Africa will fail to reach free-trade goals without new rules and infrastructure
Business Day | 25 May 2021
Africa will fail to reach free-trade goals without new rules and infrastructure
By Chris Hattingh
The goals and intentions of the Africa Continental Free Trade Area (AfCFTA) such as eliminating tariffs on 90% of goods will be stillborn without essential regulatory and infrastructure changes. New policies must be created to facilitate the faster and seamless flow of goods and services across borders, especially into and out of African ports.
President Cyril Ramaphosa visited the Durban port — Sub-Saharan Africa’s busiest, handling about 60% of SA’s shipping container traffic — in April. The president’s visit served as a site inspection and an opportunity to announce a new infrastructure investment drive of up to R100bn.
The goal of upgrading the port’s administrative and capacity abilities is to increase container capacity from the current 2.9-million 20-foot equivalent units (TEUs), to 11.3-million TEU. Achieving this will put Durban ahead of Port Said with its 5-million container capacity, and Tangier with a capacity of more than 9-million.
The president’s visiting party did not include organised business. SA Association of Shipping Operators and Agents’ chair Malte Karsten, who noted recently that “there hasn’t been a major improvement in efficiencies at the Durban Port”, said that “we were surprised business was not included, especially since we wrote a letter about a year-and-a-half ago complaining about the issues at the port”.
Business is ultimately the driver of job-creation — it must be listened to and included in the government’s plans and initiatives. While often well-intentioned in their actions, bureaucrats and politicians in far-removed offices do not have on-the-ground experience with the daily challenges businesses and suppliers face. If the government is serious about implementing the kinds of reforms that will encourage more trade and investment, business leaders, analysts and commentators must be included.
Encouragingly, port general manager Moshe Motlohi has indicated that in future the private sector will be “at the centre” of the project, and there is a clear emphasis on increasing its car-handling capacity by two-thirds. Early this month Motlohi said : “We’re calling on the private sector to throw its lot into building this new capacity.” Private sector investment and incentives will add to the probability that any changes will focus on the needs and demands of the sector and not simply be drawn up in bureaucrats’ Pretoria offices.
Crucial judgment
The focus should be on moving containers through the port cheaper and faster. It is woefully insufficient to only do annual reports, for example. Ideally traffic reports should be provided daily or weekly. For SA to entice more traffic, monthly reports should be published at least. It will increase the sense of accountability and indicate to potential users and consumers that the port authorities are serious about improving the facility. More regular reports can focus on detailing the amount of daily container throughput, for example.
The proposed investment goal of R100bn should not be praised or criticised in itself ; the most crucial judgment will be in terms of precisely what such a large amount is used for.
To improve their “trade-appeal”, an even bigger priority for emerging market economies such as SA would be to remove as many onerous tariffs on goods as possible. While this could allow businesses in other countries to sell their goods here cheaper, that in turn would mean SA consumers have more disposable income to spend on other things they consider important. With such low economic growth over the last few years, and after the devastation of Covid-19 and government-implemented lockdowns, now is the optimal time to remove as many barriers to dynamic economic activity as possible.
Investing and upgrading the Durban Port is precisely the kind of long-term change hoped for as part of the AfCFTA. If African governments were to recognise the potential for increased innovation, investment and job creation in their respective countries it could provide the required impetus that has been so sorely lacking for too long.
In addition to increasing the flow of goods and services, governments should in the spirit of the AfCFTA make it easier for people to cross borders to work and invest in other countries, speeding up the mixing of ideas and novel ways of solving the continent’s economic and social challenges.
The SA environment could become the destination for investment and innovation on the continent providing sensible policy changes are made.
