The Economist - UK (2022-03-26)

46 Middle East & Africa TheEconomistMarch26th 2022

paper  by  Patrick  Plane,  a  French  econo­

mist. Such costs can add 75% to the price of

goods, estimates the afdb. So long as this is

the  case,  Africans  will  not  feel  the  full

benefits of globalisation and freer trade. 

Why  are  logistics  so  costly  in  Africa?

Partly it is because of a paradox. Those who

want to move merchandise complain that

they cannot find lorries. Those with lorries

moan  that  their  vehicles  spend  too  long

sitting idle. One reason for this is that Afri­

can  countries  typically  buy  more  goods

than they sell. It can cost twice as much to

send cargo from the South African port of

Durban to Lusaka than the other way, says

Mark  Pearson,  a  consultant  based  in  the

Zambian capital. This is because the trans­

porter  cannot  assume  a  “backhaul”  jour­

ney.  So  he  charges  double.  Others  wait

around. Lorries taking goods from Lagos to

Kano,  in  the  Nigerian  north,  can  spend

weeks until there are enough cattle or veg­

etables to pay for the return journey. When

they do head south they often overload the

vehicle, damaging the truck and the roads. 

Small fleets make things worse. Rough­

ly 80% of transporters own fewer than five

lorries. These microbusinesses depend on

the cash from one trip to fund the next and

can be crippled by a punctured tyre. Sigma

Feeds, on the outskirts of Nairobi, once or­

ganised  its  own  lorries.  No  longer.  It  was

too stressful. “Drivers who needed money

for  school  fees  might  siphon  off  fuel  to

sell,” says Vandan Shah, the ceo. 

Putting idle lorries to work

Another problem is a lack of information.

In  much  of  the  world  large  firms  can  buy

space  on  trains  or  lorries  in  logistics  spot

markets. But in Africa, where these do not

exist, miners or brewers have to sign long­

term  contracts  with  larger  logistics  firms

such  as  Bolloré  or  South  Africa’s  Imperial

Logistics, in which they agree to pay for ca­

pacity,  whether  they  use  it  all  or  not.

“There is no visibility between supply and

demand,” explains Wale Ayeni of the Inter­

national  Financial  Corporation,  the  priv­

ate­sector arm of the World Bank.

Startups such as Lori Systems, founded

in  Kenya,  and  Kobo360,  a  Nigerian  rival,

hope  to  solve  this  problem  by  matching

traders and transporters in digital market­

places.  This  promises  not  only  to  reduce

wasted  journeys,  but  also  to  reduce  the

price­gouging  power  of  trucking  cartels.

Startups also check paperwork, vet drivers,

provide cash upfront to truckers and help

with  maintenance  in  case  of  breakdowns.

“If a tyre falls off a driver can go on our app

and  order  a  new  one,”  points  out  Ife  Oye­

dele, a co­founder of Kobo360. 

“Infrastructure  is  still  a  massive  head­

ache,”  says  Uche  Ogboi,  the  boss  of  Lori

Systems. “But our mentality is that this is a

government thing and we will have to deal

with it until they fix it.” Lori, she reckons,

canhelptoimprovemorethanhalftheob­

staclesthatleadto hightransportcosts,

suchasbyenablingdriverstoforwardpa­

perworktoborderposts.

“AbigpartofbusinessinAfricaisreli­

ability,”saysMohammedAkoojee,theboss

ofImperial,whichlastyearboughta stake

inLori.Hisclientswouldratherpaymore

toknowthattheirgoodswillarriveontime

thanforjourneystobecheaperandlate.

ImperialhopestouseLori’ssoftwaretode­

velopspotmarketsforfreight.

Thedealispartofabroadertrendof

consolidation in African logistics. This

monthdpWorld,a Dubai­basedportoper­

ator,boughtImperial,whichshouldcreate

aship­to­shopcompanyacrossmuchof

Africa.LastyeardpWorldandcdcGroup

teamed upto developAfricanports,in­

cludinginEgypt,SenegalandSomaliland.

Anotherfirm,ArisePorts&Logistics,in­

corporatedin2020,ispartlyownedbyan

investmentfundaffiliatedwithMaersk,a

Danishshippinggiant,andOlam,a Singa­

poreantrader.AndChineseentitiesarein­

volvedintherunningorbuildingofatleast

46 portsinsub­SaharanAfrica,according

tocsis, anAmericanthink­tank.

