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FEATURE STORY

Raising the Profile of Trade in Services in Africa

June 26, 2013

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In East Africa, doctors, lawyers, accountants and other professionals are working across borders to provide services.


STORY HIGHLIGHTS
  • In addition to trading goods, African countries are trading professional services like accounting and medical services
  • Trade in services is critical to the continent’s development, according to economists and others
  • A learning event in Ethiopia brought together trade leaders and practitioners to discuss solutions to increasing trade in services

ADDIS ABABA, June 26, 2013—African countries are seeing successes in exporting, not just goods to neighboring countries and overseas, but also services.

In Uganda, universities are welcoming students from across the region. Kenyan accountants, doctors, and other professionals are working across borders in East Africa and beyond to provide consumers in those countries with more options and, in some cases, more competitive rates. In South Africa, transport services companies are working hand-in-hand with regulators to facilitate the transit of goods through essential ports along the supply chain.

“The World Bank sees services as a critical part of the development agenda in Africa and other regions of the world,” said Paul Brenton, Africa Trade Practice Leader for the World Bank. “We see this because services are a very important input to all other economic activities, so the competitive provision of services is crucial to the competitiveness of other products and services.

According to Brenton, important activities stem from the export of services: transportation services, professional services, education services, for instance

“Countries also need to look at how they treat the import of services, which serves as a mechanism for increasing competition by getting access to the types of services that are not provided in the local market,” says Brenton.

Trade in Services in Africa was the focus on June 5 and 6 of a World Bank-sponsored learning event that brought together policy makers, trade negotiators, members of civil society, academics, the private sector, World Bank colleagues from the Poverty Reduction and Economic Management, Financial and Private Sector Development, Human Development and Public Sector Management networks, as well as others to encourage dialogue and reform in trade in services.

Trade in Services is key to growth, development and job creation in Africa, said Guang Chen, World Bank Country Director for Ethiopia.

Using Ethiopia as an example, Chen said that services in Ethiopia represent the largest portion of the country’s economy and have great potential to create jobs. Striking, Chen said, is the sector’s significant role in Ethiopian exports. Foreign exchange generated by Ethiopia Airlines between 2007 and 2010, for example, was on average twice as much as that brought in by coffee.

During the conference, held in Addis Ababa, discussions centered on export opportunities, scaling up financial, professional, education and transport services, regulatory reforms and regional integration of services.

Ethiopian Airlines was one of several success stories highlighted during the conference. The company’s fast, profitable and sustainable growth strategy, which emphasizes multi-hubbing, or the use of several regional airports as transfer points for passengers during their journey in Africa, makes the airline a powerful operator with a rapidly growing network of 45 African destinations and revenues in 2011/2012 of US$2 billion.

Henok Teferra, the Director of Corporate Communication and Strategy and International Affairs for Ethiopian Airlines, laid out the company’s “Vision 2025” to take advantage of the growing African market to provide service to 5.4 billion people within a ten-hour radius of Addis Ababa. 

Challenges and Solutions

While Trade in Services presents African countries with opportunities for growth, there are still challenges to the sector. Data highlighting gaps in services transactions and policies is weak; the financial sectors in many African countries remain underdeveloped; domestic regulatory hurdles and trade barriers continue to fragment the services markets on the continent; and the cost of trading in services is high. Transport prices in Africa remain the highest in the world, for instance, and air and rail transport services face high barriers to trade across the continent.   

While the World Bank has invested close to US$14 billion in African transport initiatives, there remains a strong need for policy reforms to complement these infrastructure investments.

During the conference, proposed solutions included strengthening data generation efforts, concrete, sector-specific guidance to improving regulatory frameworks, minimizing restrictions to trade, and deepening regional cooperation to support the trade in services agenda in Africa.

Some countries and economic communities are already doing this. The Common Market for Eastern and Southern Africa (COMESA), the East African Community (EAC) and the South Africa Development Community (SADC) have taken steps to reduce trade barriers and countries are beginning to discuss practical solutions to trade impediments.

“The World Bank is assisting African countries to improve regulation and recognize qualifications obtained in a neighboring country which will facilitate the movement of professionals, increase the provision of services, and ultimately will make services more competitive,” said Nora Dihel, Senior Trade Economist at the World Bank.

Represented at the June conference: Ethiopian Airlines, the Kenyan Bankers Association, the Institute of Certified Public Accountants of Kenya, the Uganda Export Promotion Board, the Central Corridor Transit Transport Facilitation Agency, the South Africa Development Community (SADC) Secretariat, and the Government of Ethiopia.

Conference Presentations

Session 1: Introduction


Session 2: Financial Services 

Session 3: Professional Services

Session 4: Education Services


Session 5: Transportation Services 


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