The majority of African trade is conducted with Europe, North America, and China. Only 16% is with other African countries. By comparison, 60% of Europe’s trade is with its own continent. The same is true in Asia. In North America, the figure is 40%. The main factors responsible for the low rate of intra-Africa trade are restrictive trade policies and poor infrastructure.
It costs Africa’s largest retail and fast food company, Shoprite, over $20,000 a week to secure import permits to distribute goods within one country. As if that isn’t enough, 1600 additional documents are required in order to send ONE of its trucks across the border to neighboring Zambia.
Another problem is the excessive amount of border check points. To transport goods from Nigeria to neighboring Ghana, you have to go through about 5 border checks. The legal and illegal payments made at these borders are all costs that are passed onto consumers in order for the traders to make a profit.
At one checkpoint in Mali, border agents extort as much as $4,000 every day. In addition to the aforementioned high costs of trade, unclear policies are another hindrance.
Seeds from Kenya can be held indefinitely at an Ethiopian border because they don’t meet Ethiopia’s standards. Tanzania may ship corn to Kenya only to find out that a ban has been implemented on the importation of corn.
The issue of poor infrastructure also needs to be addressed. The lack of adequate road, rail, and other physical infrastructure, continue to impede trade within and between African countries.
According to a report from the UN Economic Commission for Africa, only about 30% of African roads are paved. As a result of this, shipping a car from Japan to Abijan costs $1500 while shipping that same car from Addis Ababa to Abijan would cost $5000.
Some of these unpaved roads have potholes big enough to swallow an SUV. The railways in Kenya and Uganda face multiple constraints, including aging equipment and infrastructure that is over a century old.
These are just some examples of red tape and trade barriers that are costing Africa billions of dollars and depriving the region of new sources of economic growth.
However; in spite of all this, there is reason to be optimistic. It seems that for the past few years, this issue has become too dire to ignore and strides are being made to rectify it.
In 2012, South Africa’s President, Jacob Zuma, unveiled a plan to spend $97 billion on infrastructure by 2015 to upgrade roads, ports, and transportation networks. At the World Economic Forum held last May in Abuja, Kenya’s President, Uhuru Kenyatta, called on African leaders to work together in removing obstacles that hinder movement across the continent.
In his speech, he said free movement would help Africa meet its development targets. He also announced plans for Kenya and Nigeria to sign agreements that will boost trade and investment between the two countries. Since then, the Nigeria Export Promotion Council, NEPC, and its Kenyan counterpart have pledged to explore the vast market opportunities in Africa to promote trade and investment.
Also at the 2014 World Economic forum, Africa’s richest man, Aliko Dangote, spoke on the matter of visa issuance stating that presently, he and other Nigerian businessmen are required to obtain visas to enter about 38 African countries but a foreigner has more access to these same countries than he does because all they need to do is get a visa at the airport and pass through. Steps are being taken to streamline the visa process so that African businessmen and investors can invest in other countries with ease.
In Kenya, barriers that formerly prevented professionals like doctors and lawyers from practicing in Rwanda have been removed. Now, a Kenyan lawyer can practice law in Rwanda without sitting for the bar all over again. This will also lead to a reduction in unemployment because new graduates will have more job options and not so new graduates will have more opportunities to provide services.
Increased intra-Africa trade is the best way for Africa to use all of its resources and talent to become self-sustainable and prosperous. The less cumbersome the trade process is, the lower the cost of goods and services will be. The lower the cost of goods and services, the more people can afford them. The more people can afford them, the more empowered the people will be to gradually improve their economic status and begin to thrive.
