Poor logistics, border controls hurt continental market dream

Kenyan traders are yet to feel the impact of the new continent-wide free trade area, with players in different sectors raising concerns about logistical and administrative blockades that have made it difficult to trade with the continent.

While noting the huge potential the African Continental Free Trade Area (AfCFTA) holds for small and medium-sized enterprises (SMEs) by opening up the 1.2-billion-people-strong market, at least two associations have told Smart Business that thousands of their members still feel much remains undone to properly facilitate intra-continental trade, with many issues still not ironed out.

The Kenya Flower Council (KFC), which brings together flower and horticultural farmers, and the Kenya Association of Manufacturers (KAM), which represents manufacturers from different economic sectors say logistical hurdles and border control challenges still hinder exporters from accessing the AfCFTA market.

KFC chief executive Clement Tulezi says while studies showed that Central and West African countries including Nigeria, Ghana, Congo and Botswana are ready to buy produce from Kenya, growers remain apprehensive due to the issues that remain unaddressed.

“Most of the challenges have to do with logistics. It’s baffling that it’s easier to fly our produce from here to Amsterdam than flying from here to Kinshasa because it’s very expensive. It makes more sense to fly the produce to Amsterdam, then anyone who wants it can access it from Amsterdam,” he says.

Big challenge

Noting that connectivity in the continent remains a big challenge that has made movement an expensive affair, Mr Tulezi says this would affect the sector’s business, as it relies on efficiency to maintain the quality of the products they deal in.

“You want your product to be handled in as few points as possible, but if the connectivity means that it has to be handled five times at different airports, it affects the quality,” he says.

Mr Tulezi also notes that many countries have not harmonised border controls, which means that exporters still face challenges they had even before the agreement was brought on board.

This is a problem, exporters observe, that needs political goodwill to address, with the involvement of the highest diplomatic channels.

“It’s easier for us to look at AfCFTA and say we have an agreement in place, but we have not harmonised the border controls. The governments in Africa need to harmonise this very quickly and implement it. If that’s not happening, that agreement is not benefiting us,” says Mr Tulezi.

The KFC says it had identified Africa among eight new destinations exhibiting huge potential and addressing the prevailing challenges to full implementation of the AfCFTA would go a long way in seeing the sector grow its supplies to the continent beyond the current share of one per cent.

“We have a few growers who are supplying to West African countries from Kenya but in very small quantities. We can scale that up if we have political goodwill and if it’s implemented across the continent.

Trading under the AfCFTA framework was launched in the country last October with huge fanfare, and the hope of a new market brimming with potential.

Attract taxes

Kenya is part of eight African countries that include Cameroon, Egypt, Ghana, Mauritius, Rwanda, Tanzania and Tunisia that are participating in an initial stage to observe how the market works, but already actions including progressively reducing taxes on most products traded across borders started in 2021.

It is expected that by 2030, most of the products traded within Africa will not attract taxes at border points, making it easy for traders in one country to export to another.

Kenyan manufacturers also note the promise the AfCFTA market holds for local businesses but says prevailing challenges require proper attention by governments.

“We appreciate the work that has been put in by the government to kick off trading under the agreement, for instance, the launch of the National AfCFTA Implementation Strategy. The strategy aims to fast-track the implementation of the trade agreement and facilitate an expansion of Kenya’s trade and investment in Africa,” says the KAM.

In October 2022, some manufacturers exported tea and batteries to West Africa under the Guided Trade Initiative, as promoters of AfCFTA sought to sell the idea that, indeed, it was possible to actualise the free trade area.

“However, the reality remains that a lot of work needs to be done to make the trade pact operational. Some of these challenges include pending negotiations, including rules of origin for textiles and automotive sectors,” says KAM chief executive Anthony Mwangi.

Last weekend, the AfCFTA was part of the critical issues under discussion as African leaders met in Addis Ababa, Ethiopia for the 36th African Union (AU) summit.

Only Eritrea is yet to opt into the agreement that seeks to boost intra-Africa trade from 15 per cent to 60 per cent by 2034, with a total of 44 countries have deposited instruments of ratification.

Extreme poverty

The leaders held talks under the theme ‘Acceleration of AfCFTA implementation’, which are expected to spur implementation as many countries remain reluctant.

AfCFTA projects that full implementation of the agreement would lift 30 million Africans out of extreme poverty and boost income in Africa by $450 billion, by 2035.

The KAM says that for real benefits to trickle into businesses, issues such as underdeveloped transport and logistics systems across the continent — with some countries having almost no roads, air or railway systems- must be addressed.

The association also notes that countries must harmonise border controls to support trade with other African states, for the framework to work.

Traders are still facing non-uniform order clearance logistics in different countries and unfamiliar customs and administrative procedures and transit policies of goods across different regional economic blocs says the manufacturers’ lobby group.

“Therefore, governments and their agencies, the African Union and other regional trade blocs across the continent need to put in place measures to facilitate trade within the agreement. To ensure effective implementation of AfCFTA, the Secretariat needs to continuously monitor, and track progress made by state parties in fulfilling the requirements to trade under the agreement,” the association urges.

Without a solution to the challenges, Kenyan traders observe that Africa will continue being unattractive for traders to export.

“We have people who want to move produce very quickly to maintain quality when we have challenges such as border controls, that is a barrier to trade with those countries,” said Mr Tulezi, the KFC chief executive.

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