Africa and Trade
Africa is the most economically fragmented continent with the smallest GDP per country; it also has the highest level of barriers to trade. These two factors give Africa a disadvantage in attracting investment and in development.
Africa gets the lowest share of foreign direct investment, with 10% of the FDI to developing countries going to Africa. African countries also do relatively little trade with each other; just 9% of African trade is with other African countries whilst the comparable figure for Asia is 45%. This is not helped by Africa having 30 separate regional trade agreements each with its own set of rules. African economies are very reliant on mineral extraction exports and agriculture with very little further processing.
The lack of processed exports from Africa is normally blamed on the trade regimes of the West. An alternative explanation is that the small size of each domestic African economy and the high barriers to any trade between African countries makes investment unattractive, which in turn leads to high local costs, which in turn makes processing/value addition in Africa uneconomical keeping African economies stuck in primary exports.
One argument put forward to justify the high levels of trade restrictions by African countries is that western countries like Japan, the USA and Germany also used trade restrictions to help them develop, so it is only fair that African countries should be allowed trade restrictions now. This argument assumes a “one size fits all” approach, but what worked for the world’s largest economies 50 to 100 years ago is not necessarily the best policy for the world’s smallest countries now. African economies would be much better off adopting free trade, thus giving investors a chance to access a market of significant size; this is the only route likely to lead to real development beyond basic primary products.