Why Africa Is a Can't-Miss Opportunity for Freight Forwarders
In today’s unsettled global political environment, freight forwarders have to find new opportunities to help their businesses grow. Policies like sanctions and tariffs can drastically alter volumes to your most popular lanes. To be successful, logistics professionals need to find hidden opportunities around the world.
Africa, the world’s second most populous continent, is rich with trade potential. The statistics point to a region with great trade value: according to the International Monetary Fund, seven of the top-20 fastest growing economies in the world are sub-Saharan African nations, and 12 African countries ranked in the top-10 in export value in the world in 2017.
Production is spread across the continent: while northern African nations benefit from their location near the Mediterranean and Red Seas, sub-Saharan African countries have regularly outpaced the world’s GDP growth average over the last decade.
Read More: Don't Miss These Five Hidden Opportunities in Freight Forwarding
The numbers paint a very promising picture for African trade. While the market isn’t popularized the same way Asia and Europe are, the opportunities are immense. Here are a few things to know if you plan to expand your logistics business to Africa.
The Biggest Ports in Africa are Spread across the Continent
Accessibility is a commonly-noted concern when doing business with Africa -- we’ll go over that a bit more later. But Africa’s most popular ports are spread across the continent’s lengthy coastlines, making direct trade a viable option from just about any entry point.
South Africa’s Port of Durban is sub-Saharan Africa’s largest ocean port and grants trade access to the continent’s southern tip. The Port of Mombasa in Kenya and the Port of Dar es Salaam in Tanzania are busy entryways to Africa’s east coast. The Lagos Port Complex, situated in Africa’s most populous city, connects world trade with the continent’s west coast through Nigeria. And the Suez Canal Container Terminal in Egypt is the gateway to North African -- and Middle Eastern and European -- trade.
Collectively, Africa’s developed container ports actually make access to coastal trade relatively easy from any edge of the world. Africa’s coastal accessibility is second-to-none.
Africa’s Top Commodities are in High Demand around the World
Across the continent, Africa’s top exports are some of the most relied-upon natural and manufactured goods in global industry.
Prominent exported commodities include precious metals, minerals, gas, coal, and crude oil, while perishable goods like coffee, cocoa, cattle, fish, and palm products are also popular exports across the continent. As are precious stones, with some estimates estimating that approximately 1/5th of the continent’s countries list export diamonds.
Aircrafts, ships, textiles, steel, and shaped lumber are some of the most popular manufactured commodities exported globally from Africa.
Africa is an important trade ally to all of the world’s trade powerhouses. The partnerships cultivated with Asia, Europe, and North America are great news for freight forwarders because they hint at high freight volumes ahead:
- China is Africa’s largest trade partner and its biggest patron. China has invested heavily in African countries, and especially Nigeria, because of fuel, unrefined and refined metal, and timber resources.
- Germany, the European Union’s biggest trader, is a crucial export partner for Africa, ranking as the second-biggest partner by export volume for the continent.
- While trade volumes between Africa and the United States have fluctuated over the past decade, import and export volumes between the two have on average doubled since 1999, according to the U.S. Census Bureau.
The trade partnership with the U.S. and Africa has a higher floor than it ever has before; it carries the potential for an even higher ceiling. Aided by the African Growth and Trade Act of 2001, non-fuel goods imported from Africa into the United States have grown sevenfold since 2010 according to the U.N., with manufacturing and the textile industry being some of the biggest beneficiaries.
Intra-Continental Trade Is Getting Better
Of course, ocean ports are only part of the accessibility equation when it comes to global trade with Africa. In the past, a major deterrent to trade with the continent was its many landlocked countries: according to the U.N., 25% of countries in Africa are landlocked. Underdeveloped infrastructure, coupled with little cooperation between countries to improve logistics, made Africa a market that was smaller than it looked, with only a few coastal ports seen as potential trade partners.
Organizations like the WTO and the U.N. have stressed that the path to expedited economic growth for African countries is through improved intra-continental trade. Political and regional disputes have slowed down progress, but renewed interest in collective development through trade is spiking. Two initiatives in particular have signaled a new era of growth and cooperation:
- In 2018, Egypt hosted the first Intra-African Trade Fair, a seven day trade show showcasing the continent’s trade potential
- Also in 2018, 44 African countries established the African Continental Free Trade Agreement, which aims to establish one of the largest free trade areas in the history of the world
While initiatives aimed at strengthening intra-continental trade may not carry obvious benefits to international freight forwarders, many African economic leaders view improved intra-continental trade as a necessity to grow international trade.
The logic is pretty simple:
- the economic growth spurred by African nations trading with each other can help improve logistics infrastructure throughout the continent, in turn making more countries and more of the population accessible to global trade
- A strengthened intra-continental trade economy would shield African nations from fluctuations in global trade caused by terse political conditions around the world, creating a safety net that would help Africa remain a viable trade partner irrespective of international uncertainty
Numerous geopolitical factors show that Africa has all the potential to become a world trade powerhouse. The continent’s trade power is expanding because of its abundant resources, improved intra-trade relationships, and support from the world’s economic powers. Freight forwarding professionals should start exploring how they can expand along with.
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By: Petere Pamela on Feb. 1, 2019, 3:09 p.m.