Foster intra-Africa trade and market linkages for Agro-industrialization

OPINION   AGRIBUSINESS

As part of the 23rd Ordinary Session of the AU Assembly held in Malabo, Equatorial Guinea, in June 2014, the African Union Heads of State and Government adopted the Malabo Declaration on Accelerated Agricultural Growth and Transformation for Shared Prosperity and Improved Livelihoods. Specifically, the Heads of State committed themselves to end hunger and halving post-harvest losses by 2025, boosting intra-Africa trade in agricultural commodities and services, enhancing the resilience of livelihoods and production systems to climate variability and enhancing investment finance in agriculture. Most African countries that were signatories to this declaration have unfortunately stumbled in implementing it. Of the forty-nine member states that reported making progress in the 2019 biannual review cycle, only four are on track to achieving their commitments by 2025.

Thankfully, Uganda is performing well, scoring 5.68 against a benchmark of 6.66. Uganda received recognition for its strong performance on the following parameters: increase in land under sustainable land management practices, improvement in addressing domestic food price volatility, commitment to the ideals of CAADP and ensuring quality multi-stakeholder coordination, as well as, accountability and peer review. 

For Uganda to improve its ranking, the following policy recommendations have been made by the African Union: increase the value of intra-Africa trade of agricultural commodities and services, increase the value of agriculture value-added and increase the value of public agriculture expenditure, as a value of agriculture value-added. 

In this week's article, therefore, I would like to make the case for promoting intra-regional African trade in processed or semi-processed agricultural goods and services.  The fact that our exports, particularly to non-African markets, are still dominated by agricultural commodities like tea, coffee, maize, legumes and tobacco; makes a compelling case for agro-industrialization. However, our exports to African markets present a more balanced picture. This is good news considering that 51.8% % of all our exports are to other African countries.  No wonder, according to the Brookings Institute, Rwanda and Uganda have made the greatest improvements over the past three decades in increasing their intra-African trade volumes. 

In 2018 alone, Uganda exported goods worth US$1.6 billion to the rest of Africa. Indeed, Uganda needs to emphasize agricultural value addition and intra-African trade, if we are to move away from the export of primary products, to more value-added products. 

Regional markets have the following advantages when contrasted with international markets, as destinations for our exports: First, the consumers in those markets are likely to have the same tastes and preferences, like us.  This one factor alone makes it much easier for our Small and Medium Enterprises (SMEs), whose marketing budgets are limited, to penetrate these markets. Secondly, intra-African trade reduces the over-reliance of our economy on international markets, which are unreliable in times of global shock. The global lockdown due to the COVID-19 pandemic and the resulting disruption in supply chains of key businesses is ample evidence of this. Thirdly, the fact that intra-African trade is more likely to be in processed or semi-processed goods means that local industries receive a boost. Finally, increased intra-African trade is critical in supporting small and landlocked countries, like Uganda, in escaping the uncompetitiveness of having very small markets.  

That said, a number of barriers exist and the limit intra-African trade, particularly in processed or semi-processed agricultural products. These include: the high and rising number of informal agro-businesses, weak market linkages between firms, limited innovation capabilities, a low level of export competitiveness, lack of access to modern technologies, lack of access to inputs-including fertilizers and lack of access to affordable finance. There is also the challenge of agro-industries relying on obsolete and outdated technologies which lead to safety and health hazards, through the emission of hazardous wastes, into the environment.

The above obstacles notwithstanding, Uganda has an opportunity to leverage its unique position on the continent to improve on-farm and industrial firm productivity through technological innovation, ensure that the new industrial policy grows industries through linking small holder farmers to industries, as suppliers of quality agricultural produce; improve the competitiveness of agro-industries-especially small and medium-scale enterprises and boost agricultural productivity through the distribution of inputs (Operation Wealth Creation, in particular, has proven that focused Government intervention can help to boost agricultural productivity) and lead the way in eliminating Non-tariff barriers such as sanitary and phytosanitary regulations, which limit trade in processed agricultural products. Most importantly, Uganda needs to continue progressively increasing funding to the Agriculture sector to meet the CAADP Malabo target of 10%. 

In closing, I would like to highlight the important role that the recently signed African Continental Free Trade Area Agreement (AfCFTA), which will see countries remove tariffs on 90% of traded goods and remove a host of Non-Tariff barriers; will play in diversifying and transforming a country, like ours. To benefit the most from it, though, we need to continue identifying opportunities for agro-industrialization, market linkages and value chain development. 

Robert Mukiza

The writer is an international investment expert