AFCFTA: Required Infrastructure Ecosystem for Success

Dr Obiora Madu

Dr Obiora MaduIncreased intra-African trade will inevitably lead to increased industrialisation, diversification, and, most notably for Africa, enrichment of the continent’s natural resources, commodities, and some agricultural products, allowing Africa to gain more value within the continent says Obiora Madu, Director-General of the African Centre for Supply Chain. It is necessary to consider what the required infrastructure ecosystem looks like for there to be success. There will be a massive increase in demand for new industrial parks and, where permitted, special economic zones. Roads, railways, electricity, telecommunications, water, sanitation, waste management, housing, schools, and other infrastructure ecosystems must be funded and implemented.

According to the Economic Commission for Africa’s most recent estimates (ECA), the African Continental Free Trade Area will boost trade within Africa in transport services by around 50%. According to the report – with AfCFTA in place, the increase in transportation in Africa’s service production would result in about 41% and more than 24% of trade within Africa. The AfCFTA intends to significantly improve traffic flows across all modes of transportation, including road, rail, sea, and air. Still, these benefits will only occur if regional infrastructure projects are available in tandem with the AfCFTA requirements.

The establishment of the AfCFTA will enhance rail and road infrastructure across Africa. Furthermore, as trade activity expands, specialised transportation services such as cold chain logistics will become increasingly important. Shippers transporting perishable goods will benefit significantly from improvements to rail and road infrastructure and the development of new warehouses. Rail freight will likely grow in popularity due to its low operating costs. As a result, there will be a sustainable shift to multimodal transportation.

As new trade channels emerge, cold chain logistics will expand with an increase in professional freight forwarders and high demand for warehouse operators. Furthermore, the volume of exports will increase because of this. All these factors will help the industry become more competitive. Overall economic growth and enhanced sales processes will result in faster and cheaper shipping and improved connectivity between domestic and international seaports. Currently, the transportation of the highest share of freight on the continent is by road. By 2030, the AfCFTA will require 1.84 million trucks for bulk transport and 247,000 trucks for container cargo. With the implementation of the proposed infrastructure investments, this rises to over 1.95 million and 269,000 trucks. West Africa has the greatest need for trucks to support the AfCFTA, with 39%, followed by 19.8% from West to Southern Africa and 9.9% from Southern Africa to Western Africa.

The World Bank’s estimates indicate that this pact will increase intra-African exports by 81%. Furthermore, within the next 15 years, exports to nations outside of Africa will increase by 19%. One area that will benefit from this new act is manufacturing exports. A 110% and 46% increase in trade volume is the forecast for African and non-African countries. As the industrial sector develops, African countries will be able to diversify their supply networks. As the supply chain increases, there will be an expansion in transportation and logistics activities.

Shippers will gain in various ways from lifting trade restrictions while transferring freight across the continent. It will have a positive impact on commodity pricing as well. Increased consumption will result from lower commodity prices, benefiting producers and shippers. Additionally, abolishing trade regulations will drastically reduce cargo transportation times. It will provide African manufacturers with additional market opportunities and better project opportunities for African logistics companies.

About the Author:
Adjunct Professor of Malaysia University of Science and Technology holds a Doctorate in Business Administration DBA from SMC University Switzerland was a recipient of the 2014 National Productivity Order of Merit Award from the president of the Federal Republic of Nigeria. Madu has over 33 years of related working experience with international corporate exposure in international trade, customs, and maritime as well as transport and logistics/supply chain management. His experience in training and capacity building cuts across all the industries as has been shown in activities too many to list. He has experience working with international agencies like International Trade Centre in Geneva, Commonwealth, The US Commercial Service, USAID, and African Development Bank amongst others. He is also an adjunct lecturer at the Centre for Logistics and Transport University of Port Harcourt, Nnamdi Azikiwe University Awka, and Kaduna State University.

Obiora Madu is the Director-General of the African Centre for Supply Chain, CEO of Multimix Group, and President of the Association of Outsourcing Professionals (AOPN). He is a Fellow of several professional bodies. He is an Advisory Board Member, International Supply Chain Education Alliance ISCEA Malaysia.
Obiora has authored seven books: Exporting – Frequently Asked Questions and Export Value Chain Financing, Agro Commodity Export Guide, Getting Paid in International Trade, Managing Import Logistics, Fundamentals of Logistics & Supply Chain Management, and Modern Warehousing & Inventory Management.

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