Africa continues to deal with various challenges that inhibit its global trade footprint, but with an array of benefits the continent offers, coupled with efforts to improve intra-Africa cohesiveness, its trade with other regions around the globe is only likely to increase, albeit at a slow pace.
Additionally, the African Union (AU) is on the cusp of getting enough of its members to ratify the African Continental Free Trade Area (AfCFTA) needed for the sweeping trade deal to kick into gear. Although this is an intra-Africa trade deal, it could strengthen Africa’s manufacturing, and in turn, allow it to better compete on a global scale. The agreement aims to create a single market for goods and services in Africa and lay the foundation for the establishment of a continental customs union at a later stage.
Africa already has massive potential, considering its direct connections to prominent bodies of water that efficiently link it to regions around the globe, and on top of that, according to the United Nations Conference on Trade and Development (UNCTAD), Africa is the world’s youngest and second-most populous continent. Africa also holds 33 percent of the world’s uncultivated arable land, according to Tom De Wilde, who is responsible for the development of landlocked Africa at Hapag-Lloyd.
Stacking up. Africa’s ports accounted for just 4 percent of world container port volumes in 2017, while Asia’s ports held a 64 percent share, Europe’s ports 16 percent, North America’s ports 8 percent, developing America’s ports 6 percent and Oceania 2 percent, according to data in an October UNCTAD press release.
Broken down by regions within Africa, Eastern Africa, Northern Africa and Western Africa all have slightly increased their market share in world container port throughput between 2000 and 2018, while Southern Africa’s share slightly declined, as illustrated in the chart below, which was provided by Drewry Maritime Research. Between 2000 and 2018, Eastern Africa’s share of world container port throughput rose from 0.4 percent to 0.6 percent, while Northern Africa’s share increased from 0.4 percent to 0.9 percent, Western Africa’s share inched up from 1.2 percent to 1.3 percent and Southern Africa’s share fell from 0.9 percent to 0.7 percent.
Looking at Africa’s ports, the chart below, which was constructed using data from BlueWater Reporting, illustrates the top 10 ports in Africa (including Africa’s Mediterranean ports), based on the number of liner services calling each port. The Port of Tanger in Morocco in North Africa has an overwhelming lead and is at a prime location along the Strait of Gibraltar, which connects the Atlantic Ocean with the Mediterranean Sea.
The chart below, which also was constructed using data from BlueWater Reporting, illustrates that Africa’s ties with prominent regions around the globe have generally increased over the years. The chart shows weekly allocated containership capacity between Africa and various regions from 2014 to 2019, with data representing the end of February each year. For this chart below, African ports on the Mediterranean are grouped with the Mediterranean and not Africa.
For sub-Saharan Africa, both the International Monetary Fund (IMF) and World Bank project that GDP growth will pick up in the coming years.
The IMF said in January that sub-Saharan Africa’s annual GDP growth is expected to rise from 2.9 percent in 2018 to 3.5 percent in 2019 and 3.6 percent in 2020. However, for 2019 and 2020, the IMF’s projection is 0.3 percentage points lower than the projection it released in October. The IMF attributed the lower projection to softening oil prices causing downward revisions for Angola and Nigeria. “The headline numbers for the region mask significant variation in performance, with over one-third of sub-Saharan economies expected to grow above 5 percent in 2019-20,” the IMF added.
Meanwhile, the World Bank projects sub-Saharan Africa’s annual GDP growth will total 3.4 percent in 2019, 3.6 percent in 2020 and 3.7 percent in 2021, according to figures it released in January. Commenting on the region’s top economies, the World Bank said, “Growth in Nigeria is expected to rise to 2.2 percent in 2019, assuming that oil production will recover and a slow improvement in private demand will constrain growth in the non-oil industrial sector. Angola is forecast to grow 2.9 percent in 2019 as the oil sector recovers as new oil fields come on stream and as reforms bolster the business environment. South Africa is projected to accelerate modestly to a 1.3 percent pace, amid constraints on domestic demand and limited government spending.”
A rocky road. The African Union (AU) is comprised of 55 member states, 17 of which are landlocked, and transporting goods to and from inland Africa can be extremely challenging. It’s essential that improvements are made, considering inland Africa is growing at a faster rate than coastal Africa.
