What African countries must do to boost trade among themselves
Bamidele Adekunle, Glen Filson, University of Guelph
The expansion of trade among sub-Saharan African nations holds the key to faster growth and development to the benefit of all its citizens. To unlock this potential, countries will have to focus more on trade facilitation, including the simplification and modernisation of trade procedures.
Sub-Saharan African countries have the lowest trade among themselves compared with other regions. Intra-regional trade is estimated at about 10% compared with 40% in North America and 60% in Western Europe.
The factors that hinder rather than help trade
Among the factors holding back growth are non-tariff trade barriers. Excessive document requirements, burdensome customs procedures, inefficient ports and poor infrastructure add to the cost of exporting and importing goods. Firms benefit more from a 10% reduction of these costs than from a similar cut in tariffs.
This is why there has been a major focus on reducing red tape and other non-tariff trade barriers.
Implementation of trade facilitation measures can reduce the cost of moving of goods across borders by between 12.5% and 17%. It can boost exports too by making it cheaper for firms to import materials they can transform into finished products for sale in other countries.
Trade facilitation can also create an enabling environment for foreign direct investment.
And red tape harms poor producers the most, so trade facilitation is especially beneficial for small- and medium-sized businesses. This is very important in the case of African countries.
What can ease the flow
A number of African countries have been implementing measures aimed at easing the flow of goods across borders. A guide to what needs to be done is set out in the Trade Facilitation Agreement signed by World Trade Organisation members in 2013. The agreement outlines measures for expediting the movement, release and clearance of goods at borders.
A few sub-Saharan Africa countries have started working towards the implementation of a “single window” system – a collaboration between all state entities involved in the regulation of international trade.
For example, Ghana initiated a single window operation in 2002 following concerns about slow and expensive border procedures. It standardised information through a single administrative document for all its customs operations though implementation is not yet fully functional and automated.
Another measure involves the creation of one-stop joint border posts. An example of this is the Chirundu border between Zambia and Zimbabwe. Since traffic only stops once for the country being entered, the time it takes to cross the border is greatly reduced.
After the implementation of the one-stop border post, trucks are electronically scanned – which takes much less time. Another initiative, the African Union Border Program, initiated in 2007 with the goal to have all borders in Africa delimited and demarcated by 2017, has also made progress.
Make it simple and harness technology
But there is more that countries can to do to ease the flow of goods across their borders.
They should harmonise procedures. These should be made simple and then they should be aligned – first within regions and then across the continent. The alignment should be backed by appropriate legal and institutional frameworks.
Countries should also be standardising documents through a national and later regional single window system. This will resolve challenges with bureaucracy, corruption and delays in processing trade documents.
The capacity of customs should also be enhanced in terms of electronic data management. This will improve risk management and revenue generation. For example, the Philippines’ computerised customs management systems reduced corruption in its bureau of customs.
Automation is also important. It can help reduce delays and corruption along the the trade corridors. This includes the weighbridges and the use of cameras to record the registration details of trucks and other vehicles transporting goods.
A case in point is Mariakani, a key import and export gateway which links Kenya’s Mombasa port with the landlocked eastern and central African countries of Uganda, Rwanda, Burundi and the Democratic Republic of Congo. Mariakani’s weighbridges used to give different measurements which enabled bribery and corruption. This risk has been eliminated because the weighbridges are now digital.
This example shows that progress has indeed been made in trying to facilitate cross border trade on the continent. Further evidence of this is that there are a number of arrangements already in place to improve the flow of goods. These include the Economic Community of West African States’ Trade Liberalisation Scheme, Inter State Road Transit procedures for landlocked countries and the Common External Tariff. But these need to be properly implemented if Africa’s low levels of intra-country trade are to be overcome.Comment on this article
The authors do not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and have disclosed no relevant affiliations beyond their academic appointment.
University of Guelph provides funding as a founding partner of The Conversation CA.