Cross-border trade as a driver of Africa's economic development?
The question is not whether, but how countries in sub-Saharan Africa can use the opportunities offered by cross-border trade for the well-being of their populations.
As the countries of sub-Saharan Africa have little to no influence on the governance structures of international trade, they must develop adapted national strategies for competitive strategic positioning in specific markets and market segments. This is the only way to exploit synergies for sustainable growth.
Here, trust-building institutions – especially in the agricultural sector – play a more important role than structures at the macro-political level. Investments made by development institutions and organizations in macropolitical institutional structures also have costly disadvantages: on the one hand, governments of already weak enforcement states are confronted with completely unrealistic expectations, and on the other hand, changes in the institutional structure are always associated with high fixed costs.
In weak economies, it is generally more difficult to generate acceptance for institutional frameworks, since the costs incurred by actors in the course of trading relationships are usually higher than the profits, and the risks are difficult to assess. Changes in agricultural institutions cause lower costs and offer clear advantages for defined actors. In addition, they are easier to deal with and transparent negotiations are possible.
The example of Rwanda, which has positioned itself sustainably in the specialty coffee market over the last two decades, shows how effective a country's focus on sector-specific development can be. One of the most important developmental and political contributions should therefore be to promote trade and make the countries of sub-Saharan Africa competitive in their strategically important export markets. Small-scale agriculture can only survive in sub-Saharan Africa if farmers become more competitive.
This topic will be discussed in the next blog post.
Mamy
Tech & AI Enthusiast | EX-IB | VCiA | GBA | 🏀
4yInteresting take Mamy. Infrastructure and border discipline would also create a natural economic drive. The biggest countries in the ECOWAS region (Nigeria and Côte D’Ivoire) are most actively engaged in exporting goods to their neighbors. Despite all hurdles that is. Given that the free trade areas are already in place, it is as you effectively point out a matter of sector specific focus. Producing and subsidizing what is of strategic relevance. It takes fiscal discipline and balance between both the taxes and the subsidies. Some countries are doing that very well...too few.