The African Supply Chain and Its New Trade Agreement

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In 2018, 44 African nations signed the agreement establishing the African Continental Free Trade Area (AfCFTA), which was launched in 2021 to facilitate trade in goods, services, and the movement of people.

African countries have existing regional economic communities which in turn have regional trade agreements (RTAs) like the Common Market for Eastern and Southern Africa (COMESA), East African Community (EAC), Economic Community of West African States (ECOWAS), and five others. But the evidence of gains from these RTAs is vague. This may be because most studies have examined regional communities separately. However, looking at the shallow levels of intra-African trade, one realizes that RTAs haven’t significantly impacted trade flows within the continent.

This makes the new continental trade agreement an opportunity to achieve food security, reduce abject poverty and create opportunities for Africans. Though ambitious, the AfCFTA is modeled after the European Union (EU), making a borderless Africa obtainable.

There’s a general consensus that developing countries would gain more from free trade. Yet despite regional trade agreements and free trade zones within the continent, intra-African trade is just 13% of the total, compared with intra-regional trade in Europe (60%), North America (40%) and Asia (30%).

One shouldn’t forget that Africa has the richest concentration of natural resources. With 65% of the world’s arable land, it accounts for 10% of the planet’s freshwater source and agricultural products. It also holds the world’s largest reserve of bauxite, cobalt, gold, diamonds, manganese, phosphate, and uranium, and produces 12% of the world’s oil.

Despite enormous resources, Africa accounts for only 3% of global trade in goods and services, which is a massive disservice to the more than 1.4 billion people on the continent. Looking at the low levels of global and intra-African trade in spite of these resource reserves, one can tell why Africa is essentially underdeveloped, and would agree that the continent has some work to do.

Although the AfCFTA may be a recent development, free trade isn’t new in Africa. Africans have a long history of exchanging goods across all regions of the continent. However, the AfCFTA presents an economic opportunity for Africa to achieve its trade potential and contribute more significantly to the global economy.

The new trade agreement can be Africa’s game-changer if stakeholders don’t miss the vital piece in the puzzle: the need for an efficient supply chain. Without it, the gains of AfCFTA will not be far-reaching. That’s why conducting a thorough analysis of Africa’s supply chain is critical to achieving success in the African free trade agreement. 

In an interview, Adebayo Adeleke, the founder of Supply Chain Africa, spoke about Africa’s new trade agreement. He stated that for the AfCFTA to work, it will require enormous effort, and that cues must be taken from a supply chain perspective because it’s not possible to look into African trade without addressing the supply chain that underpins it. In trade, the supply chain is the means of execution, so if it’s misaligned, trade flows won’t be smooth, possibly causing the African free trade deal to fall through.

To be sure, African supply chains have issues that need to be resolved to ease procurement, production, distribution and delivery of finished goods to consumers. This could mean revamping supply chains to drive goods more within the continent instead of primarily outside it.

Creating an African supply chain that addresses these issues will lead to the smooth running of the AfCFTA. Following are some ways to achieve this.

Reconstitute freight and logistics. One of the reasons for low intra-African trade is the poor quality of transport infrastructure. There’s a lack of high-quality road networks, especially in the sixteen landlocked nations, as well as alternative means of moving goods. That’s why the Logistics Performance Index ranked African countries low, between 1.77 and 3.38 out of 5.

Adeleke stated further that Africa must synchronize its supply chain and logistical corridors by land, water, rail and air. But to benefit the regional supply chain and connect Africa with the global economy, the continent would need to invest in more transportation networks. For example, until a year ago, when the $260 million Kazungula Bridge was built on the Zambezi River, transporting goods between Botswana and Zambia was slow and congested. Today, pontoons used to load vehicles across the river sit ashore redundant, and the time of moving goods has reduced from as much as 15 days to just minutes.

Improve manufacturing output. Despite Africa’s manufacturing potential and many available opportunities, most African countries have a dearth of factories. This explains why the continent is at the bottom of the global supply chain, with a 1.9% share of global manufacturing.

According to African Development Bank president Akinwumi Adesina, there’s an urgent need for Africa to rapidly diversify its economies and add value to everything that it produces. No nation or region has succeeded by simply exporting primary commodities and raw materials.

Adesina’s remarks show that Africa needs to improve its manufacturing output to meet the demand by its large and youthful population, and contribute significantly to the global economy. But to create a regional supply chain for production and manufacturing, African leaders need to foster industrial policies that will catalyze funding of infrastructure and industrialization projects. Only then will local entrepreneurs take on the risk of market expansion.

Revamp supply chain infrastructure. Many view supply chains as limited to the processes required to move goods from suppliers to customers. But it’s much more than that — supply chain infrastructure involves transportation, communication, utilities and technology as well. Additional basic elements include security, risk, legal, contracts, insurance, customs and payment. For the AfCFTA to excel, Africa must rejigger its infrastructural issues to include logistics, purchasing, operations and market channels.

It’s actually easier to export to the Asian continent from an African seaport than from one African country to another. To make intra-African trade possible, Africa needs more investment in its supply chain infrastructure. Regulators and governments must adopt trade and investment policies that favor building a continental union with an adequate supply chain system.

Having a single African market is a lofty goal, but we need to push the conversation about what needs to be improved. Development agencies, journalists and stakeholders have touted the tremendous economic benefits of the AfCFTA. But without an efficient supply chain infrastructure, any promised gains will remain theoretical.

Lanre-Peter Elufisan is a freelance supply chain writer and executive director of Ominira Initiative, a think tank advancing solutions to Africa’s socio-economic issues.