Africa is one of the world’s most promising regions for growth. Sub-Saharan Africa has outpaced global growth by an average of 2 percentage points a year since 2001 and is home to six of 10 fastest growing economies in the world.
Yet trade between African countries continues to lag behind potential, holding back the region’s opportunities for growth. A key part of unlocking intra-African trade is addressing internal and cross-border differences in laws and regulations, says Katrin Kuhlmann, an adjunct professor of law at Georgetown University Law Center who is helping local businesses work through legal and regulatory challenges and partner with the public sector to see systemic change.
“For companies that are small or large, being able to predictably move through the market more quickly and navigate systems of economic law and regulation — which is what we focus on — is quite significant,” says Kuhlmann.
The former U.S. trade official is president and founder of the New Markets Lab, a nonprofit focused on inclusive models for commercial legal and regulatory reform in developing markets. Several years ago, her team worked with Mtanga Farms Limited in Tanzania to work through the regulatory process to bring new seed varieties to the market and help bridge the gap between smallholder farmers and commercial systems. This type of project, which she and her team are now scaling up throughout sub-Saharan Africa and in other parts of the world as well, is essential to building market-oriented legal and regulatory systems and encouraging more robust cross-border trade.
Having applied lessons learned, she is optimistic about the potential for intra-African trade. “There is still quite a bit left to do to harmonize national laws with regional frameworks, but I think we are reaching a real turning point in trade with and within Africa,” Kuhlmann says in an interview:
There’s a lot of buzz about Africa ascending economically, though we’ve heard talk before about how it will finally be the continent’s day in the sun. Are you a believer, and what’s different this time around?
I definitely think that things are changing. I think that we are at a turning point in trade with and within Africa — and this is in part because the markets are really growing and becoming more commercial. So the private sector — companies of all sizes, both within Africa and outside of Africa — is becoming more engaged and taking a longer-term view.
I’ve worked on Africa trade policy for quite a while, and I am beginning to see a fundamental difference now. Regional trade efforts are gaining momentum. This year, Africa is hosting its first WTO ministerial in December, which is a landmark event. Trade is becoming central to Africa’s future.
The work of the regional economic communities in Africa is something we study a great deal through the New Markets Lab. The frameworks are falling into place more and more. There still will be much to do with respect to implementing them and making sure that systems work both regionally and within countries. And there will be a fair amount of follow-up at the national level to put these regional frameworks in place, because countries still have to make changes domestically once regional frameworks exist. But things are moving now in so many different directions.
Trade has played a big role in Africa’s growth, yet intra-continental flows remain subdued. How important will regional integration be for sustained growth?
It’s tremendously important, and I think it’s certainly a big priority within the African institutions — from the African Union to the regional economic communities and the countries themselves.
Regional trade within in Africa is still well below potential — I think most African policymakers would note that, as well. But I think as the markets grow, there will be ever-increasing intra-African trade possibilities. Building regional trade opportunities will be critical with the large number of economies within Africa, some of which are small and some of which lack access to ports. Right now, I think one of the biggest impediments to increasing the trade flows is the time and cost it takes to get to market. So regional integration is probably the single most important element in market development and diversification.
For companies that are small or large, being able to predictably move through the market more quickly and navigate systems of economic law and regulation —is quite significant.
Much of your focus has been on tackling some of the regulatory and legal roadblocks to regional trade and integration. Are there some lessons learned from your work with potato farmers that can be applied across Africa — and globally?
Absolutely. In a number of countries, we have seen that regulatory systems can develop through engagement from enterprises at the grassroots level — working through very specific regulatory issues that arise and then back up to the broader policy level — rather than starting at the policy level and working down. Of course, government support for building strong regulatory systems is critical, and we have seen very good partnerships between the private and public sectors in many cases.
High-level policy will always be needed to send the right signals to the market. But it is also important to have enterprises that are engaging in the market day-to-day, pushing up through the system and sharing their needs as legal and regulatory systems develop.
Our initial case study in Tanzania was quite interesting, because the industry wasn’t really commercialized before this work started. One of the most immediate challenges was introducing high-quality seed varieties into the market, which involved understanding both national and regional laws and regulations, so that farmers could experience higher yields and better market returns.
Our work in this case study did focus at the company level — working in close partnership with the public sector — but all along we believed and hoped that what we were doing could produce benefits not only for the sector as a whole, but for the local community as well. Now the enterprise itself has grown and diversified, as well as attracted more investment, and the sector overall is growing. We are applying this inclusive approach through other projects and case studies.
I think that positive opportunities can unfold in many sectors and regions, and we are seeing this happen through both regulatory interventions and other important work. When regulatory approaches are done well (it does take time to really understand how the systems work in practice) and very collaboratively — with good partnership and communication between the private sector and government — it produces all sorts of benefits. It helps to build local institutions, it helps enterprises thrive and create jobs, and it helps to make laws and regulations work better and get implemented in a more inclusive way.
How important is it for companies looking to invest and do business in Africa to form local partnerships and demonstrate a commitment beyond just making a profit?
Partnerships make all the difference. In my view, to really invest in a market, you have to invest in every aspect of it — and part of that is the local community. So those relationships are absolutely critical.
The companies who have built this approach into their business model are seeing the benefits. It is also an approach that makes the most sense for what we do from a legal and regulatory perspective. We’ve made sure that when we work on legal, regulatory, and policy issues, we are objective, balanced, and inclusive. Legal and regulatory systems can both encourage the market to grow and produce broad-based benefits to the benefit of enterprises of all sizes and entire communities alike.
Katrin Kuhlmann, an Adjunct Professor of Law at Georgetown University, is President and Founder of the New Markets Lab, a non-profit organization created to pioneer an equitable new approach to commercial legal and regulatory reform in developing markets.