FRANCOIS FOUCHE AND IAN MACLEOD: Connecting 1.4-billion is an economic imperative

Any economic ranking that puts Singapore at the very top, unchanged since the last time it was reported, you know is one on which you also want to score highly. The DHL Global Connectedness ranking — a measure of “how goods & services, capital, information, and people are moving around the world” — is a case in point.

But African markets have a long way to go if they are to challenge the likes of Singapore on this count. Just five Sub-Saharan African nations appear among the top 100. With the exception of Mozambique, which stayed at 92, every one of them has declined since the last time the rankings were calculated.

Part of the issue is that Africa should trade more with other markets. However, much of the problem lies at home. The continent’s nations don’t trade nearly enough among themselves. In Europe, two-thirds of trade is intraregional and the proportion for Asia and Oceania is not much lower. In Africa, just 12% of trade is within the region.

In short, there is much to be gained by growing trade connectivity within the continent while also growing trade with other regions.

Why does this matter so much? Physical and digital connectivity are powerful enablers of prosperity. We can go back to the great British economist and politician David Ricardo for the most celebrated thinking on this. When we do what we do best, then trade with people around us who are doing the same, we all benefit. The evidence bears this out.

At a macro level, there is a robust correlation between trade growth and growth in GDP per capita.

We can also analyse the benefits of connectedness at a more granular level. For starters, better connectivity reduces hunger. Consider a 2020 study in the journal Food Security, covering 45 African nations, that measured the impact of changes in ease of trade across borders — based on documentation requirements, time and costs — on food security. The authors, Isaac Bonuedi, Kofi Kamasa and Eric Evans Osei Opoku, found that a 1% increase in the factors that make trade across African borders slower and more difficult is associated with undernourishment rising 0.36%.

There is a similar relationship between connectivity and health. A 2021 study covering Sub-Saharan Africa, published in Research in Globalization, looked at the relationship between trade openness and life expectancy. “Trade openness is statistically significant and contributes to health improvement (ie under-five mortality and life expectancy),” the authors — Mwoya Byaro, Juvenal Nkonoki and Mayaya Hozen — conclude.

One of their specific findings is that a 10% increase in trade openness correlates with a 0.25% decline in mortality for children under the age of five.

Low-hanging fruit

Connecting Africa is too vast a project to think of all at once. We need actionable first steps to get us moving. A good starting point is to unblock our border posts. According to a study by Idossou Marius Adom and Immo Schott, delays at Sub-Saharan Africa’s border posts amount to an effective 37% import tax in terms of their economic impact. 

Here we have aspirational examples in the form of the one-stop border post (OSBP). These have been embraced across the continent, albeit with varying practical outcomes. Legal frameworks and operating models are robust, especially in the East African Community, where more than 20 OSBPs are in operation.

Obstacles appear to be technological implementation and interagency rivalries. However, this is a tool that is already demonstrating its ability to grow connectedness.

The more fundamental solution lies in the African Continental Free Trade Area (AfCFTA) agreement. Much hailed, this is a magnificent outcome of political co-operation. Theoretically, it is robust. It has all the ingredients to bring into being the world’s largest economic community and unleash the benefits of free trade.

There is only one problem. The AfCFTA is stuck. Officially signed into life, the agreement is being implemented at a glacial pace. It is up to individual nations to utilise the foundational agreement to bring the intentions to life. For now, it is worth little more than the paper it is written on.

* The Centre for African Management & Markets at the Gordon Institute of Business Science conducts academic and practitioner research and provides strategic insight on African markets. Fouche is an economist and research fellow at the centre; Macleod is a founding member