Logistics operators see opportunities in AfCFTA despite slow takeoff
Notwithstanding the slow pace of implementation of the African Continental Free Trade Agreement (AfCTA), logistics executives have expressed optimism about the benefits inherent in the trade deal.
Indeed, three major issues are believed to be affecting the AfCFTA in its initial phase. First, the negotiation on the Rules of Origin seems endless. Several members were unwilling to ratify all the articles of agreement. Many African countries earn most of their trade revenue from exports to non-African countries.
In 2022, rules of origin were resolved for 87.7 per cent of the goods covered by AfCFTA, including about 3,800 tariff lines. Secondly, the AfCFTA suffers as does the African Union (AU) in general, from a lack of popular perception about its advantages across the board. African businesses in particular are not fully aware about the advantages of the AfCFTA.
Protectionist policies followed by African countries have taken time to reduce. Moreover, persuading them about the advantages of the AfCFTA and refocusing from exports to Europe for instance, to their neighbours, have taken much more time than anticipated.
According to a study by the Centre for the Study of Economies of Africa in Nigeria, one of the more anxious large economies in Africa, more than 60 per cent of Nigeria’s entrepreneurs were unaware of the AfCFTA and its benefits. Greater investment in making businesses aware of the advantages of the AfCFTA is required, as pointed out by the Africa CEO Trade Report 2022.
Thirdly, customs infrastructure to implement the AfCFTA obligations are slow. A few countries have the infrastructure and systemic capabilities for trade facilitation as required by the AfCFTA indicators.
Indeed, nearly 70 per cent of global logistics executives say they are bracing for recession amid higher costs, slowing demand, and ongoing supply chain disruption arising from China’s battle to contain COVID, Russia’s war in Ukraine, and the impact of climate change.
Ninety per cent of the 750 industry professionals surveyed for the 2023 Agility Emerging Markets Logistics Index also say their shipping, storage and other logistics costs remain well above the pre-pandemic levels they were at in early 2020.
The Index ̶ compiled by Ti Insights, leading analysis and research firm for the logistics industry ̶ ranks China number one, however only 11 per cent of respondents say their company’s manufacturing footprint is the same as before COVID-19.
“Carriers and shippers are feeling the effects of higher energy prices, tight labour markets and broader inflation even though freight rates have fallen and ports have cleared cargo backlogs,” said Agility Vice Chairman, Tarek Sultan. “Three years after the start of the pandemic, there is still a lot of volatility in supply chains. Now there’s fresh uncertainty as consumers and businesses pull back on spending and hiring.
“It is not possible to overstate the challenges faced by emerging markets countries in the past couple of years,” said Prof. John Manners-Bell, founder of Ti Insights and data platform GSCi. “Geo-political tensions have combined with financial uncertainty and the lingering effects of the pandemic to create an ever more complex business and investment environment. The role that the Agility Emerging Market Logistics Index plays in providing insight into this volatile and uncertain environment landscape is more critical than ever.”
The survey and Index are Agility’s and Ti Insight’s 14th yearly snapshot of industry sentiment and ranking of the world’s 50 leading emerging markets. The Index ranks countries for overall competitiveness based on their logistics strengths, business climates and digital readiness — factors that make them attractive to logistics providers, freight forwarders, air and ocean carriers, distributors and investors.
China and India, the world’s two largest countries, held their spots at No. 1 and 2 in the overall rankings. UAE, Malaysia, Indonesia, Saudi Arabia, Qatar, Thailand, Mexico and Vietnam rounded out the top 10. Turkey, No. 10 in 2022, dropped to 11th. No. 24 South Africa and 25 Kenya were highest among countries in Sub-Saharan Africa.
Arabian Gulf countries – UAE, Qatar, Saudi Arabia and Oman — again offered the best business conditions. Malaysia, with the 4th best environment for business, was the only non-Gulf country in the top five.
China and India were tops for domestic and international logistics. India jumped four spots to No. 1 in digital readiness, followed by UAE, China, Malaysia and Qatar.
Farther down, there was more volatility in the rankings than in any prior year of the Index. Conflict, sanctions, political tumult, economic missteps and continued COVID-19 fallout damaged the competitiveness of Ukraine, Iran, Russia, Colombia, Paraguay and others. Among countries leaping forward in certain categories are Bangladesh, Pakistan, Jordan, Sri Lanka and Ghana.