Regional Trade Could Boost African Economies
Despite an average annual growth in exports of 8.5 percent since 2010, trade between African regions remains low when compared to other parts of the world, according to The Africa Economic Outlook Report 2016. Intra-regional trade accounted for 16 percent of Africa’s total trade in 2014, mainly stimulated by manufactured goods, accounting for 60 percent of total regional trade.
Intra-African trade has not yet reached fruition, the report concluded.
“There are multiple opportunities to increase intra-regional trade, especially in line with the Tripartite Free Trade Area agreement,” said Hennie Heymans, CEO of DHL Express Sub-Saharan Africa. “If used properly, this agreement has the potential to significantly boost economic growth in the region.”
The Tripartite Free Trade Area is a proposed African-free trade agreement between the Common Market for Eastern and Southern Africa, the Southern African Development Community, and the East African Community.
The report also forecast that the Gross Domestic Product (GDP) of major Sub-Saharan African cities, including Johannesburg, Cape Town, Lagos, and Luanda, are expected to increase, citing the quality of infrastructure and logistics as the key contributing factors. “These findings demonstrate the important role that effective logistics play in boosting a country’s economic growth by enabling trade,” said Heymans.
Heymans also pointed out that if intra-regional trade in Africa is to be boosted, it is crucial to put in place effective logistics infrastructure to facilitate the movement of goods across borders, and ultimately reduce the cost and time of trade.
For countries looking to boost inter-regional trade, Heymans advised that it is vital to consider the time and costs associated with transporting goods. “It is important to take a holistic approach when it comes to managing supply chain risk, in order to achieve greater visibility, flexibility, and control,” he noted. “Businesses in Africa are under increasing pressure in the current economic climate to remain competitive, both locally and globally, and sometimes lack the ability to build resilient supply chains.”
According to Heymans, making strategic decisions to outsource logistics can make a significant contribution to a business’s profitability. “Always ensure that you have the right partners who understand the global economy and, more importantly, the intricacies of doing business in each individual African county,” he said. “It’s not a one-size-fits-all approach.”