My Endas cost 13,000 Kenyan shillings, which is around $117 US — not exactly cheap, but it still undercuts a few big-name competitors.
However, there was a catch: Delivery service DHL said it could only dispatch the shoes to my home in South Africa if I paid 879 South African rand — around $58 — in import tariffs. That’s about half the value of the shoes. The import duty priced out the African-made shoe and handed the advantage back to Enda’s big global competitors.
As it happens, I went ahead with my order, but others may have been put off. In many ways, it summed up the experience of high costs and logistical challenges that has held back intra-Africa trade.
Back in 1990, Africa’s intra-regional trade languished at around 5% of total African imports, according to the International Monetary Fund. That had improved to 12% by 2017, but there it has remained, well below intra-Asia and intra-European trade. Africa trades far more with Europe than it does internally.
But it also means something of a mental reset for many African leaders. Protectionist policies would have to be lifted, and they would need to accept the fact that locally produced goods would now be competing with those of their neighbors. And the logistics and technicalities remain highly complex.
For example, transporting goods between nearby African countries can take longer than importing from the United States because US goods arrive by sea and air. Poor road infrastructure contributes to the slow pace, but the bigger issue is the different rules that apply at every border post. And goods must be checked, and tariffs paid. A broad trade agreement would remove significant friction from intra-Africa trade.
Logistics aren’t the only issue. Remarkably few African countries have finished products to export. To the profound detriment of economic growth, true industrialization has yet to take off on the continent.
Streamlining trade will certainly make it better but road infrastructure and other physical infrastructure needs upgrading and investment to truly make a dent.
A commodity-producing country can only truly reach its full economic potential if it participates in the entire value chain. The steps involved in taking raw materials to finished product are manifold, but across Africa that journey often ends at the beginning of that process.
The lack of manufacturing capacity in many African countries has meant that raw materials are processed in other countries. Some have blamed multinationals controlling supply chains to governments not incentivizing business to process locally. The cost of building factories from scratch and intermittent electricity supply has also contributed to the challenges of successfully competing with more mature markets. Those costs can be driven down by increasing the continent’s manufacturing base with raw materials processed closer to the point of origin.
If Africa was more connected and was able to make its own goods and facilitate trade across its borders, economic prosperity would surely follow.
Multinational companies predict Africa’s consumer potential is yet to be truly tapped, and now global companies will be increasingly competing with local players that aim to produce, process and supply goods into their own marketplace.