‘Trade not aid’ has long been a popular slogan in the discourse on Africa’s economic development.  The past year has witnessed a growing tide of opinion, both within Africa and, at least in certain circles, abroad, that it is private enterprise and not foreign aid which stands to make a real impact on standards of living on the continent in the immediate future.  Certainly, with Africa experiencing remarkably sustained and broad-based economic growth and steadily increasing levels of investment, this shift in thinking seems justified. 

The recent release of the publication From the Slave Trade to ‘Free’ Trade: How Trade Undermines Democracy and Justice in Africa by FAHAMU, a Kenyan organization, serves as a timely reminder that not everyone is happy with this growing consensus in favor of trade’s developmental virtues. Leaving aside the theoretical debates about globalization and capitalism (which inevitably course through such works), the book embodies a range of legitimate concerns about trade’s impacts in Africa. 

The key issue in the trade debate is whether or not new market and investment opportunities are really available to the majority of people in society, particularly small-scale entrepreneurs.  In many cases, the reality is that trade is far from ‘free’, and the playing field far from level amongst different actors. 

Tanzania is a country that reflects some of the paradoxes of trade’s impacts.  The country has, since the late 1980’s, taken numerous steps to liberalize the economy and promote trade and investment.  Economic growth rates have climbed upwards to about 6-7 percent in recent years, and last week the government forecast a 16 percent annual increase in foreign direct investment for 2007, up to about $550 million.  But to many Tanzanians ‘globalization’ evokes little enthusiasm and popular criticisms of trade and investment policies are widespread.

The root of the problem is one of access to markets and the opportunities they provide.  The cost of starting a business in Tanzania, according to the 2007 World Bank Doing Business report, is 92 percent of the per capita income. This is is better than the 114 percent recorded for Uganda.  Although the financial sector in Tanzania is rapidly expanding, this is yet to translate into a broad increase in the availability of credit to local entrepreneurs. A survey carried out in 2006 found that less than 10 percent of Tanzanians, and 5 percent of women, had access to commercial credit in an industry where collateral requirements are demanding and alternative investment opportunities for banks, such as government debt, are enticing. 

Another barrier to trade, particularly important in a country such as Tanzania where about 70 percent of the population is rural and 85 percent are engaged in agriculture, are regulatory distortions which constrain smallholder opportunities.  These are particularly pronounced and widely documented in many key export crop markets, where price controls and crop boards constrain trade’s potential benefits to local producers. 

The hurdles local entrepreneurs face exacerbate economies of scale that favor larger, often international investors, and is one reason for the relative lack of popular support for free trade in places like Tanzania.  Another key factor is the use and management of public resources and the way they are bought and sold.  Tanzanian newspapers have been awash in public and parliamentary debate for the past three months regarding controversies over the management of mineral resources, wildlife hunting concessions, and timber production.  The distinct impression emerging from all of these intrigues is that, while smallholders and local communities remain restricted from utilizing the most valuable natural resources, public officials and private investors collude to reap most of the rewards, often through parallel ‘informal’ management systems. 

The danger posed by current trends is that trade and globalization will continue to be seen by many as processes that push people out of the marketplace, rather than enabling them to access new worlds of economic opportunity. The challenge for proponents of free trade in Africa is thus to make markets more accessible for the average citizen.  Making trade effective- and popular- is less a matter of economic analysis than a question of democratic rights and equity.  Both proponents and critics of trade need to recognize that their interests are united in that political arena.  

By Fred Nelson