AfCFTA process on track, but logistics still remains the main hindrance to movement of cargo

Movement of goods within the continent remains the biggest challenge for trade under the African Continental Free Trade Area (AfCFTA). Recently, eight African countries started the Guided Trading Initiative to test procedural and documental requirements to export under the new Free Trade Agreement a series of goods considered “commercially meaningful”. These goods include ceramic tiles, batteries, tea, coffee, processed meat products, corn starch, sugar, pasta, glucose syrup, dried fruit and sisal fiber. It is however expected that new products will be added to the list.

A paper from the Overseas Development Institute (ODI) calculated that for most of the eight countries that started the initiative, the goods included in the guided trading initiative represent only a small part of their trade. Apart from Rwanda and Kenya, where these products represent, respectively, 33 and 23.1 percent of their bilateral exports, insignificant shares of them are traded between the remaining countries.

Kenya had already two inaugural shipments under the AfCFTA, both to Ghana. The first one, concerning the export of exide batteries for a value of USD 77,000, arrived on September, 23 to the port of Tema, after six weeks (!) of travel due to the fact that being the vessel not fully charged, it went to Singapore to pick other cargo before travelling to Ghana. This is a common problem in Africa. As cabotage traffic (from coast to coast is not well developed), most of vessels need to go to Singapore or in a European port to upload goods before travelling to the final destination in the continent. The second consignment, a container of tea transported (this time) via road, started its trip on 5 October. Apart from the poor infrastructure links between the two countries, also Non-Tariff barriers, including excessive bureaucracy at border posts, risk to increase transport cost and time also of this shipment.

The main challenge, in any case, remains road infrastructure. The recently published UNECA report titled “Implications of the African continental free trade area for demand for transport infrastructure and services” calculates that currently, 76,6% of intra-African trade moves via road. Improvement of road links and construction of new trade corridors in Africa are therefore essential to open up markets and to allow African companies to trade across borders. This requires huge investment not only from governments and international donors, but also from the private sector. To this end, Public-Private Partnerships (PPP) represent an investment model that can become a key approach to increase investments in infrastructure in Africa and achieve higher levels of efficiency in its development and operation. Unfortunately, this form of contractual arrangements is still in an infant stage in Africa.

The African Development Bank estimates the Africa’s infrastructure investment gap at more than $100 billion per year.