African intra-trade and the building of an agricultural superpower.
In this article the issue of African intra-trade and the potential of unlocking the economy through the agricultural sector is discussed.
- Every successful market system has to excel in at last in cost, speed or quality.
- Addressing the problem of lack of collaboration.
- The potential that lies in the African economy.
- Evaluating the criteria’s of speed, cost and quality.
- “If you want to go fast go alone, if you want go far go together.” — Prospering together as a continent.
- The possible future — the African agricultural dream
The three criteria of any successful system in capitalism
In business only three criteria matter — are you faster, cheaper or better? With each criteria an exporter or seller meets the more competitive they become and the larger their market share. Our agricultural industry as it stands is divided, most nations and their companies only meet at best a single criteria, very few are a combination of two and even those that meet all three are not producing at nearly enough quantities as they otherwise should be.
The problem: No collaboration
Apart from a competitive issue we have a collaboration problem. According to tralac.org as of 2016, 13.4% of the total products imported by African countries were agricultural goods valued between $40 billion and $61 billion. Africa by far has the most arable land of any continent yet we find ourselves as net importers of food. These products among others were mainly wheat, maize and corn imported from Brazil, Argentina, France, Canada, Ukraine and Russia and rice imported from Thailand and India. The surprising thing is that most of these goods are produced by African countries but due to lack of intra-trade their largest import partners in the agricultural sector are countries on other continents with very little intra-trade occurring.
The potential for economic success
According to foodengineering.com amongst the top 100 companies in this industry Africa has no representation yet we have the same or even more resources at our disposal. In the fiscal year of 2018 Nestle had sales the totalled to $93 billion as stated on Nestle.com. If it was an African owned and operated country it would increase continental GDP by approximately 7.15% and directly employ 290 000 people as well as providing enumerable additional economic activity and jobs linked to its supply chain and areas of operation. To achieve such feats African countries need to be deliberate in setting up economic policy that allows cohesion and collaboration across the African continent.
Criteria of Speed
African economies from the moment of their countries’ independences have been plagued by one issue that effects all African nations — we are exporters of low-cost raw materials and importers of high cost processed goods, effectively running at a trade deficit. The problem is not one of a lack of skill or machinery to process our own materials rather it is that the machinery and skilled labour is not all within one country but scattered across Africa, supply chains very rarely ever exist in one country. We can easily send agricultural raw materials across borders to be processed and packaged in fellow African nations to then be sold overseas as finished goods at high profit margins but due to the lack of intra-trade on the continent it is easier for countries to ship agricultural raw materials to Europe and Asia then it is to our own neighbouring countries. The old saying is “time is money”. if we could produce everything from farming agricultural product to processing it and packaging it all in Africa, we will be able to offer higher quality goods cheaply and faster as well as increasing our production levels thus employ more people. Hence we can then have the fastest delivery of agricultural product of any competitor and satisfy the criteria of speed.
Criteria of Cost
Separately African countries can achieve very little, all African countries and their governments have to trade with each other to fully harness raw resources and have them fully manufactured in their continent and exported as finished goods but this is as difficult a task as any. Africa does not have nearly enough skilled labour in one country to achieve this and our relatively small GDP’s compare to the world mean that we cannot really invest huge sums of money to achieve this goal but if we create strong intra-trade policy and assign proper roles to each participating country based on its strengths we are able to set country specific policies and a flow of trade that allows us to unlock the true potential of the African continent which lies in collaboration for example, Nigeria would set up economic policy and produce funding on the production of Rice, Egypt will then create specific economic policy and providing funding for the processing of the rice, Tanzania will then produce economic policy and provide funding to ensure that this rice is packaged, South African will then be tasked with sending and distributing the finished goods to overseas countries as they will be required to develop their logistics capabilities. By having each role of a country and the supply chain path of goods clearly defined it allows each country to get extremely good at specific parts of the production of goods meaning that they will become the best at a very specific stage in the process driving down prices and simultaneously gives them the ability to increase wages without increasing the price of goods. Africa would be an agricultural monopoly in the global agricultural sector. To ensure efficiency and effectivity the continent will be divided into 4 sub trading blocs each with a designated trade partner for example East Africa will supply Asia, West Africa will supply Northern America, and North Africa will Supply Europe and Southern Africa will supply South America and Australia. This supply chain grouping system ensures that all African countries benefit. The largest economy in Africa has a GDP of $400 billion but Africa as a combined force has a GDP of $1.3 trillion thus the only way to succeed is if we work together to grow our industries. This economic trade framework ensures that we can keep African exports cheap thus satisfy the criteria of cost.
Criteria of quality
Competition is a beautiful thing, in a continent with the youngest population if we provide them with the resources they are going to compete and create fast innovative progress in their spaces that is only possible if they are allowed access to a bigger market such as that of the entire African continent rather than being plagued by only being allowed to compete at local markets which will never generate a market big enough to fuel investment for any real innovation to occur, intra-trade allows for mass collaboration across borders increasing the skilled capital and creating real advancements as a necessity of competition — “innovate or die.” Which will severely advance the agricultural industry far ahead of the rest of the world because as said “when youth is aroused change can happen” when you allow people who have been kept out of the marketplace a chance to compete they will compete with everything they have which provides an advantage as other continents do not have our youth and the untapped potential. The competition that will arise from a broadened marketplace ensures that African goods continuously get better hence satisfy the criteria of quality.
If effective intra-trade policy is set GDP of all nations involved increases thus increasing the GDP per capita of residents and when people have more disposal income they tend to want higher quality goods meaning demand for not just agriculture but higher quality processed agricultural goods will increase within the borders of the continent causing massive investment to flow into the agricultural sector, Africa’s main advantage is that we can cheaply manufacture goods as we are a 3rd World continent with very low minimum wage policies which could spark a mass influx of foreign investment into our agricultural sector as investors begin to realise the high profit margins they can achieve further creating more jobs increasing the demand for food and further growing the agricultural industry in a continuous growth cycle. The economic growth of the agricultural sector will result in the economic growth of individual participants who in turn are consumers of the sector and will begin to spend more in the sector growing the sector creating a cycle of industrial and population symbiotic economic growth. This will raise minimum wages, standards of living and African GDP.
The possible future
As a continent if we can meet all three criteria (better/faster/cheaper) we will become unrivalled and therein lie our own economic miracle — China’s economic miracle over the past few decades was achieved through deliberate planning and an industrialisation of their country. Africa’s economic miracle over the next few decades will be achieved through the rapid growth of our agricultural sector, only if as African countries we can collaborate through intra-trade. The future of Africa’s economy has the potential to fundamentally change the lives of her children for the better and liberate her economically from the shackles that limit her in the present day. Africa’s current economic state is perhaps summoned up by its agriculture, “It is reaping yield but raring to unleash greener pastures”.