Trade justice is all Africa needs

Jun 09, 2005

On June 8, <b>Andrew Rugasira</b>, an economist and the chairman of Rwenzori Coffee Company, attended a conference in London, on Africa’s trade relations with the west. The following was his speech:

We African entrepreneurs want the same as our British counterparts — markets and equal opportunities to exploit them
As an African entrepreneur, I am not looking for handouts that I have not earned. I only want the same opportunities that British entrepreneurs coming to Africa have access to. We went to the same schools and universities, and in the global community we are all looking for the same things: markets and equal opportunities to exploit them.
Many Africans are condemned from birth to a future of poverty, disease and premature death. In addition to this, the prevailing perception of Africans and their capabilities never transcends the confines of their so-called limitations. You are poor because you are poor. While poverty is an undeniable part of the African reality, it is only part of it.
There is another side to the continent. For this we must go beyond the gloom and doom and see Africa as a land of opportunity and hope. I do not know of any Africans who wake up in the morning saying: “Today I am going to engage in ‘poverty reduction’!” This phrase, beloved by the international community, has no place in the vocabulary of the African citizen engaged in the everyday struggle to survive.
It is wealth creation that links the African struggle of yesterday, today and tomorrow. To understand this we must remove the blinkers and see an Africa beyond kleptocracy and Kalashnikovs.
Contemporary economic orthodoxy postulates that the primary engine for economic growth is not central government but the private sector. If we accept this then we must assume that the private sector embodies the self-interested bottom line of its corporate members. This self-interest is driven by the pursuit of profit.
Africa’s trade relations with the west are largely determined by the conditionalities linked to multilateral and bilateral aid packages that insist on liberalisation. This means that goods and services from the west can enter African markets with few tariff and non-tariff barriers. This is why the continent remains a viable market business. How can we compete?
To underline the importance of trade for African economic growth, we can say with confidence that if African exports were to grow by 1%, this would translate into revenue flows of more than £40b a year. This income would accelerate movement towards the achievement of the millennium development goals much faster than relying on the broken promises of the G8 leadership.
Successful export-led growth will occur when African economies achieve a competitive advantage based upon higher labour productivity and the concentration of exports in sectors with high rates of growth. This was the case with the Asian economies and the results of this are clear for all to see.
One challenge of the export strategy is the limited access the few exporters have to foreign markets, and the nature of the markets themselves. Free and open markets are not the norm for most commodities that Africa exports, and nearly all those targeted are controlled, distorted or simply closed.
In the face of these controlled markets, African countries face three problems.
First, African manufacturing and processing seldom adds much value to the raw product. Think about this: coffee is the second most traded commodity in the world after petroleum. Of the £35b the global coffee market represents, £3.8b accounts for the value of the raw coffee beans traded annually.
Second, the industrialised countries’ tariff and non-tariff barriers escalate with each additional stage of processing for most primary commodities. The vertical integration of transnational corporations means producers are usually totally unaware of their product’s true value.
Third, monopolistic purchasers tend to impede available market information to check the prevailing market prices, which greatly weakens the bargaining position of the local producers.
One of the biggest obstacles to Africa’s long-term development in exports is the transnational control over processing. If exports are to lead to greater wealth creation for Africans through economic growth, then these exports must have as much value added as possible, and market access must be improved. At present the gap between the price for unprocessed raw materials and that of the final product is generally very wide. This in turn negatively affects growth because value-adding activities such as processing — which would otherwise generate employment, increase export earnings and reduce dependence on primary commodity markets — are virtually non-existent.
The case for trade justice is clear, and it is self-evident that western capital is not best served by continuing an unfair and unjust trade regime. With increased trade and increased profits, the African producer will be able to purchase goods and services from the north. This is a win-win opportunity.
This month my company, Rwenzori Coffee, will begin to sell its products in the UK supermarket chain Waitrose. This project is based on empowerment through trade and the African tradition of commitment to the community; 50% of company profits will be directed into social projects. Our goal is to address wealth creation rather than poverty reduction.
So does this mean that from understanding free-market economics I have embraced the socialism of yesteryear? No! For centuries we Africans have been sharing our resources. Commitment to our communities represents our unofficial welfare system.
Let me give you a simple illustration of why we need to use trade and not aid as our principal weapon. One needs approximately 5gm of roasted and ground beans to make a cup of coffee that sells for £2, so one kilogramme can make 200 cups worth £400. Green coffee beans are bought for an average price of 70p per kilogramme. In other words less than 0.2% of the value of processed coffee is retained by the growers. If profit sharing leads to the empowerment of African growers, employees and shareholders, then this is what needs to be done.
Make aid history and trade justice the future.
The Guardian

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