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Tag: intra-African trade

  • UNCTAD: Rules of origin ’ll enhance intra-African trade

    Rules of Origin (RoO) could be a game changer for Africa and enable the African Continental Free Trade Area (AfCFTA) to catalyse the continent’s regional integration by generating significant gains.

    The United Nations’ Conference on Trade and Development (UNCTAD) made this known in its “Economic Development in Africa Report 2019.”

    RoO is a “passport” enabling goods to circulate duty-free within a free trade area, if those goods qualify as originating within the area.

    They are, therefore, one of the cornerstones for boosting trade on the continent, according to UNCTAD.

    The UN’s agency in the report estimated that the Gross Domestic Product (GDP) of most African countries could increase by up to three per cent once all tariffs are eliminated, if RoO is made simple and business-friendly.

    Read Also: Beyond the glitz and glamour of AfCFTA

    The 2019 Ibrahim Forum Report highlighted that Africa’s most urgent challenge was the fact that its massive youth bulge has mostly been devoid of prospects.

    About 60 per cent of Africa’s population is currently under 25 years old, and the continent’s youth will account for twice Europe’s  population in 2100.

    However, demographic and economic trends are not in tune. While important economic growth of the last decade has mainly been jobless, Africa’s youths consider unemployment by far the most pressing challenge for their governments to address.

    Besides hindering the potential of Africa’s biggest resource, its human capital and lack of economic opportunity are also key driver of African migrations, which are mainly composed of young and educated people.

    In some cases, the absence of prospects can also influence young people to join extremist groups. These urgent challenges can only be addressed by African countries, and the AfCFTA is an important step towards this.

    The AfCFTA is a trade agreement among African Union (AU) member states, aiming at creating a single continental market for goods and services as well as a union of customs with free movement of capital and persons.

  • Afreximbank holds parley on intra-African trade

    The African Export-Import Bank (Afreximbank) is set to host the inaugural Intra-African Trade Fair (IATF2018) billed for December 11 to 17.

    Hosted by Egypt, through the Export Development Authority (EDA), and organised in collaboration with the African Union (AU) and other partners, the fair is aimed at deepening trade ties among African countries and  supporting the implementation of the African Continental Free Trade Area (AfCFTA) Agreement.

    A conference was held last week on the forthcoming fair. It featured a panel discussion entitled: “Towards a strategy for deepening trade between Egypt and Africa”.

    It was attended by former President Olusegun Obasanjo and Chairman of the IATF2018 Advisory Council; Tariq Qabeel, Minister of Trade and Industry of Egypt; Benedict Oramah, President of Afreximbank; and Ahmed el-Sewedy, Chairman of the Elsewedy Group, who represented the private sector.

    Obasanjo, who highlighted the various capabilities and resources of African countries, said larger economies, like Nigeria, Egypt and South Africa, had important roles in leading the transformation of the continent.

    Their participation in the AfCFTA would contribute to the success of the agreement, Obasanjo said, noting: “The train has left the station” and that those countries that were yet to sign on to the agreement would have to catch up.

    Oramah said the IATF was being organised as part of initiatives by Afreximbank to address the challenge of the low volume of intra-African trade, which he attributed largely to lack of market information on the continent.

    He said many African businesses were not aware that some of the products they import could be bought for less from neighbouring countries.

    IATF2018, the first-ever such fair to be organised, would provide a platform for exchange of information on markets, dialogue and meetings among businesses, he said. It would also enable traders to conclude deals and access information about investment opportunities.

     

  • Afreximbank lists hurdles for intra-African trade

    Limited knowledge about trade opportunities in African countries was among the biggest impediments to intra-African trade, Amr Kamel, the Executive Vice President for Business Development and Corporate Banking at the African Export-Import Bank (Afreximbank), has said.

    Speaking during a panel discussion at the Africa 2017 Forum, organised in the Egyptian resort city of Sharm el Sheikh, Egypt, Kamel said that contrary to the popular view that lack of infrastructure was the biggest challenge to intra-African trade, such trade was actually being hindered mainly because people in one African country lacked information about trade opportunities in other African countries.

