8 September 2008
opinion
Johannesburg — ONE of the greatest challenges to doing business in Africa is the lack of an adequate trade and transport infrastructure linking key markets and providing access for landlocked countries to international trading networks.
A recent United Nations (UN) survey found that transport costs are the most significant component of trade costs, and therefore the most profound determinant of trade competitiveness for countries around the world.
There is empirical evidence to suggest that the lower the transport costs incurred by a country to access international trade routes, the faster its local manufacturing industry is able to grow. Landlocked countries face on average 50% higher transport costs than coastal countries, with trade volumes estimated to be in the region of 60% lower.
Furthermore, a UN Conference on Trade and Development (Unctad) study conducted in 2003 found that international transport costs faced by African countries are about twice as high as the world average. Africa also has the most landlocked countries of any continent, and by far the poorest infrastructure.
The same UN study also differentiated between domestic and international transport costs. As many South African exporters active in the sub-continent would know, poor infrastructure and administrative irregularities at border posts pose a major challenge to effective intra-continental trade. The cost of exporting goods into Africa via land for South African manufacturers is often too high to ensure profit margins are met, and regional initiatives aiming to stimulate intra-regional trade suffer as a result.
However, with the ongoing commodities boom and recent economic developments in many Sub-Saharan African economies, infrastructure seems to be finally receiving its day in the sun.
Cognisant of the constraints faced by inadequate transport networks, and eager to reduce reliance on neighbouring countries in order to access international markets, governments are taking the initiative to stimulate private sector investment and donor aid funding into upgrading key ports, road and rail networks, bridges and border posts throughout the sub-continent.
The strategy employed by the Southern African Development Community (SADC) and New Partnership for Africa's Development, and indicated at its recent conference held in Sandton, is to concentrate efforts on the development of so-called infrastructure "corridors", the success of which lies largely in the ability to attract African and international private sector project financiers to partner local governments, regional bodies and the donor aid community.
The most relevant corridor for South African exporters is the North-South Corridor, which begins at the Durban port and heads on two separate routes. The first goes through Botswana and crosses into Zambia at the planned Kazangula Bridge, ending in the Zambia/DRC Copper Belt, with the other branching off into Zimbabwe, Malawi and ending at the Dar es Salaam port in Tanzania.
There are several major infrastructure projects tying the corridor together, such as the road rehabilitation programmes in Zambia and Botswana, the construction of the Kazangula Bridge and the attempt to create one-stop border posts at Chirundu and Beit Bridge. The implications for intra-regional trade, particularly given the recently signed SADC Free Trade agreement, are significant. For South African exporters the cost and time of transporting goods into the southern African region will be reduced, with plans in motion to increase transparency and to harmonise tariff structures.
As mentioned, these corridors require private sector buy-in to be successful. In order to attract project financiers there needs to be coordination between all relevant stakeholders and a clear agenda set out as to how the private sector can be involved.
Simon Freemantle is head of Africa for Frontier Advisory, which specialises in emerging market research and strategy.
Be the first to Write a Comment!
Copyright © 2008 Business Day. All rights reserved. Distributed by AllAfrica Global Media (allAfrica.com). To contact the copyright holder directly for corrections — or for permission to republish or make other authorized use of this material, click here.
AllAfrica aggregates and indexes content from over 125 African news organizations, plus more than 200 other sources, who are responsible for their own reporting and views. Articles and commentaries that identify allAfrica.com as the publisher are produced or commissioned by AllAfrica.
