Interview: Miishe Addy
What effect did the Covid-19 pandemic have on trade in Africa, and what trends have emerged since the early months of the health crisis?
MIISHE ADDY: During the early months of the pandemic there was a spike in the sale of personal hygiene products and personal protective equipment. Even so, there was a decline in containerised trade volume in 2020. For players in logistics, this meant working capital was a big issue. Moreover, as the health crisis eased, the price of freight imports from China to most places in the world surged. For example, freight prices from China to West Africa – which is a very important trade corridor – were up more than five times in late 2021 when compared to before the pandemic. This created ripple effects, as trading companies struggled to find affordable prices and maintain adequate levels of working capital, putting pressure on most businesses. It also meant that trade became more expensive, and in some cases the cost of shipping exceeded the unit value of the goods being traded. Unfortunately there is not yet a strong local production base in Africa and there are not many alternatives to importing.
In what ways can the public and private sectors facilitate trade between countries in Africa, as well as reduce logistics costs?
ADDY: There are three reasons why moving goods between African countries is difficult. The first is infrastructure, as roads are poorly maintained, and there is a lack of investment from governments in cross-country motorways and rail systems. This lack of connectivity significantly raises the cost of transporting goods by land, even between countries that are in relative proximity, like Ghana and Senegal. There is a $25bn infrastructure initiative currently under way to link East Africa through road, rail and pipeline projects via the Lamu Port-South Sudan-Ethiopia Transport (LAPSSET) Corridor, but West African countries are still in the early stages of these efforts. The current focus is to build internal infrastructure, which is a step that will eventually lead to connections with other countries.
The second issue is related to economies of scale. Even though Egypt and Ghana can trade by ship, volumes are small. Logistics is an industry where economies of scale have a big impact on pricing, therefore it is difficult for local companies to ship their products via trade corridors where volumes are still small. In this sense, the role of technology is crucial in aggregating small, fragmented players and creating economies of scale.
Third, non-tariff barriers play a large role in dampening regional trade. From border closures and road checkpoints to inconsistent Customs requirements, regional trade in Africa suffers from a lack of transparency and procedural standardisation. Technology and regulatory harmonisation are key to standardising processes to ease this hurdle.
How can innovation support the development of Ghana’s transport sector and supply chains?
ADDY: There is a need for capital investment to help drive innovation. For example, establishing more public-private partnerships can help bolster financing for the necessary infrastructure and equipment. However, to boost innovation in the transport sector and facilitate intra-continental trade, it will first be necessary to create regional supply chains where, for example, Ghana exports cassava to Nigeria, which then processes it into cassava starch. Output within Africa should be diversified to support trade as well, given that West African countries produce similar products and this hampers trade. Investing in irrigation, cold storage and processing equipment will be helpful to differentiate the regional product base and build a strong, reliable supply chain in West Africa that connects with others on the continent.
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