Afrika: Trade and infrastructure

Picked up on Weitzenegger’s Website for International Development Cooperation, and its Newsletters.

Published on African Economic Outlook AEO, article not authored nor dated.

Weak infrastructure and institutional policies of many of the countries in Africa are partly responsible for poor intra-African trade. For instance, only 29.7% of the African road network is paved. The continent’s railway network is also very poor. These factors contribute to high transport costs on the continent as compared to the rest of world. For example, shipping a car from Japan to Abidjan costs USD 1 500, while shipping that same vehicle from Addis Ababa to Abidjan would cost USD 5 000.

Furthermore, the numerous roadblocks and checkpoints on African highways raise transport costs and contribute to increased delays in the delivery of goods. They also limit the free movement of commodities, persons, inputs and investments. African customs administrations are generally inefficient, contributing to barriers to trade within and outside the continent. Customs regulations require excessive documentation, which must be done manually because the process is not automated and information and communication technologies (ICTs) are absent in most of the customs offices. Furthermore, customs procedures are outdated and lack transparency, predictability and consistency. These inefficiencies result in delays that raise transaction costs. A case in point is southern Africa, where waiting for up to 24 hours to cross a border is the norm.

Additional barriers to trade include payment and insurance systems, which are also not well developed. Furthermore, foreign trade financing, export credit facilities and export insurance systems are not available in most African countries. Because monetary and financial regulations are not harmonised at the regional, sub-regional and national levels, there is no inter-convertibility of African currencies. In terms of insurance, a gap exists between the needs of exporters and the services and products offered.

Africa’s trade would not improve much with the current poor state of Africa’s infrastructure. Africa needs safe, reliable, efficient, affordable and sustainable physical infrastructure to support economic activities and to provide basic social services, especially for the poor … //

… To promote and address the challenges impeding the flow of goods and services within the continent, policy makers could consider the following prescriptions and strategies that would strengthen Africa’s infrastructure development:

  • Deepen regional capital markets for more effective mobilisation of local savings and regional financial integration.
  • Improve access to long-term financing by setting up special investment instruments, such as infrastructure bonds, to harness resources for infrastructure investments.
  • Strengthen public-private partnership (PPP) arrangements by involving the private sector not only in project financing and implementation, but also as stakeholder in policy formulation and enforcement of rules and regulations.
  • Continue actions to improve the investment climate in African countries for increased private sector participation by setting up legal, regulatory and institutional reforms.
  • Undertake aggressive promotion of Africa as an investment destination since achieving the right investment climate by itself may not necessarily result in increased inflow of investment.
  • Aim for sustained economic growth and improved living standards. Governments can do this by establishing a stable economic environment for entrepreneurs. Indeed, in such stable economic environments consisting of careful inflation management and public finance stability, entrepreneurs would expect to face a steady rise in demand and stable production costs.
  • Focus on simplifying customs procedures and harmonising the required information. Standardise documents in accordance with internationally accepted practices and guidelines and make them adaptable for use in computer systems. Customs administrations should cultivate a high level of professionalism and integrity and be more transparent about their procedures and more service oriented. Further, customs administrations should collaborate more with tax departments and other related government agencies.

(Full text and References).

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