    He noted that a recent study co-sponsored by Afreximbank showed that some African countries were importing certain products at high cost from outside Africa while the same products were available at much lower costs in nearby African countries.

    Kamel said that the fact that Africa was able to support the current level of overall trade with its existing infrastructure meant that infrastructure was not necessarily the issue but rather the challenge was how to make more of that trade intra-African.

    He expressed satisfaction that African countries were gradually beginning to realise that intra-African trade held the key to Africa’s development.

    Kamel announced that Afreximbank was building certification centres in an attempt to help address the issue of the quality of goods produced in African countries. Having the goods certified to international standards would make them acceptable exports into the international markets.

    Timothy McPherson Jr., Minister of Finance of Jamaica, said that the African Diaspora was key to the continent’s integration as its members thought of investment in Africa in terms of the entire continent rather than segmenting it into countries and regions.

     

  • Practical framework for boosting intra-African trade

    It is now well known beyond the shores of our continent. Several African economies, of which Nigeria is the biggest, have been experiencing GDP growth rate of 5 per cent or more for about a decade. The positive outlook of economic growth on the continent, when the major economies of the world are in decline with negative or weak growth, has made Africa the darling of global investors in a way never seen before. More than ever before, this is an exciting time for Africa and investors in Africa.

    The bright prospects for investments in Africa are linked to vast untapped economic opportunities. But market mechanisms are known to be weak too. When I assumed the leadership of the Nigerian Export – Import Bank (NEXIM Bank) four years ago, I was immediately interested in knowing the connection between economic growth trends in West Africa and trade flows within the sub-region.

    Of course, this was not a mere academic inquisition. By the statute setting it up (Act 38 of 1991), NEXIM Bank is an Export Credit Agency, and is the trade policy bank of the Federal Government of Nigeria. I therefore wanted to see how Nigeria can leverage regional trade in pursuing the goal of a more robust external sector performance, which has underpinned the quest for diversification of foreign exchange earnings for the country.

    Shocking statistics

    What I found was shocking. At the same time, it inspired action. Economic growth rate in the member-countries of the Economic Community of West African States (ECOWAS) has accelerated past existing infrastructural capacities. Intra-Ecowas trade had grown from 4.7 million tonnes in 1998 to 13.2 million tonnes in 2008 without any corresponding increase in road or rail transport infrastructure. Until recently when investment in infrastructure became a national economic growth strategy into which citizens’ welfare is embedded in Nigeria, the country’s housing and construction industry contributed just 2 per cent to GDP.

    Across the sub-region, existing road transport infrastructure has degraded, while the networks provide very limited access to economic opportunities. The few rail networks were not interconnected across countries to provide regional coverage, which would have improved their viability. And in the last two decades, the major airlines in the sub-region – Nigerian Airways and Ghana Airways – have collapsed. The ports also lack enough capacities. This acquaints port users with the phenomenon we call port congestion.

    The reaction I get from non-exporter middle- senior level professionals when I paint the poignant picture of the constraint infrastructure deficiency puts on regional trade within Africa is usually unbelief. Freight charges for shipment of cargoes within sub-Saharan African are the highest compared with what obtains within any other region of the world.

    Whereas it costs about $2,500.00 to ship a containerised cargo from China to Lagos, it costs roughly $3,500.00 to ship the same from Lagos to Douala. And whereas a shipment from United States to Lagos might take 10 days, cargoes sent from Apapa Port in Nigeria to Tema Port in Ghana will take a minimum of 45 days, because unavailability of direct sea link between the two countries necessitates that the goods are first shipped to Europe, then transhipped to the West African destination by European vessels.

    If an exporter in Nigeria cannot afford the time and higher cost of cargo transhipment, and therefore opts for road transport in spite of the poor state of the roads and dilapidated trucks, that exporter would be confronted with some of the worst pains of non-tariff barriers to trade in West Africa. Multiple (sometimes illegal) road blocks and several immigration checkpoints will prove very daunting.

