DHL agony over intra-trade barriers in Sub-Saharan Africa
Windhoek – The Managing Director of DHL Express in Sub-Saharan Africa, Charles Brewer, says that African countries are quite restrictive when it comes to cross border trading with a lot of red tape, manual paper work, slow finance flow and frustrating border customs that can also discourage international companies from doing business in Africa.
He says that intra-trade in Africa is not easy as less than 20 percent of airports have no more than two flights per week, while infrastructure is another impediment, where in some countries it takes longer to ship goods, which increases the cost of logistics.
Brewer says that he hopes things will improve with the signing of free trade agreements on the continent to ease the movement of goods between countries, lessen bureaucracy and get rid of red tape. Last week, three regional economic communities COMESA-EAC-SADC launched a Tripartite Free Trade Area bringing together 26 African countries. The Tripartite FTA is a forerunner to the Continental Free Trade Area that the African Union hopes to establish to ease trade and investment on the continent.
Brewer adds that while 12-17 percent of goods are produced in Africa, most of the goods procured are actually imported, but the difficulty of cross border trading perpetuates problems of manufacturing.
He says that according to Ernst and Young financial advisory firm, potential overseas investors have identified the key factors that impedes them in doing business with Africa as unfavourable political environment, corruption, security, basic infrastructure, skills and regulatory policies.
Brewer maintains that another key challenge that also discourages international companies from doing business in Africa is that they do not appreciate or understand the culture of local markets, which is why quite a few regional multinational companies leave or close their doors here.
“The more connected a country is, the easier it is to do business,” he reckons, saying that Africa is the least connected continent on the globe and something needs to be done to improve the situation.
However, he says that Africa is improving fast as in East Africa where the business community has realised the benefits of opening up borders to make trade simple in order to create more jobs.
He says that there are good examples of countries that are taking trade forward and making their region easily accessible, such as Tanzania, where for instance, it used to take a 100 days to move (exports) from Dar es Salaam to Rwanda but now takes only 30 days or less because of less bureaucracy.
“Trade is challenging (in Africa) but not as negative as perceived. We will see significant change in the landscape, mostly with the African Union, SADC, COMESA, TFTA (Tripartite Free Trade Area) that can create the European Union of Africa, so that people can move across border as easy as it is in Europe.”
He said that African leaders have also realised the importance of liberalising their borders with the Cairo-Cape Town Free Trade agreement, which was signed recently by 26 nations for free-trade and creating a common market from Cairo to Cape Town, spanning half the continent.
The agreement will integrate the East African Community, the Southern African Development Community (SADC) and the Common Market for Eastern and Southern Africa (Comesa).
Brewer said that the recently held World Economic Forum in Cape Town also had a subtle clear changing tone on Africa’s growth and potential.
“In the last three to five years, the story has been very positive around Africa’s growth. Africa’s potential, whether it be trade or poverty, generally there is a very positive message – the glass is still half full. Opportunities for Africa to realise its potential are still very positive,” he said.
But there are setbacks, such as in the last 12 months where in Sierra Leone, Guinea and Liberia, the Ebola virus not only impacted on lives but also destroyed economies, because of the negative efffects the virus had on tourism and business investment in Africa.
“People don’t want to come visit Africa because of Ebola,” he said, adding that there are also negative connotations, because of wars in the Democratic Republic of the Congo (DRC), South-Sudan and Nigeria, where markets are generally very unstable, creating negative perceptions about Africa.
He said that South Africa was also another country, where despite being the biggest market in Africa, it was growing far more slowly than the rest of Africa, because of the Xenophobia issue, load shedding problems and human resource issues due to strikes.
Brewers says when all these issues are taken into consideration, the general sentiment is that Africa has moved down as a destination for investment and people are a little more cautious and nervous than they were 12 months ago.
“But those of us in Africa still have a positive opinion on its potential. If you are not in Africa and you read of these reports, you would be left less positive than you were last year. We (DHL) have been here more than 35 years, we know you have to be patient, you have to commit and if you take the longer route the returns are big,” he said.
Brewer says that DHL has a high market share in Sub-Saharan Africa and is a good employer, with consistent market growth in Botswana, Angola, South Africa and Namibia.
He added that until recently in the northern part of Namibia, to ship internationally you had to drive to Windhoek or Walvis Bay as you could not access an express operator like DHL.
DHL has now expanded from three to 52 access points and aims to bring the number of access points to 100 before the end of this year and eventually to 300 in the next two years to make shipping accessible and affordable.
“There is a growing need for infrastructure development in Southern Africa,” he says, adding that in some markets or countries lack of infrastructure is still very challenging, whether it is roads, ports, systems, bureaucracy, electricity or entry at borders.
Brewer says that the net result of that is that it drives up the cost of logistics by six to nine times compared to Europe or elsewhere.
Brewer is a supply chain professional and specialist in international shipping with industry experience spanning over 30 years.
He started his career with DHL UK in 1984 as a customer service agent before moving up the ladder to his current position as Managing Director, where he is also responsible for finance, information technology, operations, customer service, human resources and commercial activities in the Sub-Saharan Africa region.