Increased exports from West Africa promise immediate income increases and more jobs for poor households in the region. Enduring benefits of increased trade will reach West African producers, exporters, importers, trucking firms, bankers, and others engaged in supporting the regional economy. The exact nature of those benefits will vary, but they will go to sectors of the West African economy that participate in—and successfully compete in—the global economy.
In October, Prof. Bromley presented his findings at a public lecture in Accra.
The reality of exporting and importing is that the West African economy must achieve a level of economic coherence that will allow importers and exporters to compete in world trade. Economic coherence is the idea that a well-functioning economy is rather like a fine-tuned machine. All the parts must work together. When market signals—prices—no longer transmit proper information to producers, then the economy does not cohere.
Markets must work well enough to be reliable signaling devices to indicate ideal enterprise choice, and ideal use of productive inputs. For example, if the price of millet goes up, while the price of cotton goes down, farmers will abandon cotton in favor of millet. If the price of fertilizer drops then farmers will use more of it. If the price should rise again, farmers will use less fertilizer and yields will suffer.
What are the qualities of economic coherence? First, West African firms—basket makers, wood craftsmen, and agricultural producers—must be capable of producing the quality of goods expected by global consumers. This means that product design and quality standards for handcrafts must be at or above world standards, and agricultural products must meet quality and safety standards of regulators in Europe and North America.
Second, economic activities in the region must be carried on with a degree of efficiency that will allow West African exporters to compete on price as well as on quality. This means that the organization of production inside of the firm must be brought into close harmony with what is found in the rest of the world. For many enterprises in West Africa, production practices will need to be re-engineered to bring equipment and labor activities up to international standards.
Third, West African producers must gain access to credit on competitive terms. They are now stifled by some of the highest rates of interest in the world. It is not uncommon for interest rates to approach 36%APR—far above what would be justified on inflation-adjusted terms. Perhaps of equal concern, there is a sense that many lenders will not bother to meet with potential borrowers. If true, this means that credit is being rationed.
Selling more baskets creates jobs and lifts incomes in rural areas.
Finally, transportation costs must be competitive. Currently, transportation costs in West Africa are approximately double those found in Western Europe. When the costs and delays of the transport sector are added in, it is virtually impossible for West African products to compete in world markets. Studies conducted by the USAID West Africa Trade Hub show that trucks carrying imports face generally higher levels of bribes and delays than those carrying exports – and even those carrying goods produced in West Africa face this harassment. This means that products from Benin, Côte d’Ivoire, Ghana, and Togo carry a severe cost burden which dampens demand in countries such as Burkina Faso, Mali, and Niger.
Each of these problems causes a general lack of economic coherence in the region. When credit markets do not offer necessary financial instruments to the basket weavers of Bolgatanga then production is choked off. When wood carvers and furniture makers of the Ashanti region are denied access to affordable credit then necessary supplies are restricted, inventories must be minimized, innovation is stifled, and new products are impossible to create. When cashew and shea producers cannot obtain loans to invest in tree planting and improvement—and to reduce post-harvest losses—the sectors fall into financial despair, and incomes fall.
When road transport, already twice as expensive as that in Western Europe, entails an additional burden of corruption, the economy lacks coherence. Corruption chokes off commerce and makes it much more difficult to engage world markets in competition with countries whose economies do not suffer from incoherence. Indeed that is one of the advantages of international trade—engaging and confronting the global economy.
When production practices inside of farms and firms become more efficient, when credit markets begin to work better, and when the transport system begins to work at a level of cost-effectiveness that approximates that found in Western Europe, we can say that the economies of West Africa are beginning to show evidence of coherence.
Engaging the global market offers a wonderful opportunity for citizens and politicians in West Africa to learn from that experience and to act on what they learn, enhancing economic coherence. If nothing is learned from a greater engagement with the global market then temporary gains in household incomes and employment in the region will ultimately dissipate under the dead weight of current economic incoherence. This would be a tragedy.