Obstacle course – Africa’s trade suffers from dismal infrastructure, lack of investment and corruption
Apr 16th Economist
It was midday when the lorry on which your correspondent had hitched a ride pulled out of the factory yard in Yopougon, an industrial suburb of Abidjan, Ivory Coast’s commercial capital. By 7pm, when it reached Bouaké, the second-biggest city, the driver had been stopped by police nine times and paid seven bribes. And that was the easy part of the six-day journey taking a cargo of carpets across bumpy, bandit-infested roads to Ouagadougou, capital of next-door Burkina Faso.
Ivorian ministers give the impression that trade in west Africa should be going swimmingly. “We want Ivory Coast to be a hub for the region, we want our goods to go through the country to Burkina Faso, to Mali, to all of our neighbours,” says Abdourahmane Cissé, the country’s budget minister and a former Goldman Sachs banker. On the face of it, the region seems well integrated. Ivory Coast shares its currency, the CFA franc, with its northern neighbours. It belongs to a customs union, UEMOA, that is older than the European Union. Yet according to IMF figures, in 2014 trade between Ivory Coast and Burkina Faso was worth just €376m, or a mere 2% of Ivory Coast’s total trade.
What is true of Ivory Coast is true of much of the continent. Last year 26 African countries signed an agreement to create a “Tripartite Free Trade Area”, combining the existing eastern and southern African trade blocs into one. That ought to be a huge boon for a continent divided by arbitrary colonial borders. Yet the trade figures suggest that African cities are mostly not hubs; rather, they are islands with ports. According to the United Nations, merchandise trade within the continent made up just 11% of Africa’s total trade between 2007 and 2011. In Asia, intra-continental trade was 50%; in Europe, 70%.
This lack of internal trade helps explain why Africa remains poor, and why it has failed to create big firms that straddle national boundaries. Even though the sub-Saharan part of the continent contains over a billion potential customers, in reality it is made up of lots of small markets, each of which has to be conquered individually. That is what prompted The Economist to hitch a ride with a lorry driver and his brother to get a sense of the true barriers to trade, going north from Abidjan via Ferkessédougou, a rough Ivorian border town, towards Ouagadougou.
After a couple of hours of waiting for paperwork, with Michael Jackson blaring through the speakers, the lorry pulled out onto a new, wide, fast-moving road. At the end of 2013 a new toll road opened that goes all the way from Abidjan to Yamoussoukro, the grandiose official capital that Ivory Coast’s post-independence president, Félix Houphouët-Boigny, built around his home town in the 1980s. The road was, as an expat businessman had predicted, “like driving in Europe”. As the driver, Sounkalo Ouattara, revved the engine, he explained that only a few years ago the 220km journey to Yamoussoukro could take six or seven hours. Now, on the six-lane highway, even a heavily laden lorry can do it in three.
The good road comes at a cost, though. The official tolls are fairly modest: 5,000 CFA francs, or about $10, for a lorry to travel all the way. But that is only the start. “You have to pay everyone, even the national-park rangers, you have to pay,” says Sounkalo. “Everyone who has a gun, you have to pay.” His lorry was travelling on a Saturday afternoon, a particularly bad time. “At weekends, all of the senior police officers are not working, so that is when the junior ones make their money.” At 1.22pm a police officer gestured the lorry over with his gun. The lorry stopped while Fousseni, Sounkalo’s brother, got out and handed him 1,000 francs (about $2). At 1.29pm, another road block and another bribe. Then again at 2.21pm, 2.31pm and 3.32pm. Overall, the bribes add up to more than the tolls.
And Yamoussoukro is not much of a destination, even though it offers one of the world’s most egregiously expensive churches and one five-star hotel with “presidential” suites for $420 a night. After stopping briefly to admire the church, your correspondent squeezed back into the cab for the 100km stretch to Bouaké, which has a customs checkpoint. From there, the distance to Ferkessédougou, the second night’s stop, is about 200km, yet it took the Ouattaras’ lorry the best part of ten hours to get there. Just a few miles out of Bouaké the tarmac starts to develop potholes several metres long. At each, the vehicle has to slow down almost to a standstill to cross it, and then gradually regain speed. Some go faster, but they take a big risk. At one point the lorry passed a group of about 30 people and their luggage, waiting by their crashed bus. A smear of rubber led from a particularly large pothole off the road and into a tree.
