For decades, Africa’s officials and private-sector leaders have clamored for “trade, not aid.” Increased trade through unfettered access to markets in the United States and other wealthy nations would accelerate the continent’s industrial growth and lead to more prosperous economies, the argument goes. Aid money comes with political and economic exigencies, and in the long run tends to benefit the aid giver’s commercial interests more than the recipient’s. Loans are just as bad. Loan agreements requiring borrowing countries to, say, slash spending for health and education, privatize public assets, deregulate the economy and allow multinational companies to compete with local firms have led to all sorts of social upheaval—not to mention the repayment burden when the value of the dollar and the euro goes up.
Like water wearing away stone, the persistent call for “trade, not aid” has begun to produce results. It helped that Southeast Asia was trading its way into economic vibrancy, that the “aid + loans = prosperity” formula was wracking up failure after failure and that developing countries collectively were putting pressure on the World Trade Organization to reel in rich countries’ barriers to trade. Initiatives like the African Growth and Opportunity Act appeared, freeing up access to U.S. markets for “eligible” sub-Saharan African countries.
True, African countries must implement “democratic” reforms in order to benefit from AGOA. And debate still rages about which side is really benefiting from the law. Still, AGOA beneficiaries are exporting more now to the United States than in pre-AGOA times—$5.3 billion worth of goods in 2000 and $6.1 billion in 2003. Two-way trade was valued at $32.5 billion in 2003 against $29.4 billion in 2000. Africa is now the United States’s fastest growing export market and the United States is Africa’s single largest export market. West Africa, a confirmed energy-producing hotspot with a voracious appetite for luxury cars— especially Hummers, BMWs and SUVs—is the dominant trading area.
With 12 percent of the world’s population, economies growing faster than the world average, a coastline that gives 39 countries direct access to the sea and 95 ports handling international cargo, Africa’s trade potential is huge. Amazingly, however, it is a tiny player. Africa handles just 6 percent of all world cargo and 3 percent of container shipments. Sub-Saharan Africa accounts for less than 1 percent of U.S. merchandise exports and less than 2 percent of U.S. merchandise imports.
One of the biggest culprits in this troubling underperformance is the inadequacy and inefficiency of the infrastructure required to move goods to and from ports. The ports are plagued with problems such as:
High freight costs.
Freight costs in Africa total about 17 percent of product value, when the global average is between 8 percent and 9 percent. Importers are playing musical chairs with ports in search of lower costs. Sierra Leonean importers, for example, are clearing their goods in neighboring Conakry (Guinea), where tariffs and clearance costs are half those of their own Freetown port, then trucking them across the border. Nigeria’s seaports are said to be the most expensive in the world. Their charges include a 5 percent value-added tax, 2 percent National Automotive Council levy and a 7 percent surcharge for port development.
Yes, piracy! The International Maritime Bureau declares Nigeria’s territorial waters the world’s most deadly, accounting for half of the 30 deaths from pirate attacks worldwide between January 1 and June 30 this year. Gangs armed with automatic rifles and rocket-propelled grenades prowl the oil-rich Niger Delta region in speedboats and barges, trading arms and stolen crude.
At the second annual Africa Intermodal Transport Conference in February, one expert said Africa would require capacity for an additional 6 million 20-foot containers by 2010. “Underinvestment and undercapacity are serious problems, leading to congestion in many ports,” he said.
In many instances, processes are not automated, slowing up the clearance of goods.
Delays at inland border crossings are costing Africa about $48 million annually.
High transit costs.
According to the World Bank, it costs between $1,000 and $1,200 to ship a container from Baltimore to Dar es Salaam or Durban, but to transport the same container from Dar es Salaam to Bujumbura (Burundi) and from Durban to Mbabane (Swaziland) costs $10,000 and $12,000, respectively.
Across the continent, with the help of local and foreign groups, officials are taking steps to resolve these problems. Are they investing enough? Are they moving fast enough? Many worry that they are not. Drewry Shipping Consultants Ltd., a maritime consultancy in London, predicts Africa’s container shipping will erode in the future, dropping to less than 2.8 percent of the world total by 2012.
By Rosalind McLymont