African businesses struggling to compete on global market due to high shipping costs
The high cost of shipping international cargo is a major challenge that African businesses face in the global market. According to Benonita Bismarck, the Chief Executive Officer of the Ghana Shippers’ Authority, the multiplier effect of these high transportation costs leads to a consistent rise in the general prices of goods and services, which adversely affects economic growth. As a result, strategic measures are needed to reduce transportation costs and improve competitiveness in order to benefit both shippers and the people.
The African Continental Free Trade Area (AfCFTA) is expected to increase intra-African trade demand by 28 percent, requiring nearly two million trucks, 100,000 rail wagons, 250 aircraft, and more than 100 vessels by 2030, according to a report by the World Economic Forum. However, high transportation costs have been a bane to Africa’s international merchandise trade, both within and with other continents. It is well-documented that transport costs to and from Africa have always been far higher than the global average, with freight rates between African countries higher than those to other continents. This is largely attributed to the fact that most cargoes to and from Africa have to be transhipped through other continents, particularly Europe.
The problem of high transportation costs is not new, but it has been exacerbated by the COVID-19 pandemic. Three years since the pandemic hit the world, the global economy and international maritime transport are still recovering from its devastating impact, with freight rates going through the roof. To address this issue, the Union of African Shippers’ Councils (UASC) Committee of Experts on Transport Costs was inaugurated in Abuja, Nigeria, in October 2021, with the principal objective of tackling the seemingly intractable problem of high transportation costs of international cargo in the sub-region.
During the meeting, Abayome Adewuyi, Assistant Director of Trade Services at the Nigerian Shippers Council, called for measures to be taken to address the problem, stating that the UASC Committee of Experts on Transport Costs would not continue to watch while foreign shipping companies exploit the sub-region with higher freights and surcharges. He stressed the need to thoroughly examine why the transportation cost component of commodities in the sub-region is more than 35 percent, while it is less than 10 percent in other developing economies and less than 5 percent in developed economies. He urged participants to be open and free to present the positions confronting their various countries and provide all the measures that have been put in place to address this trend, which is injurious to the economy, leads to the high cost of doing business at ports, and limits the growth of indigenous shipping companies.
The high cost of shipping international cargo remains a significant challenge for African businesses seeking to compete in the global market. Strategic measures are needed to reduce transportation costs and improve competitiveness for the benefit of shippers and the people. The AfCFTA is expected to increase intra-African trade demand, but this will require significant investments in transportation infrastructure to reduce the reliance on transhipment through other continents. The UASC Committee of Experts on Transport Costs is a step in the right direction, but sustained efforts are needed to address this issue and unlock the potential of African businesses in the global market.
