Africa’s $20bn trade potential with non-tariff barriers reduction – WEF

BY MADUABUCHI EFEGADI

The World Economic Forum (WEF) has advised Africa’s decision makers, including those at the African Continental Free Trade Area (AfCFTA), that a reduction of non-tariff barriers, including border and customs administration, could lead to trade gains of $20 billion a year in Africa, compared to the $3.6 billion that could be achieved by the elimination of tariffs alone.

“The digital transformation of customs and borders in Africa could improve efficiencies in processes, such as administration at customs and borders, and yield trade gains on the continent of $20 billion a year,” the international organisation for public-private cooperation said in a new report it released at its 2022 annual meeting in Davos, Switzerland.

WEF launched the report in which it is calling for public-private partnerships to drive more integrated digital reforms on the continent.

It noted that inefficient border and customs processes in Africa remain a significant concern, and may result in some countries being unable to realise the full benefits of the Africa Continental Free Trade Area (AfCFTA).

Chido Munyati, head of Africa at the World Economic Forum, said, “even after tariffs are lowered, and simplified procedures put in place, the full benefits of the AfCFTA will not be realised unless non-tariff barriers to trade are also addressed. Policy-makers can make a difference by implementing digital solutions.”

The report, “Growing Intra-Africa Trade through Digital Transformation of Customs and Borders”, provides a pragmatic perspective on the non-tariff barriers in border and customs services that can be exponentially improved through digital transformation to increase intra-Africa trade.

Written in collaboration with Deloitte, the report was launched at the convening of the WEF Friends of the Africa Continental Free Trade Area (AfCFTA), a multistakeholder group that supports implementation of the goals set out by AfCFTA through public-private collaborations. The group comprises Paul Kagame, President of Rwanda, Wamkele Mene, secretary-general of the AfCFTA secretariat; Patrice Motsepe, founder and executive chairman, African Rainbow Minerals; and Jim Ovia, chairman, Zenith Bank, among others.

The AfCFTA implementation, which started in January 2021, has the potential to increase intra-African trade from its current 18 percent of total trade to 50 percent by 2030. It also has the potential to lift 30 million people out of extreme poverty. However, achieving its full potential depends on putting in place significant policy reforms and trade facilitation measures.

Kavitha Prag, Africa lead, enterprise technology and performance at Deloitte Africa, said: “The African Free Trade Area agreement can be a great catalyst for Africa’s growth and development, but its full realisation hinges on the introduction of efficiencies, including the improvement of customs processes. Digital transformation of border posts and customs is thus a crucial and necessary step in the implementation of the protocol, especially for many of Africa’s landlocked countries.”

Various countries and the regional economic communities are making efforts to build better trade networks enabled by world-class logistics networks that can withstand recent supply chain shocks such as the COVID-19 pandemic and geopolitical tensions.

The WEF report highlights insights from the Logistic Performance Index, as well as key insights from case studies demonstrating the quantifiable value of digital reforms in countries such as Ghana, Kenya and Uganda. The paper is a call to action for more integrated digital reforms that can drive higher impact through public-private partnerships that sets the course for Africa’s post-pandemic recovery and growth.

The report calls on the following policy support to enable digital transformation: legislative support and acceptance that embraces new practices such as e-signatures or the use of drones to monitor cargo; buy-in from the various agencies that enable these operations to embrace digital reforms and embed them in their processes; take action based on demand-driven interventions that lead to higher adoption of rates by all organisations and position intra-Africa trade as more cost- and time-competitive.

Other policy actions recommended are: develop skills of services agents that can maximise the potential of the digital solutions; and better coordination among AfCFTA members to establish Single Customs Territories (SCT).

The World Bank notes that while African exports of goods and services have seen their fastest growth in the past decade, the volumes remain low at just three percent of global trade. The global lender says boosting intra-regional trade requires improvement of physical integration, such as cross-border energy, transport and connectivity infrastructure, strengthening cooperation by harmonising customs rules and procedures, and facilitating business integration through regional electronic settlement systems, an electronic cargo-tracking system, and easing restrictions on services trade.