This growth trend can be seen by analyzing annual GDP growth projections provided by the World Bank, as illustrated in the next two charts below. The first chart shows the World Bank’s annual GDP growth projections for the AU’s members for 2019 to 2021. Landlocked AU members are marked with an asterisk. The World Bank did not have GDP growth projections on the Central African Republic, Eritrea, Libya, Saharawi Arab Democratic Republic, Sao Tome and Principe, Somalia or South Sudan.
The chart below was constructed by taking the mean annual GDP growth rate projection for landlocked AU members and coastal AU members, based on figures from the chart above. By doing so, it illustrates that landlocked countries are growing at a faster rate than coastal countries.
Hapag-Lloyd’s Tom De Wilde noted in an interview posted on the company’s website on Jan. 31 that infrastructure is still a key issue in Africa. “Terminal operators and even shipping lines are increasingly investing in Africa’s port setup. Unfortunately, the landside infrastructure is often neglected and distances are vast. All our offered corridors, for example, exceed a distance of 1,000 kilometers, and the port and its corresponding inland location are often linked by just a single road. So if there is an issue on that one road, it immediately and severely affects logistics — and basically the supply of the destination country,” De Wilde said.
He also pointed out that language barriers can present challenges for shipping goods to and from inland Africa as well as the lack of a continental free-trade zone, which results in most of the countries having different customs regulations.
Additionally, when BlueWater Reporting asked an A.P. Møller – Maersk spokesperson in February to identify challenges associated in shipping goods to and from Africa, particularly inland, the spokesperson pointed to the “seamless connection of ocean and landside services, efficient inland network and infrastructure, security and cargo visibility.” A.P. Møller – Maersk has a substantial footprint in Africa between two container shipping brands that serve the market, Maersk Line and Safmarine, as well as through its terminal operating arm, APM Terminals.
Maximizing potential. AU members generally have been collaborating more closely to improve intra-African trade relations. By strengthening their core, this will allow them to boost manufacturing and compete more effectively on a global scale through offering more exports.
On March 21, 2018, 44 members of the AU signed a deal to create the African Continental Free Trade Area (AfCFTA) and it appears its ratification could soon become a reality.
The AfCFTA, which will go into force 30 days after it is ratified by 22 members, strives to create a single market for goods and services and lay the foundation for the establishment of a continental customs union at a later stage.
As of Feb. 27, the deal had 19 ratifications (including approved and deposited) and 52 signatories, according to South Africa-based nonprofit organization tralac’s frequently updated “AfCFTA Ratification Barometer.”
“The AfCTA will create a trade bloc of 1.2 billion people with a combined gross domestic product of more than $2 trillion,” UNCTAD said in March 2018. “The agreement commits countries to removing tariffs on 90 percent of goods and to liberalize services.”
UNCTAD also emphasized that the deal “aims to speed up cross-border trade and tackle ‘behind the border’ regulations — also known as non-tariff measures — which put a brake on trade.”
Additionally, the United Nations Economic Commission for Africa said in March 2018 that it estimates “AfCFTA has the potential both to boost intra-African trade by 52.3 percent by eliminating import duties and to double this trade if non-tariff barriers are also reduced.”
Meanwhile, on Dec. 13, Burundi, Kenya, Rwanda, the United Republic of Tanzania and Uganda agreed to make trade between them and with other countries cheaper, faster and more straightforward. Representatives of the nations said they would “implement trade facilitation reforms, including reducing non-tariff barriers,’ such as burdensome and incompatible product regulations,” according to a UNCTAD press release.
These five nations, as well as South Sudan, comprise the East African Community (EAC), an economic bloc that strives to improve political, economic and social cooperation among its members.
“By diversifying their economies and enabling greater integration into regional and global value chains, Africa can improve its containerized trade and port traffic volumes and emerge as an exporter of containerized goods. For this to happen, however, trade policy and regional integration initiatives, such as the African Continental Free Trade Agreement (AfCFTA) will not be enough,” UNCTAD said in October. “Africa’s container ports and hinterland transport networks need to support these efforts by upgrading infrastructure and services and improving performance to match international standards.”