Assessing regional Integration in Africa VI study projected that a global reduction in waiting times at ports or customs by one day would cut landed costs of goods by 0.5%. This would save developing countries $240 billion annually. Expansion of information communication technology (ICT) would reduce this cost through innovation and trade facilitation.
Poor inter connectivity and infrastructure hinder trade growth among African countries and the rest of the world. Moreover, underdeveloped, distorted transport markets and time-consuming border crossings reduce productivity and inflate prices. Road transport which is compounded by cumbersome transit procedures, over regulation, multiple checkpoints and poor data management also delay transactions. As a result, African countries are paying a huge cost.
Designed policies and strategies show that the continent’s long-term goal is to establish a combined network of automated and standardized customs-clearance system that connect all engaged in trade and logistics. This will enable information to flow impeccably with limited manual interventions thus clearing goods quickly, increasing efficiency and reducing transit costs.
Industry experts point out that e-commerce is the next frontier in global expansion. The key challenges to applying ICT in trade are not technical, but infrastructural and institutional. Enabling ICT infrastructure, regulatory frameworks and evolving consumer preferences have become a necessity. In major developed countries, domestic and cross-border retail is expanding through online channels as retailers invest less in traditional brick taking advantage of technology. Such multi channel approaches are a novelty to most African markets where the regulatory and ICT framework for e-commerce is still in its infancy.
Progress is hampered by a lack of consumer trust, poor ICT expansion and limited inventory which are critical elements for e-commerce retail. Some African countries such as Nigeria and Kenya have begun taking steps in line with these initiatives. The use of e-commerce by firms also enhanced efficiency and competitiveness. Similar to the impact of removing tariffs and quantitative restrictions, trade facilitation through ICT can promote trade by reducing transport and transit costs.
ICT cannot transform trade performance on its own. It depends on the quality of data input into single-window processes, the compliance of trading businesses and the modernization of administrative systems. Further, the value of ICT in trade facilitation can only be realized if it is integrated with broader cross-cutting reforms by governments and development partners.
ICT is an influential complement to the traditional trade facilitation measures that deal with infrastructural and non-tariff barriers to trade. Thus countries and regional trade agreements (RTAs) around the world focus more on harmonizing and integrating trade and transport. Democratic Republic of Congo (DRC), Djibouti, Ethiopia, Kenya, Malawi, Rwanda, Sudan, Uganda, Zambia and Zimbabwe have set up road funds and road development agencies to maintain regional and national road networks.
Nevertheless Africa lags behind in deploying ICT infrastructure, particularly broadband. More investment is needed in regional communications networks to allow all trade posts to be integrated into single windows and ensure the continuity of data transmission.
By Eden Sahle