Africa’s economic growth is impressive, with trade agreements such as the African Growth and Opportunity Act (AGOA) positive for the continent’s continued progress, but if this growth will be sustainable, emphasis needs to be placed on intra-Africa trade.
According to Charles Brewer, Managing Director of DHL Express Sub Saharan Africa, while progress is slowly being made, insufficient trade agreements exist in order to encourage and drive intra-Africa trade. This he said has made doing business with regions outside of Africa, such as the United States or China, very popular.
“The DHL Global Connectedness Index revealed that Africa is the world’s least connected continent, when considering the ease of moving people, trade, information and finance. All African countries should therefore be focused on developing connectedness on the continent and building trade relationships,” said Brewer.
He noted that DHL was focused on making logistics more accessible and connecting Africa. This he said was why the company has expanded its retail footprint on the continent, to over 3300 outlets in less than 3 years.
Why Africa prefers trading with others
When comparing intra-regional trade statistics, Africa rates amongst the lowest, with less than 20 percent of what is produced in the region staying within the region. This, in essence, means that over 80 percent of what is produced in Africa is exported, mainly to the EU, China and the US. By comparison, 60 percent of Europe’s trade is with its own continent, and in North America, the figure is 40 percent.
As is well documented, one of the region’s biggest challenge in terms of realizing its trade potential is an under developed infrastructure, but Brewer says that this is slowly improving as several Africa regions continue to invest large amounts of capital into infrastructure development.
“Under developed infrastructure directly impacts the speed at which goods are moved into, out of and across the region. It also drives up logistics costs, and it is estimated that supply chain costs are up to nine times more expensive in Africa in comparison to other regions in the world. These inflated costs also ultimately hamper economic growth in the region.”
Brewer adds that while progress on infrastructure development and investment should continue, a push now needs to be made by African countries towards developing and implementing trade agreements which will encourage trade between the regions.
Ease of doing business
“Angola is the only country in Africa that has a formal and declared de minimus, and whilst all other Sub Saharan Africa countries have informal agreements, the fiscal clearance levels vary greatly. For example, in Tanzania, anything with a value greater than USD 5 will require formal clearance, which creates an additional administrative burden and potential clearance delays with minimal returns for the government in terms of duty revenues.”
“With that said, the situation is improving, and more countries are recognising that they need to find ways to make their markets accessible and easier to do business with. A great example for the region is Rwanda, who is looking to strip away bureaucracy, remove the red tape and make their country an attractive destination for trade and investment. More African countries need to follow this example, and the region will reap the rewards,” concludes Brewer.