As the roads deteriorate, so does the security. Though there are police checkpoints every 10km or so—generally a couple of men and a piece of a string or a log blocking the road—they mostly go home at sunset. Vehicles travelling after that are often held up by robbers wielding AK-47s. Even in the day, there is a risk. Luckily the Ouattaras’ lorry was not robbed, but Bright Gowonu, a Ghanaian analyst for Borderless Alliance, an NGO which tries to promote more trade, was less fortunate. Travelling from Ouagadougou to Abidjan on the same route, the lorry he was on came across an armed robbery of a bus, and was stopped at gunpoint. When Mr Gowonu and his driver reached a police checkpoint, somewhat lighter on cash, they were told that there was nothing that could be done. But they were still asked for money for tea and mobile-phone credit.
In the middle of nowhere
According to a study by Saana Consulting, a development-economics firm, carried out on behalf of the Danish government, the cost of moving a container from a port in west Africa inland is roughly 2.5 times what it would be in America. Bribery generally makes up about 10% of that (although for perishable goods such as fruit it can be much more). But the biggest cost is the sheer amount of time swallowed up by poor roads. Just one-third of Africans in rural areas live within 2km of an all-season road, compared with two-thirds of those in other developing regions of the world. Some of the statistics are astonishing. The Democratic Republic of Congo, a country four times the size of France, has fewer miles of paved road than Luxembourg.
The costs of this mount up quickly. A study in 2010 by Africa Country Infrastructure Diagnostic, a research project led by the World Bank, found that farmers four hours by road from a city of 100,000 people produced only 45% of what their land ought to yield. Those six hours away produced just 20%, and those eight hours away produced a mere 5%. Not only do they find it hard to sell their produce, they cannot easily buy fertilisers and equipment or get credit, because doing any of this requires access to a reasonably sized city. And what is true for farmers is true for everyone: being unable to move around means that children do not get educated, job opportunities are missed and businesses are not started.
Things are improving, but not nearly fast enough. In 2009 the World Bank estimated that Africa needed an extra $93 billion a year in infrastructure spending. Last year the Brookings Institution argued in a report that a large chunk of this has now materialised. New ports, roads, railways and power stations are springing up across the continent. Some rely on private finance, others on soft Chinese loans. Next year Kenya will open a new railway line going from Mombasa, its main port, to Nairobi, its capital. Ethiopia has recently opened a new line from Djibouti to Addis Ababa. Both are Chinese-funded.
But progress would be much faster if governments were willing to let private investors build. Too many African politicians favour projects that create opportunities for kickbacks, or which mostly help favoured groups. Governments’ unwillingness to pay the bills for power generated by private companies puts investors off. The projects that do get built are either so profitable that they can accommodate these risks, or else they are funded by the World Bank or China. Sovereign-wealth funds are desperate to invest in long-term projects, but cannot find nearly enough opportunities for reasonably safe investments to soak up the available capital.
Meanwhile smaller fixes could help boost trade. One would be better customs arrangements and more containerisation. At the moment, coastal countries such as Ivory Coast repeatedly check lorries travelling inland to try to stop tax evasion. Duties provide much of the government’s revenues. As Nigeria’s smugglers know, a common ruse to avoid them is for goods “in transit” to a landlocked country to go missing en route. But those checks also slow things down and provide opportunities for bribery. If Burkina Faso were able to collect its import duties at Ivorian ports, lorries could move inland more quickly.
At the final customs checkpoint at Ouangolodougou the crew had to negotiate the lorry’s passage into Burkina Faso with an officious man in a khaki uniform who was adamant that their paperwork was not in order. It seemed ominous, but within a few hours the official was back and the truck was moving again. Within half an hour the lorry was at the border itself—a thin river, with the final barrier a simple gate guarded by a couple of sleepy soldiers, where your correspondent descended.
A decade ago, this was rebel-held territory and there was no trade at all, so those carpets crossing the border represent an improvement. Yet barriers to trade in goods are only part of the story. If Africa is going to become more prosperous, cross-border investment, too, will have to become a lot easier—and that still seems a long way off.