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AfricaMoney | August 19, 2017

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Africa is the world’s least connected continent on trade front: DHL Index

Africa is the world’s least connected continent on trade front: DHL Index

A whopping 80% of Africa’s production is exported to the European Union, China and the United States, and only 20% of what is produced in the region, is traded within the continent itself. (Image: Ideate)

Africa is depicted as the world’s least connected continent in the DHL Global Connectedness Index report, which stresses that formal trade agreements are desperately needed between African economies.

With regard to intra-regional trade statistics, the continent scored less than 20% on the parameter of what is produced in the region, getting traded within the region.

In comparison, 60% of Europe’s trade is with its own continent, and in North America, the figure is 40%.

The DHL Global Connectedness Index notes that the African continent should lay more focus on trade partnerships between African countries, which will later on lead to seamless intra-Africa trade.

Indeed, the continent shows many positive developments on international trade agreements, for instance the African Growth and Opportunity Act (AGOA) with the US and the recently announced Economic Partnership Agreement between European Union and Southern Africa.

According to the Managing Director of DHL Express Sub-Saharan Africa, Charles Brewer, there is a tendency in African States to do business with regions outside of Africa, such as the United States or China.

A whopping 80% of Africa’s production is exported to the European Union, China and the United States.

He highlighted that there is a great need for African countries to start trading with each other and that the push for trade agreements should also be amongst African countries rather than only with their international trading partners.

The latter explained that Africa is considered as complex to negotiate on multiple fronts such as ease of moving people, trade, information and finance.

Hence, he advised that all African countries should focus on developing connectedness on the continent and building trade relationships amongst themselves.

According to the report, one of the region’s biggest challenges to overcome in order to realise its trade potential is an underdeveloped infrastructure.

For his part, Brewer pointed out that there is gradual improvement however, as several African regions invest large amounts of capital in infrastructure development.

Charles Brewer said that underdeveloped infrastructure causes a negative impact on intra-regional trade by triggering delays in movement of goods into, out of and across the region.

Also, with underdeveloped infrastructure, there is an increase in cost of logistics which makes the supply chain process upto nine times more expensive in Africa compared to other regions in the world.

Therefore, these inflated costs lead to slow economic growth in the region, according to Brewer.

The latter concluded that African countries should lend support towards developing and implementing trade agreements that will encourage trade between the regions while progress on infrastructure development and investment should continue.

Source: This Day

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