Grow intra-Africa trade through digital transformation

The digital transformation of customs and borders in Africa could improve efficiencies in processes, such as administration at customs and borders, and yield trade gains on the continent of $20 billion a year.

A new report by the World Economic Forum, launched at its annual meeting in Davos, provides a pragmatic perspective on the non-tariff barriers in border and customs services that can be exponentially improved through digital transformation to increase intra-Africa trade.

The report is entitled “Growing intra-Africa trade through digital transformation of customs and borders.”

Written in collaboration with Deloitte, the report was launched at the convening of the Forum Friends of the Africa Continental Free Trade Area (AfCFTA), a multi-stakeholder group that supports implementation of the goals set out by AfCFTA through public-private collaborations.

Among others, the group comprises Rwandan president Paul Kagame, AfCFTA secretary-general Wamkele Mene, and African Rainbow Minerals founder and executive chairperson Patrice Motsepe.

The AfCFTA implementation, which started in January 2021, has the potential to increase intra-African trade from its current 18% of total trade to 50% by 2030, according to the report. It also has the potential to lift 30 million people out of extreme poverty.

However, achieving its full potential depends on putting in place significant policy reforms and trade facilitation measures.

Kavitha Prag, Africa lead: enterprise technology and performance at Deloitte Africa, says, “The African Free Trade Area agreement can be a great catalyst for Africa’s growth and development, but its full realization hinges on the introduction of efficiencies, including the improvement of customs processes.

“Digital transformation of border posts and customs is thus a crucial and necessary step in the implementation of the protocol, especially for many of Africa’s landlocked countries.”

Various countries and the regional economic communities are making efforts to build better trade networks enabled by world-class logistics networks that can withstand recent supply chain shocks such as the Covid-19 pandemic and geopolitical tensions.

The report highlights insights from the Logistic Performance Index as well as key insights from case studies demonstrating the quantifiable value of digital reforms in countries such as Ghana, Kenya and Uganda. The paper is a call to action for more integrated digital reforms that can drive higher impact through public-private partnerships that sets the course for Africa’s post-pandemic recovery and growth.

“Even after tariffs are lowered, and simplified procedures put in place, the full benefits of the AfCFTA will not be realized unless non-tariff barriers to trade are also addressed,” says Chido Munyati, head of Africa at the World Economic Forum. “Policy-makers can make a difference by implementing digital solutions.”

The report calls on the following policy support to enable digital transformation:

• Legislative support and acceptance that embraces new practices such as e-signatures or the use of drones to monitor cargo.
• Buy-in from the various agencies that enable these operations to embrace digital reforms and embed them in their processes.
• Take action based on demand-driven interventions that lead to higher adoption of rates by all organisations and position intra-Africa trade as more cost- and time-competitive.
• Develop skills of services agents that can maximize the potential of the digital solutions.
• Better co-ordination among AfCFTA members to establish single customs territories

The World Bank notes that while African exports of goods and services have seen their fastest growth in the past decade, the volumes remain low at just three per cent of global trade.

The bank says boosting intra-regional trade requires improvement of physical integration, such as cross-border energy, transport and connectivity infrastructure, strengthening cooperation by harmonizing customs rules and procedures, and facilitating business integration through regional electronic settlement systems, an electronic cargo-tracking system, and easing restrictions on services trade.

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