Unlocking transport infrastructure to boost intra-African trade
African countries have been told serially by African and other global experts to trade and not depend on aid. According to World Economic Forum (WEF) statistics the trade statistics in Africa aren’t too impressive, especially when it comes to one of the biggest opportunities for growth: trade among African countries.
WEF suggests that in 2014 in Europe, for example, 69 percent of exports were to other countries on the continent. In Asia, that figure stood at 52 per cent and in North America at 50 percent. Africa had the lowest level of intra-regional trade, at just 18 percent.
Also the United Nations Economic Commission for Africa (UNECA) in a report titled “harmonizing policies to transform the trading environment assessing regional integration in Africa VI” published in 2013 also said “Africa’s dependence on overseas trade of more than 80 per cent, and intra-African trade of just 10 per cent, contrast sharply with other regions: intraregional trade in North America is 40 per cent and in Western Europe is 60 per cent.”
WEF agree that there is one way of boosting intra-regional trade, and with it economic growth and development: technology but getting the right infrastructure first.
Infrastructure development is a top developmental priority in Africa, particular in two critical areas: electricity and transport - all critical to intra-African trade.
Connecting the vast African continent via transport infrastructure for ease of trade is humongous but already great investments are being made in major carriage ways.
UNECA said in its report that “if Africa trades more with itself, it can take advantage of shorter travel distances, but to make good on this natural advantage, it must do more to remove tariff and non-tariff barriers and boost its industrial base.”
“Africa’s physical infrastructure (rail, roads, communications and power) is inadequate, deterring regional
trade. Africa needs to upgrade its infrastructure, fix institutional and organizational systems, and scale up its managerial and skilled labour,” UNECA said further.
UNECA suggests that transport costs of goods within remain the highest in the world. It costs, for example, $5,000 to ship a 20-foot container from Durban to Lusaka-far more than the $1,500 it costs to ship the same container from Japan to Durban. The same experience is across Africa.
UNECA agrees that 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.”
However, there are institutions within Africa like the Nigeria Export Import Bank (NEXIM) that are committed to breaking the intra-African regional trade barriers to foster better trade across Africa. Based on this, the NEXIM as a trade facilitation bank has been focused on promote trade within Africa and of course the rest of the world too.
One of the biggest move to making this happen is the Sealink Project promoted by the bank.
NEXIM Bank initiated, funded the study and is currently facilitating the setting up of a regional shipping company (Sealink) in collaboration with the Federation of West African Chamber of Commerce and Industry (FEWACCI), the Nigerian Shippers Council and Transimex (a Central African logistics company based in Cameroon) and recently the National Inland Waterways Authority (NIWA) who have also latched on.
The aim is to establish a dedicated regional shipping company, which will be owned and operated by the private sector, to provide shipping services for the movement of goods and passengers within the West and Central Africa subregions. This is intended to boost trade by helping to mitigate the issues of high transportation cost and excessive transit time, which makes intra-regional trade non-competitive and the West and Central African transport and logistics cost one of the highest in the world.
Efforts towards actualising this initiative have continued and the Board of the Sealink has concluded arrangement with a major operator to commence a pilot scheme by deploying ships along the routes that have been designated.
Recently, the NEXIM, NIWA and Sealink Implementation Committee signed atripartite memorandum of understanding (MoU) with the specific objective to revive the neglected inland water transportation system as a key component to actualising the Sealink initiative and drive trade.
Speaking at the MoU signing ceremony in Abuja, the Managing Director/CEO NEXIM Bank Mr. Abba Bello said the MoU “would promote waterway operations for hinterland, transit and coastal trade, especially for bulk cargo. It is noteworthy to highlight that it is projected that this development would enhance non-oil exports annual revenue receipts to between $500 million and $1.2 billion annually on bulk solid minerals exports.”
The effective implementation of the Sealink project, which he said the bank has promoted since 2011 and the safe utilization of the inland waterways would no doubt bridge logistics gaps that will attract and facilitate investment flows the two sectors.
Mr. Bello also said that as a trade policy bank, “NEXIM strategic interest and partnership in the Regional Sealink Project is to promote and diversify exports as well as enhance trade connectivity in line with government’s objective to diversify the economy.”
“Also, the bridging of maritime infrastructure gap is expected to significantly enhance exports of bulk solid minerals, thereby enhancing the GDP contribution of both shipping and solid minerals sectors from current levels of about 0.2 percent” he noted.
Recall the bank had also intervened in the key non-oil export sectors of the Nigerian Economy and has disbursed about N2.3bn between January, 2016 and February, 2017.
The then acting Managing Director/ Chief Executive, NEXIM Bank, Mr. Bashir Wali had told Daily Trust in an interview in 2017 that“Given the current policy of the Federal Government to promote the Agriculture and Solid Minerals sectors, about 46 percent (N1.058bn) of our intervention went to Agriculture/ Agro-processing, while Manufacturing, Solid Minerals and Services received 26 percent (N605.13m), 11 (N240.00m) percent and 17 percent (N400.00), respectively” he had said.
Mr. Wali had further explained that “the total disbursement of N2.3billion during the period is expected to facilitate the creation of 1,355 direct jobs plus many indirect jobs and has a foreign exchange generation potential of $8.10million annually.”
All of these initiatives and more are geared towards impacting Africa in general and Nigeria in particular to tap into the opportunities available in global trade. One only hopes NEXIM remain committed to the programmes so they don’t end as failed programmes.