18 December 2012

Rwanda: Regional Central Bankers Chart Economic Growth Agenda

Sindiso Ngwenya, secretary general of the Common Market for Eastern and Southern Africa (COMESA) knows why most African countries are poor despite being endowed with vast resources: "We lag behind because we continue to export raw materials whose value is created by western countries."

It is high time Africans started 'creating' rather than 'adding' value to their commodities so as to get maximum benefits, he said.

"What we need is to encourage investment in the manufacturing sector, that way we shall be creating continental demand for the products we produce which will enhance pricing," Ngwenya said during the 18th meeting of COMESA's central bank governors in Kigali last week.

Ngwenya's assessment is indeed correct because if a producer is not happy with the price of the unfinished product on the international market, they can decline to sell and use local industries to produce commodities for the local market. Consuming own commodities is working for China, the world's leading producer and importer of cotton.

Ngwenya's view was one of the many discussed during the meeting in which a number of issues were highlighted as priority for Africa if economic growth projections were to be realized.

The IMF says East Africa and sub-Saharan African economies will grow at a slightly higher rate than the global economy against the backdrop of difficult external conditions. Rwanda's growth is expected be in double digit.

Uganda's economy that slowed to 4.2% in 2012 will recover and grow at 5.7% in 2013, while Tanzania's will improve from 6.5% to 6.8%. Kenya is looking at 5.6% growth from this year's 5.1%.

But the experts warned that growth will not come on mere wishes but through good policies.

Africa appears to favor regional economic integration as the vehicle to prosperity. For example, five countries have had to form the East African Community with a population of 130 million consumers. There are plans to further enlarge the bloc by admitting S. Sudan and Somalia to create a bigger market.

Recently, heads of state in the EAC even signed a tripartite extending economic cooperation to SADC and COMESA, two older and larger regional economic blocs.

"If we can all subscribe to the REPSS, that cost can be drastically brought down for the benefit of all our people," said BNR governor Claver Gatete.

This, however, is no guarantee for Africa to shine. Experts heard last week that after creating large regional blocs, instruments must be put in place to make them work effectively.

Statistics indicate that intra-regional trade is growing but the cost of doing business is still high due to non tariff barriers and poor infrastructure.

According to African Union's Maxwell Mukwezalamba, limited political will to implement protocols signed under regional frameworks is also a hindrance.

For instance, while intra-COMESA trade has grown from $3.1billion in 2000 to $18.8bn in 2011, the cost of making payment for the import component of trade (which is mostly done through international correspondent banking relationships) was $444.3 million.

COMESA central banks recently created the Regional Electronic Payment and Settlement System (REPSS) that is expected to reduce this cost from 5% to less than 1%. However, only four out of the 20-member states have since gone live on the system.

This was one of the key points of discussion during the meeting with Mauritius, Rwanda, Sudan and Swaziland urging colleagues to hook up.

"If we can all subscribe to the REPSS, that cost can be drastically brought down for the benefit of all our people," said BNR governor Claver Gatete.

But delivery of goods and services normally comes before payment--which brought in the issue of the need for good roads and railways. Trade within the COMESA relies on expensive flights in the absence of a railway network.

Experts however note that a railway network requires billions of dollars to achieve and urged to look into short term solutions which would include smoother payment systems and elimination of non tariff barriers.

Copyright © 2012 Rwanda Focus. All rights reserved. Distributed by AllAfrica Global Media (allAfrica.com). To contact the copyright holder directly for corrections — or for permission to republish or make other authorized use of this material, click here.

AllAfrica publishes around 2,000 reports a day from more than 130 news organizations and over 200 other institutions and individuals, representing a diversity of positions on every topic. We publish news and views ranging from vigorous opponents of governments to government publications and spokespersons. Publishers named above each report are responsible for their own content, which AllAfrica does not have the legal right to edit or correct.

Articles and commentaries that identify allAfrica.com as the publisher are produced or commissioned by AllAfrica. To address comments or complaints, please Contact us.