    The bigger damage done to this exporter is psychological. The exporter will not be able to contemplate significant increase in trade capacity. For him/her to move 20 container-size cargoes across the West African borders, one extreme is that 20 trips would be done with one truck. On the other extreme, 20 trucks would have to be deployed on the road at the same time.

    Either way, or in-between, the odds that stark against the exporter can be overwhelming. With this scenario, it is trite to say that intra-regional trade in Africa is not competitive. Intra-ECOWAS trade is about 10 per cent, while intra-Africa trade fared only marginally better at 12 per cent. Trade within the European Union is about 50 per cent.

    Facilitating “Eco” Sealink

    I don’t believe in arm-chair banking, never mind the profession is white collar. Therefore, at NEXIM Bank, we follow our clients to the market in order to understand the risks to their businesses (to which we provide credit), and how we might help them harness opportunities for growth.

    I came up with the idea of what we call the Sealink project as a response to the challenges our exporters face. This project is intended to provide direct maritime links between ECOWAS member-countries. That was the original idea. But when we began to work on the initiative; when we began to mobilise support for the project from our sisters and brothers across the sub-region; and when we exposed the project to our friends in Cameroon, we found that the Sealink project is born in due season, and that its scope should cover both West and Central African sub-regions.

    Last month, we held the first Sealink bilingual investor forum in Accra, Ghana. For me, it was emotional to see the overwhelming support and endorsements the project received across the two sub-regions. The ECOWAS Commission, which was represented by its Vice President, Dr. Toga Gayewea Mcintosh, is backing the project.

    The Sealink project is seen as assisting the Commission to actualise some of its objectives under the 1979 Protocol on Free Movement of Persons, and the Right of Residence and Establishment across West Africa. Since the ECOWAS Commission was an early backer of the project as far back as 2011, it came to the Forum with substance. We were told the attention of Heads of Government of ECOWAS member-countries has been drawn to addressing piracy – one of the risks the Sealink project contemplates. Beyond this, the ECOWAS Commission is happy to lobby Member-States to provide priority berthing for Sealink vessels.

    The enthusiasm for the Sealink project cuts across the language divide. Our brothers from the francophone countries, particularly Côte d’Ivoire want full integration into the Sealink project. This has always been the business case. However, at the time NEXIM Bank commissioned the feasibility study for the project, Côte d’Ivoire was embroiled in a political transition crisis which prevented the study team from visiting the country as they did all other ECOWAS Member-Countries. But today, the crisis is history. His Excellency, President Alassane Ouattara of Côte d’Ivoire is Chairman of ECOWAS. Rather than being seen as an exclusive project, delegates saw the setting up of the Sealink project, which enthusiastically attracted the name “Eco Sealink” (to reflect its origin) in the same light as Ecobank when it started. Today, Ecobank has transcended the boundaries of its origin to become truly a Pan-African institution with subsidiaries in 34 countries across Africa. This was the shared fate of the Sealink project. Like Ecobank, the Sealink project will operate as a private sector business, which will leverage national and regional governmental institutions to bring prosperity to its shareholders and peoples of the sub-regions. The programme to raise $60 million in combined equity and debt capital for the SPV which will operate the project has gathered steam ahead of its commencement of operation in 2014.

    Further endorsements have been provided by the Maritime Organisation of West and Central Africa (MOWCA), Union of African Shippers’ Council, African Development Bank, ECOWAS Bank for Investment and Development and West African Development Bank (BOAD).

    What is in it for Nigeria?

    I have had to answer the needless question on whether NEXIM Bank had derailed with this initiative, by not focusing exclusively on providing funding for Nigerian businesses. Honourable Chukwudi Jones Victor Onyereri, Chairman of House of Representatives Committee on Banking and Currency, emphatically noted at the investor forum in Accra that Nexim Bank is enabled by the Act setting it up to “facilitate” Nigerian trade. He pledged further legislative backing for NEXIM Bank, should the need arise in the process of opening up the sub-regional markets to Nigerian manufacturers and exporters.

