TRADE-AFRICA: Small Firms Seek Foreign Markets to Break the Circle of Poverty

By James Hall Reprint | | Print |

James Hall

MAPUTO, May 30 2003 (IPS) - Impoverished local economies may limit the growth potential of ambitious small Southern Africa businesses, but the entrepreneurs who run these start-up firms are seeking foreign markets to achieve their profits.

"Increasingly, growth for African business will come by exporting," says Swaziland’s Minister of Enterprise and Employment, Lutfo Dlamini.

Export of African goods is growing in three ways: cross border between neighbouring countries, regionally through trade blocs seeking to encourage trade between area nations, and overseas to Europe, North America and Asia, facilitated by favourable trade agreements.

The European Union (EU) purchases Swaziland sugar, often at higher than market rates, and is a guaranteed purchaser of the kingdom’s top export. The United States accepts imports for dozens of African nations through the African Growth and Opportunities Act. The trade scheme, begun two years ago, and its sister trade initiative, the Generalised System of Preferences, allow African exports to pass into the lucrative U.S. market duty free. This gives them a competitive advantage in relation to other imports.

"The goal is to boost African economies through trade. This will reverse unfavourable balance of payments, raise tax revenues, provide employment, and assist with the goal of poverty eradication," said U.S. Assistant Secretary of State for African Affairs Walter Kansteiner on a recent visit to Botswana.

While heads of government prepare the groundwork for exporters by negotiating trade treaties to ease the way into foreign markets, thousands of small business people, from handicraft carvers to vegetable growers, are eyeing overseas opportunities, and preparing marketing strategies.

"My father has been cultivating farms around Maputo (the capital of Mozambique) since 1955, and it has always been subsistence, just enough to feed the family. He never dreamed that the same soil could produce things that are sold in Italy," Simeo Marinho told IPS.

Marinho followed his first shipment of orchids grown on his family farm to the main airport in Maputo, where the flowers were transported to Europe. It was a moment of pride for the 29 year-old farmer who hopes to break the cycle of feast and famine that has plagued his family’s farming operations for generations.

"The agriculture ministry gives us advice on how to prepare our product for market. There are strict standards that have to be met," he said.

"Food products have to conform to safety standards. This is a red-light/green-light matter," William Hargraves, an official with the Southern Africa Global Competitiveness Hub in Gaborone, Botswana, told IPS. The hub is one of three in Africa – its siblings are in Ghana and Kenya – where local businesses interested in exporting come to learn requirements their products must meet to be accepted in developed nations.

"If standards are not met, it’s over. It isn’t enough to have 90 percent compliance, you need total compliance," Hargraves said.

"The majority of rural communities have based their agricultural production on subsistence farming and turned away from commercial production due to financial constraints and lack of suitable markets," noted Debra Cutting, Product Coordinator for the National Agricultural Marketing Board in Swaziland. "However, African governments today are serious about creating linkages between small producers and foreign markets."

By developing regional markets, Cutting and her marketing board will have created over 600 jobs in the rural areas of Swaziland, and can show corresponding inroads into alleviating hunger and poverty in those areas.

Empowering small businesses by helping their products find new markets overseas has been the goal of Zambia Trade and Investment Enhancement. Its Private Sector Development Strategist, Chimbebe Nyalugwe, points out that to enable a small African business to be competitive, sensitive national legislation is required. "National budgets and national economic plans, amendments to Investment Acts, local tax policy, bilateral trade agreements, and negotiations with multinational institutions like the World Bank all come into play," Nyalugwe said.

One challenge is the complications of doing export business, which most small African companies are ill equipped to handle. "The cost of wading through the oceans of information, regulations, conditions and support mechanisms is great, and while some of the large multi-nationals and strong economies can afford these costs, for most of Africa, they are prohibitive," he said.

For Marinho, the Mozambican flower exporter, a government ministry tasked with promoting small business exports provided guidance through export regulations. Trade officials like Swaziland’s Dlamini feel all African governments must commit themselves to doing the same for their fledgling export businesses.

"The small business of today may be the large corporation of tomorrow, as we have witnessed countless times in the past," said Sophia Mohapi, chief executive of the Lesotho National development Corporation.

Mohapi would know. Lesotho had no manufacturing industries at all before trade opportunities arose in Europe. All the country’s manufacturing output – mostly garments – is exported.

"These are mostly large companies. But the way has been paved for smaller firms, even rural cooperatives that are exporting their goods and handicrafts. They are realising profits they simply could not find locally," she said.

But success for small exporters depends on knowledge of the rules of international trade – something well known by government trade ministries as they work to widely disseminate that information to aspiring international entrepreneurs.

Africa’s share of world trade is miniscule – less than 2 percent – and analysts fear this will shrink further as the technological revolution leaves the continent behind.