While the free trade agreement between African nations could mean more business and growth for the transport industry, there are still many obstacles to be overcome. MARISKA MORRIS takes a look
Although it officially came into force in mid-2019, the African Continental Free Trade Area (AfCFTA) agreement is potentially the biggest change facing the transport industry in 2020. The agreement could lead to an increase in cross-border trade among African countries and change the way in which many companies trade.
With the 90-percent tariff liberalisation to come into effect by July 1, cross-border trade will be much more affordable – especially for smaller businesses. According to the United Nations, without the tariffs intra-Africa trade could increase by 52 percent in less than five years.
In addition, the planned Pan-African Payments and Settlement System (PAPSS) will provide low-cost and risk-controlled payment options for businesses, which could further motivate growth, or change how companies conduct transactions.
As one of the few industrialised countries on the continent, South Africa is in a particularly good position to trade under the AfCFTA agreement.
However, despite the immense opportunity for growth, the continent still faces many obstacles, of which a lack of transport infrastructure is possibly the biggest. The vast underdeveloped road and rail networks in Africa will limit the ability to trade, as transporting goods will prove challenging.
According to estimates, less than a fifth of the roads in western Africa are paved. Among the countries neighbouring South Africa there are many challenges. Zimbabwe, for example, requires road infrastructure investments of up to US$ 34 billion (R493 billion) over the next decade – about US$ 3,4 billion (R49 billion) each year – according to the African Development Bank (AfDB). An additional US$ 43 million (R624 million) is required for road maintenance.
South Africa has a vested interest in the maintenance of transport infrastructure in Zimbabwe, as the country connects South African transport operators with Zambia and the Democratic Republic of Congo (DRC). The three countries are also connected by rail – another underdeveloped form of transport infrastructure.
Only a handful of African nations have an extensive rail network spanning across the entire country. Among the countries that have any rail at all, very few have networks crossing into a neighbouring country. The South African rail network is among the most advanced on the continent as it runs into all neighbouring countries and connects with different networks all the way to Angola, the DRC and Kenya.
In addition to addressing the need for better transport infrastructure, many African countries need to improve the efficiency of border post crossings. There are many horror stories of transport operators waiting days or weeks to cross a border. If there is an increase in cross-border trade on the continent, border posts will need to be very efficient to deal with the increased number of vehicles passing through.
Along with the road infrastructure, countries will need to address other infrastructural challenges such as access to electricity and recurring social issues, including xenophobia. South Africa is also not the only country on the continent facing serious electricity shortages.
Zimbabwe has seen daily 18-hour load shedding with an estimated US$ 1,14 billion (R16,6 billion) needed to build sustainable energy infrastructure according to the AfDB. The bank also suggested major investments into the Zimbabwean communication sector – particularly fibre optics.
Closer to home, anti-migrant sentiment could lead to continued violence and destruction that could cripple the South African transport industry. Last year, transport operators had a taste of this when their vehicles were targeted in violent attacks during which many trucks were burned and lives were lost – allegedly because they were employing foreign nationals
According to the Road Freight Association’s (RFA’s) estimates, 1 200 vehicles and cargos were destroyed and 213 lives lost with many more drivers injured. Many of these drivers were, in fact, South African. The RFA estimates the cost to economy was about R1,2 billion (see more in FOCUS Issue 7, 2019).
Carin Smith, in an article for Fin 24, quotes senior futurist at the Institute for Future Research in Stellenbosch, Njeri Mwagiru: “At social levels, while the slogan of one Africa is catching within the political economy, at community level issues of xenophobia, ethnic rivalry and anti-migrant sentiments continue to be rife.
“Social animosity tends to intersect with economic relations, and competitive rivalry between groups can hamper economic integration.”
It is, however, important to keep things in perspective. It’s never easy for an entire continent comprising many countries to work together. President of the Lagos Chamber of Commerce and Industry, Toki Mabogunje, explains it best in an article for the Nigerian news organisation The Guardian.
“I do not think any African country is ready for the AfCFTA. I think when you want to do regional integration like this, it is the spirit, passion and the will to do it that is important, because I lived through the European Union being formed, and it was not easy at all for all of them to get together.”
It might take many years, but with commitment and investment from the private sector, the African economy could enjoy rapid growth.