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Supply Chain Trade and Logistics

Intra-African Trade – Border Closures, Trade Agreements, and How They Affect Livelihood

Intra-African trade has been around for thousands of years. There is documented evidence of the trade in animals, gold, and salt, across the length and breadth of Africa. With over 50 countries, Africa is blessed with both human and natural resources, but effectively harnessing these resources is a different reality. Boosting trade relations within African countries has a lot of benefits for the continent, but is not without several bottlenecks. One of such bottleneck that presented itself, particularly during the pandemic is border closures.

As many as 43 out of 54 African countries had a total or partial shutdown of their borders during COVID-19. In a continent that has challenges with proper data collection, the effects of these closures may never be fully known. There is no denying the hardship that ensued during this period. For many citizens who work across borders, especially low-income work, the movement was greatly reduced, which affected their livelihood. Companies were not able to replace workers in the short term, affecting normal company operations. The slow transportation of goods between closed borders meant traders were in danger of running out of stock. The Head of Chisco West Africa Division, Mr. Valentine Ogege opines that the border closure has brought untold hardship because of the loss of jobs to thousands of SMEs that would usually be transporting goods to their customers on a daily basis along the West African corridor.

Border Closure in Nigeria

On August 19th, 2019, the government of Nigeria closed the nation’s borders to the importation of goods from neighbouring countries. This closure lasted for close to 17 months before reopening in December 2020. Several opinion pieces and analyses of the border closure have noted that it did more harm than good to the Nigerian people, while a few others have tried to argue for its merits. Also, the border closure put a strain on informal trade relations between Nigeria and neighbouring countries like Benin and Togo. Informal Cross Border Trade (ICBT) between Nigeria and these countries has a long history, facilitated by reasons ranging from porous borders, corruption to poor joint economic policies. It is, however, important to note that not all trade along these borders is illegal. For Benin, ICBT makes up as much as 20% of its GDP. With an economy, tied to Nigeria’, a border closure or other economic challenges in Nigeria will likely pose negative effects for Benin, as discussed by this analysis by Brookings University.

Trade Agreements in Africa

Trade agreements allow for easy movement of goods, services and sometimes human resources between countries with reduced taxation and other incentives. Trade agreements in Africa have largely been between countries and regions. Examples of trade agreements in Africa include;

  1. Southern African Development Community (SADC): 16 member states including Angola, Botswana, Comoros, Democratic Republic of Congo, Eswatini, Lesotho, Madagascar, Malawi, Mauritius, Mozambique, Namibia, Seychelles, South Africa, Tanzania, Zambia and Zimbabwe.
  2. Community of Sahel–Saharan States (CEN–SAD): Benin, Burkina Faso, Central African Republic, Chad, the Comoros, Côte d’Ivoire, Djibouti, Egypt, Eritrea, the Gambia, Ghana, Guinea-Bissau, Libya, Mali, Mauritania, Morocco, Niger, Nigeria, Senegal, Sierra Leone, Somalia, the Sudan, Togo and Tunisia.
  3. Economic Community of West African States (ECOWAS): Benin, Burkina Faso, Cabo Verde, Côte d’Ivoire, The Gambia, Ghana, Guinea, Guinea-Bissau, Liberia, Mali, Niger, Nigeria, Senegal, Sierra Leone, and Togo
  4. Common Market for Eastern and Southern Africa (COMESA): Burundi, Comoros, Democratic Republic of Congo, Djibouti, Egypt, Eritrea, Eswatini, Ethiopia, Kenya, Libya, Madagascar, Malawi, Mauritius, Rwanda, Seychelles, Somalia, Sudan, Tunisia, Uganda, Zambia and Zimbabwe
  5. Arab Maghreb Union (AMU): Five-member states including Algeria, Libya, Mauritania, Morocco and Tunisia
  6. East African Community (EAC): Six member states including  Burundi, Kenya, Rwanda, South Sudan, Tanzania, and Uganda
  7. Intergovernmental Authority on Development (IGAD): Eight member states including Djibouti, Eritrea, Ethiopia, Kenya, Somalia, South Sudan, Sudan and Uganda
  8. Economic Community of Central African States (ECCAS): Eleven member states including Angola, Burundi, Cameroon, Central African Republic, Chad, Democratic Republic of Congo, Equatorial Guinea, Gabon, Republic of the Congo, São Tomé and Príncipe

However, these trade agreements are between a few countries and not across Africa. In order to boost trade across African countries, the continent-wide African Continental Free Trade Area Agreement (AfCFTA) was proposed.

Some key stats on Intra-African trade provided by the United Nations Conference on Trade and Development (UNCTAD) include;

  • Intra-African exports were 16.6% of total exports in 2017, compared with 68.1% in Europe, 59.4% in Asia, 55.0% in America and 7.0% in Oceania.
  • Intra-African trade, defined as the average of intra-African exports and imports, was around 2% during the period 2015–2017, while comparative figures for America, Asia, Europe and Oceania were, respectively, 47%, 61%, 67% and 7%.
  • In 2016, intra-regional economic community trade was highest in SADC ($34.7 billion), followed by CEN–SAD ($18.7 billion), ECOWAS ($11.4 billion), COMESA ($10.7 billion), AMU ($4.2 billion), EAC ($3.1 billion), IGAD ($2.5 billion) and ECCAS ($0.8 billion).

What is the Africa free trade Agreement?

Signed in March 2018, the African Continental Free Trade Area Agreement (AfCFTA) is a trade agreement signed by 54 out of the 55 countries on the continent. It seeks to promote intra-African trade among African nations and boost economic development. It came into effect on January 1st, 2021. 

What are the benefits of AfCFTA?

Some benefits of AfCFTA  include;

  1. Creating a Single Market: The AfCFTA will turn Africa into a single trade zone reducing trade barriers among nations with policies that facilitate the easier transfer of goods, services, intellectual property and other resources.
  2. Removing tariffs: A stumbling block to inter-country trade are varying tariffs. The AfCFTA will lead to the total or near-total elimination of tariffs such as import duties within participating countries. 
  3. Boosting economic activity and sustainable growth: Small and medium scale African businesses will be able to sell their goods and services to other African countries. This will greatly boost economic activity which is expected to reflect positively on the African continent with time. 
  4. Collaborative Structure and Enforcement. Participating countries have the opportunity to be a part of decisions reached. Various institutions exist within the AfCFTA to provide checks and balances so that countries can contribute to the success of the pact.
  5. Settling Trade Disputes. The AfCFTA makes it easier for states to settle trade disputes as it has a Dispute Settlement Mechanism to resolve trade disputes should they arise between state parties. 

Logistics and the African Trade Agreement

Logistics will play an integral role in the success of the AfCFTA. All hands will need to be on deck to ensure the smooth movement of goods and services across Africa. The governments of African countries should work together to create an enabling environment for stakeholders in the supply chain industry, which will, in turn, impact the economy of the continent at large.

However, logistics companies like Chisco Express, a technologically driven logistics company, are poised to foster growth in the sector. The company is led by Obinna Anyaegbu, a man born into logistics and now at the forefront of tech adoption within the sector. Chisco Express uses a centralized data-driven marketplace for the movement of goods from origin to the last mile in the African market. With over 40 years of experience, Chisco Express is leveraging technology to deliver value to supply chain participants like drivers and fleet owners and excellence in delivery solutions to the African SME by forming global strategic partnerships that have increased its operational efficiency. 

This has given Chisco Express access to over 2,000+ haulage trucks, vans, and motorcycles, as well as warehousing, and distribution networks across many countries.