African Countries Seek to Improve Trade Flows

Published on: 10:54AM May 26, 2020

 

Combined, the 54 countries on the continent of Africa imported nearly $83 billion worth of food and agricultural products on average between 2013 and 2017, according to data maintained by the UN’s Food and Agricultural Organization (FAO).  Of that amount, the vast majority of shipments come from outside the continent, consisting largely of grains, oilseeds, vegetable oil and dairy products from major agricultural exporting countries such as Brazil, Russia, the United States, Argentina, India, France, and China.

While there are grain surplus regions within the continent, a variety of barriers, both official and unofficial, have long discouraged extensive trade across national borders.  For example, within the 15-member Economic Community of West African States (ECOWAS), it is estimated that only 11 percent of agricultural trade flows occurred between member countries in 2015, with the majority of imports arriving instead from overseas sources at the region’s many ports on the Atlantic Ocean, such as Lagos in Nigeria, Abidjan in Cote D’Ivoire, and Dakar in Senegal.  However, it is also widely acknowledged that informal trade in goods, such as bags of corn or millet smuggled along cross-border roads without undergoing customs procedures, may actually exceed recorded trade flows in most years.

The official barriers include relatively high tariffs between neighboring countries, cumbersome customs procedures, including country of origin requirements, and government-imposed “freight-sharing agreements” and cabotage rules, which are government-imposed trucking rules which undergird oligopoly ownership of overland freight capacity in many countries. As a result of the preferential trucking rules, owners have little incentive to upgrade their vehicles to maintain a competitive edge--a 2007 study produced for the World Bank found that the average age of semi-trucks in the fleet in Niger was 29 years.

Informal barriers are more infrastructural in nature, due primarily to lack of public sector infrastructure investment and/or government enforcement of rules and regulations.  Delays in shipping due to the factors described above encourage truckers to carry more cargo than their vehicles are designed for, leading to more frequent breakdowns and greater damage to roads. Although the roads along main transportation corridors in Africa are generally paved, they are not all well-maintained.  Cross-country rail transportation is limited, because in many cases the tracks are of different gauges between neighboring countries.  

In addition to delays created at official border checkpoints as described above, many cross-country truckers are plagued by “informal” checkpoints, where local police stop vehicles and essentially demand small bribes to allow them to continue.  A 2011 survey by the Improved Road Transport Governance (IRTG) initiative found that illegal payments collected from truck drivers at such checkpoints in West Africa ranged from $21 to $214 per 1,000-kilometer trip, depending on the country.

In recent years, leaders across Africa have taken steps to try to address these barriers.  Within the member states of the African Union, discussions were formally launched in June of 2015 to try to establish a continent-wide free trade agreement.  Although countries missed their self-imposed deadline of 2017 to complete the work, they did reach agreement in March of 2018.  The African Continental Free Trade Area Agreement (AfCFTA) formally entered force as of May 30, 2019, when 22 African countries had formally ratified the deal.  Trade under AfCFTA was due to begin on July 1, 2020, although that step has been postponed due to the global coronavirus pandemic, which has forced closure of many national borders within Africa.

Once it is formally launched, its initial mpact will be limited by the fact that only 29 countries are formally parties to the agreement, a list which excludes Nigeria, the North African AU members (Algeria, Morocco, Tunisia), and many of the recently conflict-ridden countries, such as Congo, Somalia, the Central African Republic, Sudan, South Sudan, and Burundi.

The early focus of the agreement will be to reduce tariffs on 90 percent of goods, to develop a consistent and enforceable set of rules of origin, and arrive at commitments to liberalize the services sector.   Each nation is permitted to exclude 3 percent of goods from this agreement.  Some of the future phases are still under negotiation, in such areas as protocols for intellectual property rights and cross-national investments.

Other steps are being taken by African countries, often with assistance of donor countries and/or international organizations, to address the barriers that impede intra-African trade.  In 2015, the U.S. Agency for International Development (USAID) launched a “Food Across Borders” program in Sub-Saharan Africa, aimed at reducing problems in the following areas:

•    road harassment, 
•    export restrictions, 
•    rules of origin, 
•    clarity of sanitary/phyto-sanitary and veterinary regulations, and 
•    taxation.

In this effort, USAID enlisted the assistance of ECOWAS, and focused their attention in West Africa.

In 2018, the African Development Bank launched a new initiative to bring advanced technologies to more farmers in Africa, entitled “Technologies for African Agricultural Transformation.”  This $1 billion initiative, co-funded by the Bill and Melinda Gates Foundation, the International Fund for Agricultural Development (IFAD), the Alliance for a Green Revolution in Africa (AGRA), is engaging seed companies, public and private extension and financial institutions with the goal of reaching 40 million African farmers with yield-boosting technology in a sustainable manner via value added chains.
 

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