Africa's untapped free trade potential

The planned expansion of the port of Tema in Ghana is expected to cost approximately one billion euros. By its completion at the end of 2019, it will be the largest container-handling station in West Africa. Nigeria also wants to build a new four billion euro six-lane highway which will connect the port in Calabar with the north of Nigeria. Meanwhile in Kenya, Chinese companies have secured a $3.8 billion project to renew the railway line between the capital Nairobi and the port city of Mombasa.

This combination of new ports, roads and railways has been designed to facilitate trade between Africa and other parts of the world. But the existing routes which connect African states with one another are in desperate need of attention. Old railway lines from the 1970s continue to face operational issues, while people who wish to fly from Accra to Luanda still need to make an inconvenient stopover in Addis Ababa.

Not keeping it in the family

Only a small fraction of African goods are sold to other African countries. "Our data shows that less than 14 percent of African trade takes place within Africa," Andrew Baldwin from the global audit firm Ernst & Young told DW. In comparison, more than 60 per cent of goods are traded within the European Union (EU).

"It can't be just the rest of the world that benefits from the Africa rising story," Donna Nemer, director of the capital markets section of the Johannesburg Stock Exchange, told DW. "Africa itself has to benefit." 

Most African countries export primarily unprocessed raw materials such as mineral resources, oil and agricultural products to other continents. But this does not contribute to job creation and their economies have been weakened by the presence of major outside customers such as China.

Poor infrastructure holding trade back

According to the World Bank, the poorer rural African populations are more likely to benefit from economic development if intra-African trade increases. Farmers will be able to sell their products more easily to neighboring countries, and will be able to make higher profits and counter food shortages, especially in drought-affected areas.

But as things are, a lack of proper storage facilities, damaged roads and encounters with excessive bureaucracy at state borders means that at least 40 percent of food in Africa is going to waste, according to the Food and Agricultural Organization of the United Nations (FAO). In 2015, only five percent of African grain imports came from other African countries.

"If a small company is producing mangoes in Mali and there is already a company in a neighboring country which is processing mangoes into juice or jam, then they need that mango to begin with," founder of the African Impact Group Issam Chleuh told DW. But the young entrepreneur also says there are still too many barriers in place.

"There is a lack of infrastructure – it is difficult to get your product transported from one country to the next. You also often run into issues regarding customs at the border and it is not always clear how much you should get charged."

Africa the capital of expensive trade

The World Bank estimates that the cost of intra-continental trade in Africa is 50 percent higher than in East Asia. The average truck driver delivering goods across the border to supermarkets in southern Africa would need to carry up to 1,600 documents. In addition, delays at the border can end up costing thousands of euros.

"There has to be a mindset shift in customs, they have to move from being revenue collectors to trade facilitators," the  director of UPS Sub Saharan Africa, Michael Druce, told attendees at the World Economic Forum in Durban, South Africa, earlier this month. "Revenue collection is important but that is a by-product. They also have to have a mindset of trade facilitation and not look for reasons why goods should stop, but reasons why goods should move."

East African Community leading the way

It is already evident that free trade can boost the economy. This is why a number of African states have established several partially overlapping economic communities, as well as signing free trade agreements and monetary unions. However the results have so far been underwhelming.

One notable exception, however, is the East African Community (EAC), which counts Kenya, Rwanda, Burundi, Southern Sudan, Tanzania and Uganda among its members. Since its inception, the organization has significantly improved regional cooperation. Before the EAC came together in 2000, it took three weeks to transport goods from the Rwandan capital of Kigali to the Kenyan port city of Mombasa. Now, transport time has been reduced to just four days.

A new free trade route from Cairo to Cape Town?

In June 2015, 26 African countries signed a plan to develop a new free trade agreement which would merge three existing trade blocks to allow for free movement of goods and services between Cairo and Cape Town. The proposed Tripartite Free Trade Area (TFTA) is now pending ratification from individual national parliaments.

The success of the TFTA will ultimately depend on how well it is implemented. This not only requires political willpower and honest customs officers, but also massive investments in infrastructure across the continent.