    My response is that proper understanding of the role of an Exim bank shows they are national financial agencies with the primary objective of providing access to foreign markets for their local businesses. In this regard, NEXIM Bank is facilitating the Sealink project through mobilisation of private sector resources for a scheme that will increase market access for Nigerian manufactured goods, while also providing Nigerian businesses with inputs from neighbouring countries to drive up cost-efficiency and competitiveness for manufacturers operating in Nigeria. Our manufacturers should be able to leverage their relative high capacities to produce for the sub-regional market, where good appetite for Nigerian manufactured goods, including pharmaceuticals, have been established for decades.

    Part of our goals at NEXIM Bank is to unlock opportunities in the maritime sector through effective indigenous participation, thereby stimulating maritime-related employment as well as minimise capital flight by domesticating substantial percentage of an average $5 billion generated within the country annually from import and export tonnages. Also, the objectives of the Sealink project ventilate the economic goal of Nigeria’s foreign policy which has always emphasised support for Africa. In this context, development practitioners, including the World Bank, have identified growth of intra-Africa trade as a necessary prelude in improving Africa’s trade with the rest of the world.

    Business case and governance

    In providing transportation service for producers, manufacturers and traders across 35 countries of West and Central Africa, the Sealink project will be serving a market of over 400 million people. Our initial proposition is to start off with three passenger-cum-cargo vessels. This ensures we accommodate the preferences of our traders who are accustomed to travelling with their articles of merchandise.

    Traded goods which the Sealink vessels will carry include agricultural produce like yam, plantain, pineapple, water mellon, etc. The dry cargoes will also include used vehicles, automobile spare parts, manufactured products, building materials, solid minerals, etc. Financial analysis by the financial adviser to the project, FBN Capitals, projects very attractive financial performances by the company which will operate the venture. A robust corporate governance framework has been put in place by a carefully selected board from the leading light of private sector operators. Partners to the setting up of the Sealink projects, apart from NEXIM Bank, are Federation of West African Chambers of Commerce & Industry (FEWACCI) and TRANSIMEX – an integrated logistic services provider based in Cameroon.

    Development impact

    I believe the biggest development impact of the Sealink project would be its enhancement of food security in West and Central Africa over the coming years. Countries within the sub-regions have differences in food production capabilities due to climatic and cultural reasons. Food surpluses in some countries would be traded in countries having shortages. Because of market access, we foresee enactment of economies of scale and elimination of wastage arising from production to excess consumption requirement in one country or region. Thereby, the principle of comparative advantage would be unleashed to combat poverty and boost prosperity by facilitating job creation, especially in agriculture and industrial activities around the port areas, as well as by saving foreign exchange which would have been lost to exorbitant freight charges of European shipping lines.

    · Orya is Managing Director / Chief Executive Officer, Nigerian Export–Import Bank

  • Govt to remove barriers on intra-African trade

    Nigeria has taken steps to remove tariff and non-tariff barriers within the continent to encourage regional integration and increase Intra- African Trade, the Minister of Trade and Investment, Olusegun Aganga has said.

    Aganga, who was represented by the Minister of State for Trade and Investment, Dr. Samuel Ortom, stated this during the African Industrialisation Day (AID), in Abuja, with the theme, Accelerating industrialisation for boosting intra African trade.

    He said: “The African Industrialisation Day is a special day set aside by the Conference of African Ministers of Industry (CAMI) under the aegis of the African Union Commission (AUC), to focus on specific strategies of African countries to stimulate industrial development and draw attention to the progress and challenges of relevant stakeholders on the policy direction of the government towards a sustainable Industrial sector development.”

    He explained that effective regional integration in Africa would also enhance trade within the continent and attract investment into the manufacturing sector.