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AfricaMoney | August 23, 2017

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Southern African borderless trading to boost Mauritius

Southern African borderless trading to boost Mauritius

For small island nations like Mauritius, regional integration can alleviate problems of connectivity to the mainland and global markets, according to a recent report by the African Development Bank. (Source: Hansueli Krapf)

For small island nations like Mauritius, regional integration can alleviate problems of connectivity to the mainland and global markets, according to a recent report by the African Development Bank. The report entitled, Intra-regional Trade in Southern Africa: Structure, performance and challenges, takes a wider view of how borderless trading can exploit economic synergies among Southern African nations.

The study mentions the small size and fragmented nature of South African countries as a major barrier to economies of scale. Only regional integration offers the way out as pooling resources and enlarging markets would stimulate national production, trade and investment. Landlocked countries, which depend on coastal neighbours for transit and access to the sea, and small island economies, which need access to bigger markets, can especially leverage regional trade to their advantage.

And, the benefits of intra-regional trade are tangible. Trade among countries in the region increased from $11.6 billion in 2000 to $29 billion in 2008. This was driven mainly by the region’s shift in sourcing imports from Europe to South Africa following the end of apartheid and the launching of the South African Development Community Free Trade Agreement.

Currently however, Mauritius as well as Madagascar – island nations with no land routes for trading with the rest of Africa – continue to trade mainly with Europe. They do not export much to the region, largely reflecting the high costs of shipping small volumes of cargo. Few shipping lines operate between them and the ports of either Maputo or Durban. This does not augur well for the island nations, as Europe is still suffering from the after effects of recession and a speedy recovery cannot be expected.

Going forward though, these countries can provide important trans-shipment centres if a regional approach is taken to reduce high costs for shipping goods to and from them.

Excluding members of SACU (Southern Africa Customs Union comprising Botswana, Lesotho, Namibia, South Africa and Swaziland), most of the region’s countries have diversified their export destinations. A number are increasingly exporting within the region, while Europe (the United Kingdom in particular) is no longer the main export market for most. Instead South Africa has become the most important export destination for manufactured exports of most Southern African countries.

Moreover, on the import front, goods and services are mainly sourced from the region. Only South Africa and the island countries of Mauritius and Madagascar import more from Europe. SACU member countries’ imports from South Africa account for between 68% and 81% of total imports. For the rest of the mainland countries, imports from South Africa account for between 27% and 66% of the total.

Also, even though South Africa is not the main source of imports for Mauritius and Madagascar (probably due to transport costs), the two countries have been sequentially increasing their imports from the country. In 2008, South Africa supplied 8% and 6% to Mauritius and Madagascar respectively.

The research concludes on a positive note stating that despite a divisive past, progress is being made in the region. Mauritius is a part of both the Common Market for Eastern and Southern Africa (COMESA) and the Southern African Development Community (SADC), which are leading regional integration in southern Africa. Moreover, efforts at integration by the larger regional trading communities are being supplemented by those of smaller groupings such as the East Africa Community (EAC) and SACU (Southern Africa Customs Union).

Source: Intra-regional Trade in Southern Africa: Structure, performance and challenges Report

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