AfDB Releases Concept Note on Ports, Logistics and Trade on the Continent

22/04/2009
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The African Development Bank (AfDB) Group has released a concept note on a report to be published on the continent’s ports, logistics and trade. The report, one of the institution’s flagship publications, will focus on themes that address critical development challenges facing the continent. The 2010 edition will specifically focus on ‘Ports, Logistics and Trade in Africa’, given the tremendous opportunities offered by globalization and the need for the continent to be efficient at harnessing these opportunities. The 2010 theme is crucial considering that trade is one of the necessary conditions for placing the continent on a higher growth trajectory, which is a prerequisite for accelerating progress towards meeting the Millennium Development Goals (MDGs) by 2015.

There is a genuine concern that Africa’s share of global trade is negligible, amounting to only 3.1 percent of total global trade in 2007. Intra African trade has also lagged behind, with both imports and exports estimated at a little over 9 percent of global trade. Africa’s sluggish trade performance can be attributed to various reasons from domestic policies to high trade restrictions in developed countries. As trade liberalization progresses, artificial barriers such as tariffs are becoming less important, leaving natural barriers such as infrastructure relating to ports, transportation and boarder posts, among others, as the most binding constraints on trade. There is general concern that ports in Africa are besieged by huge inefficiencies. These bottlenecks impose high transaction costs which adversely affect the competitiveness of African economies, therefore lowering trade performance. In this respect, it is important to generate a deeper understanding of Africa’s ports and associated logistics and their implication for trade.

The Africa Competitiveness Report 2007 estimates that indirect trade costs – mostly for transport and energy – stand at about 30 percent of the price paid by consumers. Freight costs constitute about 10 percent of the value of imports in developing countries, compared to 3 percent in developed countries. For landlocked countries, the challenge is even more daunting. Freight costs account for over 20 percent of the value of imports for Rwanda, 24 percent for Mali and 23 percent for Niger. Delays at border posts account for about 40 percent of transportation time and imply immense costs associated with product quality deterioration and staff time.

The linkages between high transport cost and deficient transport infrastructure as well as management are striking. African countries rank low in the global Logistics Performance Index (LPI), except for South Africa which is ranked 24th. Only São Tomé and Principe, Tunisia, Guinea, Sudan, and Mauritania fall within the second top quartile out of a total of 150 countries. A key constraint identified in the overall transportation system is the lack of ports and the deteriorating state of existing ones. Being a critical node in Africa’s transport system, ports remain crucial for efforts at boosting trade performance. Over 80 percent of Africa’s trade is in goods that need to be physically moved within and “in and out” of the continent, and the demand for port services and related logistics is increasing. However, the demand remains unmatched by available ports.

Furthermore, while in East Asia the time spent in ports averages 20 percent of total transportation time, in Africa this ratio increases over 80 percent. In 2004, about US$5 million in revenue was lost on the weekly service between Europe and Africa because of congestion at ports. This cost is transferred to shipping companies through congestion charges which escalate transport cost in Africa. The quantity and quality of port infrastructure, logistics and processes as well as procedures therefore need a critical assessment, given their impact on the end prices of tradable goods.

The report will call for tremendous efforts to be made to address these challenges in order to improve the performance of ports and logistics, which are vital for boosting competitiveness and trade. Better trade opportunities offer prospects for employment, a necessary condition for higher national income growth and consequently poverty reduction, the report says.

The 2010 African Development Report will focus on ports and their implications for trade in Africa. It will examine the state and efficiency of port infrastructure, the regulatory framework, and the associated costs; areas that have constituted a vacuum in discussions on trade facilitation. The ultimate objective is to contribute to the debate on strategies to improve connectivity between and among African countries to regional and global markets with the aim of boosting trade and, ultimately, contributing to the economic development process. The document’s theme properly aligns with the AfDB’s Medium Term strategy, especially in the areas of infrastructure investment, as well as the role of regional integration and private sector development.