Tuesday, November 26, 2013

Red tape and corruption hamper Africa trade


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For many years economists have pointed to Africa’s patterns of trade to explain why its share of the global total remains so small.
Look at almost any country on the continent and the chances are that it trades more with distant lands than it does with its neighbours. It is this factor that has dragged on the continent’s development for decades.

The oft-cited reasons for this state of affairs – beyond the economic legacies of colonialism – are poor infrastructure, and the daunting bureaucracy, corruption and other barriers that business people find at borders on the continent.
Africa remains in desperate need of better road and rail connections. But there are signs that addressing the difficulties of crossing borders is at last coming into new focus.
When the world’s trade ministers gather in Bali in December for the biennial ministerial meeting of the World Trade Organisation, they hope to sign off on a “trade facilitation” deal aimed at cutting red tape at state frontiers.
The goal is to standardise fees and paperwork, set clear, transparent and enforceable time-limits on how long goods can be delayed at borders, and put emphasis on such things as automation.
If it lives up to even part of the hype, the benefits could be huge for trade in Africa.
Dissecting the proposed package in May, analysts at the Organisation for Economic Co-operation and Development estimated that the deal would reduce the cost of trade by up to 14.5 per cent in low-income countries worldwide.
Each 1 percentage point reduction in costs globally would increase income worldwide by $40bn, with 65 per cent of that benefit going to developing countries, they found.
Those sorts of gains would be very large for Africa, according to Raed Safadi, the former Dubai government chief economist who is now one of the OECD’s leading trade experts. A pro-trade industrial policy might reduce costs by 3-5 per cent, Mr Safadi says.
Cutting the costs of business by “14-15 per cent will define the difference between those who participate in global supply chains and those who don’t,” he says.
Also important is reducing the delays that both exporters and importers face at many borders in Africa.
“Time is money,” says Mr Safadi. “We live in a ‘just in time’ world ... Time is what determines if the contract goes to Romania or to a supplier in Africa.”
In a report last year, the African Development Bank (AfDB) offered a daunting view of the challenges to intra-regional trade on the continent.
In Africa, the average customs transaction involved 20-30 parties, 40 documents, 200 data points, and the re-keying of 60-70 per cent of all data at least once, the AfDB report’s authors wrote.
Moreover, “in most African countries, there are two complete sets of controls to be completed – one on each side of the border post”.
African leaders have certainly latched on to the need for better regional integration. The 15-nation Economic Community of West African States (Ecowas), a bloc of some 300m people, agreed in October to implement a single customs tariff regime from 2015 to speed integration.
So too has the private sector. Created in 2011, the Borderless Alliance in west Africa is a private sector advocacy and education group that also monitors the practical costs of trade along the region’s roads and at its ports.
Its quarterly reports, which detail the cost of bribes per 100km travelled and stops and delays faced by truckers along important corridors, make for daunting reading.
In 2012, for example, drivers taking goods from the port of Abidjan in Ivory Coast to Bamako, the capital of Mali, could expect to pay $66 in bribes along the road and a further $25 in bribes at the border, according to Borderless Alliance reports.
But Justin Bayili, Borderless Alliance’s managing director, says that the main obstacle to reform in west Africa remains one of implementation. Over the years, leaders and ministers have committed to many ambitious goals at summits, he says, and delivered few results on the ground.
“We are all convinced that trade can benefit our region provided some of the barriers are eliminated,” he says.
“It’s easy for our ministers of trade to sign documents about facilitation. But concrete measures are needed.”

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