Economic Planning and Investment Promotion minister Simon Khaya Moyo
ZIMBABWE has an insufficient linkage in the national strategy documents with the service trade agendas it is promoting at regional and global levels, Economic Planning and Investment Promotion minister Simon Khaya Moyo has said and only bridging that disconnect will unlock the sector’s potential to transform the economy.
Officially launching the UNCTAD Economic Development in Africa Report 2015 on Thursday, Moyo said the country needs to self-introspect and benchmark its performance against other countries.
“The importance and share of the services sector in both developed and developing economies is rising, with growth in the sector widely accepted as an indicator of economic progress. As a result of these changes, people are leaving the agricultural sector to find work in the services sector.
According to the report subtitled, Unlocking the Potential of Africa’s Services Trade for Growth and Development”,, most African countries have a national development plan, and most of the countries in the report were found to mention services in that document. However, the degree to which services trade is linked to development objectives and forms part of that process varies considerably.
“African policymakers formulating these documents need to envision the ways in which the services sector could be a conduit for their development outcomes such as inclusive growth, employment and poverty reduction. It is critical to link this vision to existing regional integration plans and visions that exist at the regional economic community level, as well as the pan-African level,” the report says.
The report argues that because Africa’s infrastructure provision remains suboptimal and costly, the services sector, though a dynamic driver of growth in Africa in recent years has not been able to deliver the kind of structural transformation required to address the continent’s development needs.
Infrastructure services are critical to achieving the sustainable development goals being set by the United Nations for 2016–2030 and creating a platform for broad-based growth in Africa, the report argues, adding that some infrastructure services such as water and sanitation are directly linked to sustainable development goals targets central to achieving social development outcomes. In addition, while services such as electricity, telecommunications and transport contribute to productivity, they also determine the competitiveness of African firms.
“Africa accounts for 15% of the world’s population but only 2.2% of global services exports, indicating tremendous untapped potential for the sector.
Presenting the report, Africa Capacity Building Foundation (ACBF) director research, monitoring and evaluation Thomas Munthali said financial services trade restrictions are still pervasive in Africa. He said while Zimbabwe is still ranked among the highest countries with restrictiveness of trade in financial service, it has improved from its previous position of 2012.
“The restrictiveness of trade in financial services varies among African countries and is highest in Ethiopia, Zimbabwe and Egypt. However, in Zimbabwe we have noticed some great improvements over the years as international financial institutions continue to exist and expanding in the economy,” he said.
He added that the country has also opened up in terms of investments coming from across the world.
The most open services trade regimes in Africa include Morocco, Zambia and Mauritius.
Munthali said African policy makers need to place great emphasis on how to move towards the provision of more sophisticated services where there is greater value addition, opportunities for technology transfer and linkage development with other sectors of the economy.
The report notes that during 2009–2012 the services sector in Africa grew at a rate of 4.6 per cent, compared to 5.4 per cent in the developing world. The fastest growing services subsectors were transport, storage and communications. Africa’s services sector propelled gross domestic product growth in 30 out of 54 countries during 2009–2012. Of the 45 countries where the share of services in output rose, 30 experienced a contraction in manufacturing from the period 2001–2004 to the period 2009–2012.
Some African economies have developed their services industries with relative success and are even sourcing services to African markets, the report notes. Examples include the financial and banking services industries of countries such as Mauritius and Nigeria, the commercial and cargo air transport industry in Ethiopia, Kenya and South Africa, the educational services industries of Uganda, the telecommunications services of Egypt, as well as the port services industries of Djibouti and Kenya.
Illustrative is the case of Ethiopian Airlines, the fastest growing, largest and most profitable airline in Africa, growing by an average rate of 20 to 25 per cent per year since 2005. The company is a $2.3 billion African powerhouse, with a reported net income of $228 million in 2013/14, making it the most profitable carrier in Africa.
However, African countries continue to grapple with building the necessary infrastructure to enable industrialization and economic growth. It is necessary to put in place clear and consistent regulatory and compliance frameworks to achieve efficient services. Infrastructure services regulation is also critical as a guarantor of interconnected factors such as access, affordability, investment requirements and quality control. The latter is significant in Africa, where networks are often quite limited in range and poorly maintained, but private providers may be reluctant to expand and upgrade.
However, with the trend towards greater regional liberalization of trade in services and deeper economic integration in Africa, it may become easier to prioritize the service sector and necessary policies to enhance its contribution to growth.
“The impact of a continent wide free trade area will only be meaningful for Africa if services are opened up in parrallel with trade goods. This is because services such as transport and storage services are necessary components of trade in goods.” -FinX