Sell Africa, Buy Africa For Free: Why Does It Matter?
In 2015, Osamede Evbakhavbokun decided it was time to take his online retail across Africa and to the world.
He already runs a successful online marketplace in Nigeria called Gidimall.
The plan, according to him, was to focus on Nigerian made goods.
It was a grand plan. Website was perfected. Marketing was undertaken.
But no sooner than the first order was placed than the reality dawned on him that there was more to the process than the enticing opportunity of a Pan-African e-commerce business.
“It was mainly a challenge of logistics,” he told Bounce News in an interview on Tuesday in Lagos.
According to him, when time came for shipping the goods to his customers, he realised that the cost of shipping the items across Africa was just too expensive.
For instance, the cost of shipping alone was three to four times the value of the item.
“Even with the African country kind of delivery, there was no predicated way of making it happen. It couldn’t just happen. Cost of logistics was a major setback,” he said.
Besides logistics, another challenge he had to contend with was payment.
*Issues around shipping remain thorny for businesses in Africa
To make payment possible, he devised a way to receive the money in dollars, but it was a merry-go-round that added to the logistics headache.
At the time, Nigerian payment cards were not being accepted on PayPal.
So, he had to get the money in dollars anyhow, but after receiving in dollars, he would then try to get the money back in naira.
Osamede had to open an account in naira through a partner. He then linked the PayPal account to the partner’s account so when the money gets to him, the partner would do a wire transfer.
With PayPal, he couldn’t transfer to the Nigerian account that the company had. People could pay with PayPal but that was just it.
He tried with about three countries including Ghana, Benin, Cameroon.
These couldn’t work because, according to him, the only reliable logistics company was the German courier services company, DHL which had presence in those markets.
But there was a problem. With DHL’s last mile delivery, the cost quadrupled.
So, he tried to find a way around it, by using international bus transporters such as Chisco, ABC, etc.
The idea was to convince the end user to go to the transporters to collect their goods. But there were issues around customs searching, immigration, etc.
He gave up on the idea.
Our Reality Across Our 'Wakanda'
Trade between African countries is quite low at about 15%. To put that in context, it means a typical African country conducts more business with say, Britain or China, than with any of its African neighbours.
Côte d’Ivoire, Democratic Republic of Congo, Ghana, Liberia and the Republic of Congo, for instance, all produce palm oil in large quantities, but Nigeria imports its palm oil from Malaysia.
“Trade barriers, red tape and other barriers have stifled trade between African countries forcing it to trade in isolation despite the benefits of doing otherwise,” said an economic analyst, Geoff Oserame in an interview with Bounce.
Connectivity in the continent is also a huge problem. As at today, it is far cheaper for instance to fly to London from Lagos than to Abidjan from Lagos.
*The AU is also proposing a single aviation market to improce connectivity in the continent
A travel operator, Ken Ekerete who spoke to Bounce News said if he had to send clients to Malabo, Equatorial Guinea, he would have to fly them first to Lagos from any part of Nigeria that they may be.
From Lagos, he would fly them to Paris, France before connecting directly to Malabo.
If he had to fly someone to Duala from Port Harcourt, Nigeria. What does he do?
He would have to fly him to Lagos first. Then he would have to fly him to Lome, Togo before connecting to Duala.
Meanwhile the two countries are practically next to each other.
According to Oserame, “The rapidly urbanising Africa with its ballooning population is supposed to provide a thriving market and bring prosperity to its people. But that is hardly the case across the continent today because of trade barriers, making the African market unattractive.”
The population of Africa is increasing rapidly. From an estimated 140 million in 1900, it has grown to a billion by 2010.
According to United Nations “medium scenario” projections, this figure will rise to 2.5 billion in 2050 and more than 4 billion in 2100.
These statistics do not translate to economic opportunities for investors who are deterred by the trade barriers which raise by the cost of investing on the continent.
To address this challenge, the African Union came up with the Continental Trade Free Agreement, CFTA.
The conceptualisation of CFTA started since 2012 and the idea was to create a single continental market for goods and services, with free movement of business persons and investments.
At an African Union, AU meeting in Kigali, Rwanda last week, 44 African countries signed up to the free trade zone.
Sadly, 11 countries including Africa’s biggest economy, Nigeria, and its most-developed, South Africa, did not sign up.
Others staying on the sidelines were: Botswana, Lesotho, Namibia, Zambia, Burundi, Eritrea, Benin, Sierra Leone and Guinea Bissau.
*Despite 1.2 billion population, Africa has failed to translate to a vibrant market
Nigeria backed out at the last minute, citing the need to protect entrepreneurs and local industries.
South Africa said it needed time to consider the terms of the agreement.
Was this a smart or dumb move by Nigeria? Economic experts in Nigeria such as the Manufacturers Association of Nigeria, MAN and Nigeria Labour Congress, NLC believe it was a smart move.
The NLC National President, Comrade Ayuba Wabba, warned in a press statement that signing the agreement was “extremely dangerous” as it was a “radioactive neo-liberal policy initiative…which seeks to open our seaports, airports and other businesses to unbridled foreign interference”.
MAN has also rejected the ratification of the agreement until issues of market access and enforcement of rules of origin are addressed.
But Evbhavbokun thinks otherwise.
According to him, “There is a lot of financial outflow from Nigeria already. Trade imbalance between Nigerian and other African countries runs into billions of dollars annually. With this kind of agreement, we stand a chance at correcting that imbalance.
“So, if you ask me, is there a need for Nigeria to have signed that agreement? Yes, I think they should have signed up to open up the market more.”
He added: “I understand the fears about flooding the market with cheap European goods, but that is where the customs need to step up to do their work and put up the necessary controls. You cannot because of that and close opportunities that would make other businesses flourish.”
A clearing agent, Simon Ebiome told Bounce News that fears of flooding the market is not unfounded, but the government needs to get its act together by providing critical infrastructure such as power to drive manufacturing and make Nigerian products more competitive.
“If we have power for instance, and we sign up to this free trade zone, investors will come in not just because they can produce competitive products but because there is a market for them.
“Lack of power in Nigeria means locally manufactured products can’t compete in the market as cost of production will be high.
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“So, instead of resorting to protectionism, why not think big by providing the necessary infrastructure that will make businesses to compete. In that case, you won’t be scared of cheap European goods flooding the market.”
But the Director General of Lagos Chamber of Commerce and Industry, LCCI, Muda Yusuf disagrees.
According to him, while the dream of the AU to open up the African market is fantastic, but it poses significant risks to Nigeria’s manufacturing sector.
*Muda Yusuf is DG of LCCI
“The CFTA is a good dream, especially in the light of the numerous benefits of a larger market. However, a liberal trade regime within the continent poses a major risk to the Nigeria manufacturing sector.
“The Nigerian industrial sector is highly vulnerable because of its weak competitiveness. Manufacturing in Nigeria is burdened by profound infrastructure challenges and high cost of fund which put tremendous pressure on their production and operating cost.
“These two major factors in the vulnerability of the sector in a continental or global setting,” Yusuf said in an emailed response to Bounce on Nigeria’s decision not to sign up to the trade deal.
“The way forward,” he said, “is to strengthen the competitiveness of the Nigerian industrial sector. It is only then that the country can get value from being part of a continental free trade agreement.”
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