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Boosting trade in services within Africa is a win-win for diverse economies

Boosting trade in services within Africa is a win-win for diverse economies

The Hub and Spokes programme provides trade experts to national ministries and regional trade organisations in the African, Caribbean and Pacific (ACP) group of states.

Carolyne Tumuhimbise, a trade adviser seconded to the African Union Commission through the Hubs and Spokes programme, is supporting the commission’s effort to break down trade barriers and help companies access foreign markets. In this blog, she outlines the promise that increased trade in services heralds for the continent.

When African leaders signed the Abuja Treaty in 1991 to establish the African Economic Community they envisioned a continent with a single currency, where people, goods, services and capital move freely. The target date for this vision is 2028.

The same vision is embedded in Africa’s Agenda 2063, a transformation plan for the continent that targets an increase in regional ‘intra-African’ trade to 50 percent by 2045, with Africa’s share of global trade increasing from two percent to 12 percent.

As a Trade Adviser working for the African Union Commission through the Hub and Spokes programme, I am working towards delivering on this agenda to increase trade in Africa. This has involved helping the commission and member states to prioritise and mainstream trade in services in policy development and free trade negotiations.

Until recently, Africa’s trade story was seen through the export of commodities with limited impact on poverty and employment rates. However, this is changing. Evidence has proven that foreign direct investment (FDI) in Africa is moving towards the services sector and not manufacturing and the labour force is shifting from agriculture to services (World Bank, 2014).

The share of services in overall output rose highest among exporters of manufactured goods (UNCTAD, 2015). This evidence points to the fact that services are a key determinant of export competitiveness and crucial for the industrial and manufacturing development of African countries, as well as for boosting agricultural productivity.

There’s also evidence that the value of trade in services, when taken from a value added perspective, is estimated at half of all African exports (UNECA, 2015) and that reduction in supply chain barriers like customs administration, transport, communication infrastructure and services could increase world GDP over six times more than the removal of all tariffs (WEF-WB, 2013). This means that the transformation of any economy to-date cannot exist without investment in the services sector and African countries are no exception.

At the African Union we conducted a study, entitled Services Exports for Growth and Development: Case Studies from Africa, which showcased the successful export of trade in services. The aim was to help national policy-makers support companies seeking to access regional and global markets.

This study promotes better understanding of trade services so as to provide a basis for service sector development and enhanced regional integration in Africa. It offers information on how trade in services is actually being carried out in specific sectors in Africa and what policies have contributed to the success of service exports.

The study has influenced a number of outcomes. The African Union Heads of State and Government Summit held in June 2015, adopted a decision to negotiate trade in goods and trade in services concurrently, and member states also expressed the need for capacity building in the area of trade in services negotiations.

My colleagues and I at the African Union are now working on delivering a four-year Services Sector Development programme to boost intra-African trade in services. It runs from 2016 to 2020 and is focused on measures to assist with the liberalisation of services by member states.

The programme is designed to help strengthen the capacity of government officials to negotiate trade in services, and to promote the engagement of the private sector as an active voice in negotiations on trade in services at both the regional and continental level.

By supporting governments in this way to increase market access for companies, we are helping to deliver on the vision of the Abuja Treaty.  We are supporting an important engine for growth which, in turn, will help to reduce poverty and promote socio-economic development across the continent. 

More about the Hub and Spokes programme