship Week Pan-Africa, we hosted a high-level panel on Intra-Africa Trade & Diaspora Collaboration; moderated by Rasheeda Seshie (People Director at Africa Foresight Group) and featuring Ayesha Bedwei, Tax Partner at PwC, Ziad Hamoui, Founding Member, Borderless Alliance in West Africa, Tucci Goka Ivowi, Deputy CEO & founding member, Ghana Commodity Exchange, Miishe Addy, Co-founder, Jetstream, and Emmanuel Gamor, President, Unpacking Africa 4.0. This post was written by Tucci Goka Ivowi about her submission on the panel and was first published on her LinkedIn page.
The framework for successful Intra-Africa trade already exists. The seven action points highlighted are both my recommendations and my current views on the status quo. I surmise (unsurprisingly) that what is remaining is to continue to add value, improve the quality of goods and services, and then increase the scale.
1. Recognize the role the diaspora plays
I don’t know if I still classify today, but once upon a time, I was a diasporan. I came to Ghana from the UK on holiday about 18 years ago, and never went back, except for on holidays. On one of these trips back to London I received a Christmas hamper which tickled me and I’m not sure I’ll ever forget it. One of my sisters-in-law gave me a large delightful hamper with lots of goodies in it. One of those goodies was a pack of ‘Chocomilo.’ For those who don’t know what that is, it is a confectionery product produced by Nestlé in Ghana and Nigeria only. Now the irony for me was that I was the person responsible for the brand and product business in Central and West Africa. But I traveled to another continent and received it as a gift, unbeknownst to my sister in law. I was excited to know that ‘my product’ was so valued that she bought and carted boxes of it from Nigeria during her last holiday. And many others do the same. But it also highlighted for me the relevance and role that diasporans (and multinationals) play in the global trade of African or any country of origin products.
2. Learn from multinationals who successfully contribute to intra-regional trade
That was just one product. That product is made in two countries using mainly locally sourced raw materials, and mainly local labor from the respective countries. That product is then sent across the ECOWAS region so that consumers in other countries can enjoy it too. They have found an audience in multiple countries, they understand the customs, taxes and other legal frameworks of the countries they do business in. African companies can learn a lot from multinationals like Nestlé. They play a positive and beneficial role in Intra-African trade!
So diasporans and multinationals help by:
- Contributing to increasing exports – large volumes of goods are exported and responsible multinationals pay large sums in taxes.
- Contributing to introducing goods and to increasing demand in foreign markets – market expansion.
I can’t leave out the strong influence and impact that other aspects of culture have in expanding markets. Thanks to diasporan presence globally, modern African music and film have steadily been expanding its footprint. If Intra Africa trade is supposed to benefit Africa, it sometimes has to reach beyond the shores of Africa. What is attractive globally, becomes attractive locally. Once African film, for example, is appreciated by global markets, it becomes less taken for granted in its home markets.
3. Build alliances, one person, one country, one step at a time
Alliances are key to any successful venture; even individuals who are establishing their own companies need a string of alliances to succeed. Those alliances may come in the form of investor, advisory, connections, advocacy… These are all useful and in some cases instrumental to business success.
A former team member organized an Innovation Forum bringing together start-up business owners from across central and west Africa. At first, the participants were a bit suspicious as to why a multinational would bring them together. Did the host organization want to steal their ideas? In the end, they were most grateful for the opportunity to exchange with people facing similar triumphs and, particularly, hurdles as they were and realized they could learn from each other as some were further ahead in the process. They even started to recommend to one other supplier of raw and packaging material and what they had learned working with trans-border companies. What these types of alliances do is they help create scale leading to better pricing, they provide opportunities for market expansion and so many other softer opportunities. If you can be successful in Cameroun, why not expand into Burkina Faso, perhaps with a local partner? African companies can become global too if they see the benefits and capitalize on strategic partnerships.
African countries are far behind today, making the need to form strategic alliances with one another even more pertinent. There is no solid argument in favor of waiting until all countries are on board, or until ‘everything is ready’ before being able to benefit from synergies and partnerships. Strategic alliances can be formed between one or two countries in strategic areas. With reference to Ghana and Cote d’Ivoire’s recent stance on cocoa, it’s not only the act or the outcome, but it’s the collaborative nature of the bilateral ‘teams’, (from the two Heads of State to the Ministers, to the technical teams), that we can learn from. What this type of alliance will do is foster a long-running collaboration and start strengthening a country’s position to position it better for growth. As the old adage goes, “too many cooks spoil the broth.” You are potentially stronger if you develop smaller alliances and build on them. If you wait for everyone, too many different priorities will slow down the process and consequently, progress.
4. To function effectively, negotiate trade-offs at the onset
A big country like Nigeria being subject to influence by albeit a consortium of smaller countries, will arguably always be a barrier to the effective functioning of a regional trade bloc. It will slow down the take-off of any policy or real initiative. It must be agreed upon that to function in unity, there must remain a certain level of autonomy for individual countries, particularly when it comes to making macro-economic decisions. It is the same for business alliances. Determine the roles each will play before jumping in.
5. The integration of infrastructural development within the trade zones should form part and parcel of the efforts
Even without a trade bloc, African nations would benefit more greatly from trade if transport networks (road and rail infrastructure for one) was better. The increase in the exportability of goods may generate more revenue than that to be derived from tax benefits. Informal trade is everywhere. Reducing structural barriers will propel trade further. So countries shouldn’t limit their infrastructure to within their borders. They should integrate the region as part of their infrastructure planning and development.
6. Stop bemoaning the plight of Africa and become globally competitive
Until it happens, we won’t stop hearing that what stops Africa from being competitive is the lack of value add that our products and even services offer. Any country that has thrived through trade, has thrived because of value addition. Nation-states can start by investing in infrastructure, whilst scaling up to industrialization efforts as the first point of call. Although Africa indexes slightly higher in intraregional trade of manufactured goods vs raw commodities, the value is still low. And even where commodity trading is still needed, markets can be better structured through, for example, the intervention of a commodity exchange. Commodity exchanges, such as that recently established in Ghana, seek to provide efficient and risk-free trading solutions, establish fair and transparent price discovery mechanisms, develop product standards and contracts to protect producers and traders, amongst other things. Lack of structure disturbs markets; exchange rates and nothing else dictate trading behavior. This is limiting and myopic behavior which curtails growth in business value for countries and for the continent. Click To Tweet Africa should be the originators of many more recognizable quality brands which are the result of adding value to commodities which have African countries as their home. As the African Continental Free Trade Agreement comes into effect, a good starting point will be to look at the harmonization of the regulatory frameworks which will be a pre-requisite for smooth implementation of intra-Africa trade and then ultimately, once scale increases, to international trade.
7. Take action now; refine later
As an entrepreneur, one should:
- Learn more about other African countries; study those markets.
- Understand the customs and legal frameworks of the countries you are interested in doing business with.
- Produce goods and services that will have an audience within the continent.
- Create partnerships.
- Get going – you will refine your products and services as you go along.
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About the author
Mrs. Tucci Goka Ivowi is the Deputy CEO and a founding member of the Ghana Commodity Exchange. She is an experienced business leader with over eighteen (18) years’ experience in marketing and general business management in the UK and emerging markets of Southeast Asia and Sub-Saharan Africa. Follow her on Linkedin and Twitter.
Tom-Chris Emewulu is the Founder & President of SFAN (Stars From All Nations). He is an education and policy enthusiast, entrepreneurship and career coach, ex-consultant at Mastercard Foundation, Seedstars Ambassador for Ghana, and an aspiring Venture Capitalist. He is also the author of the forthcoming book: Breaking the Limits.