Logisticsfirms,aswellasthebusiness­

eswithgoodstomove,hopethatthelong­

mootedideaof“tradecorridors”willcome

tofruition.Thesearea mixofhardandsoft

infrastructurelinkingcountries.Corridors

wouldallowa containersealedinShang­

haitoreachLagosorMombasa,withitspa­

perworkallapprovedforittotravelright

onto,say,NigerorUganda.

Theafcftaismeanttoencouragesuch

trade­easing efforts. This year ithelped

start a scheme to allow traders in one

countrytopayforgoodsinanotherusing

theirdomesticcurrency,ratherthandol­

lars,thuscuttingforeign­exchangecosts.

But in general progress has been slow.

Thoughtheafcftahashadmorelaunches

thannasa, notradehasactuallyhappened

underthetermsofthedeal.“Thereisa lack

ofurgency,”saysDavidLukeoftheLondon

SchoolofEconomics(lse).

The current stumbling block is over

rulesoforigin,thefoundationsofanytrad­

ingarea.Incontrasttotheeu, wherelarge

countriessuchasGermanyand(pre­Brex­

it)Britainwereadvocatesofliberalisation,

Africa’s largest economies—Egypt, Nige­

ria,SouthAfricaand,toa slightlylesserex­

tent,Kenya—areallrunbygovernments

withprotectionistleanings.Outsidersdo

nothelpeither:theeuhasmanydifferent

typesoftradedealswithAfricancountries,

making itharder for those countries to

harmonisetheirownrules.

Disputesbetweencountriescanclogup

trade for months. Rwanda and Uganda

closedtheirborder forthreeyears,only

openingitrecently.Formostoflastyear

KenyabannedimportsofUgandanchicken

andeggsbecauseitsfarmerscomplained

abouttheirneighbours’prodigiouslypro­

ductivepoultry.In 2020 a disputebetween

transportunionsintheGambiaandSene­

galmadeitdifficulttogetgoodsfromBan­

jultoDakar.Andsoon.

Stalledtalksoverrulesoforiginhaveal­

sostoppedprogressonotherissues.Many

countries still rely on paper customs

forms. Fewborder crossingshave “one­

stop windows”. Truckers need to queue

separatelyforimmigration,customs,car

taxandcovidtests.Suchthingsaddtothe

costsofgettingthingsacrossborders;itis

$2,000toshipa containerfromChinato

BeirainMozambique,buta further$5,000

toshipit 500kminlandtoMalawi.

Thepoliticalobstacleswithincountries

can be just as tough as those between

them.Overhaulingportsandborderposts

isdifficultpartlybecauseofvestedinter­

ests.Africanstatesoftenrelyheavilyon

customsdutiestofilltheirstatecoffers,a

practicegoingbacktotheextractivemodel

ofcolonialregimes.Anindividualinspec­

torattheportofToamasinainMadagascar,

forinstance,isresponsibleforcollecting

1.3%ofalltaxesinthewholecountry.

Such power opens the door to rent­

seekingandcorruption.Sandra Sequeira

and Simeon Djankov, both of the lse,

foundthatabout 15 yearsagomorethan

halfofshipmentsgoingthroughMaputo,

andmorethana thirdviaDurban,involved

bribes.Digitisationandhigherwagesdo

notseemtoreducecorruption.WhenGha­

na raised salaries for policecontrolling

borders,bribe­takingincreased.

Businessesarefarfromblameless,adds

GaëlRaballandoftheWorldBank.Power­

fuloligopoliescancolludeincorruption,

whethertogettheirgoodsmovingor,as

oddasit mayseem,tokeeptheminport—a

waytoraisethecostsofentryforwould­be

competitors,notesMrRaballand.

“The problemisstill attheborders,”

grumblesa Kenyanfleetowner. Evenif

driverssendpaperworkinadvance,they

canstillwaitbehindotherswhodonot.

“Wepayfordriverstoskipthelines.You

haveto.ThisisAfrica.”n

Insider trading

Intra- and extra-regional exports

as % of total exports, 22

Source: UNCTAD

Oceania

Latin America/

Caribbean

Africa

North America

Asia

Europe

100806040200

Intra Extra