What constrains Africa's exports?
Abstract What is the binding constraint to Africa's exports: transit, paperwork, or ports and customs costs? We use detailed data on the breakdown of trade times to answer this question. We find that transit costs are the most constraining. A one percent reduction in inland travel times leads to a 1-2 percent increase in exports. Put another way, a one day reduction in inland travel times translates into nearly a three percentage point reduction in all importing country tariffs. In contrast, higher times in the other areas are not robustly significant in reducing exports. We control for the possibility that greater trade leads to improvements in transit in a three ways. First, we examine the effect of trade costs in a transit country on the exports of landlocked countries. Second, we use a sample of food products, ranging from perishable goods where time is most critical to preserved goods, and show that transit costs reduce exports by relatively more for goods with a shorter lifespan. Third, we show that transit times have a greater effect on existing exports, while other costs also affect new exports. One explanation for the domination of transit is that it is associated with more uncertainty than other costs. Our results imply that improvements in moving goods inland must be included in trade facilitation programs in Africa.
Earlier work has shown that delays in getting goods from the factory gate onto the ship hinder
exports more than foreign tariffs do (Hummels (2001), Djankov, Freund and Pham (2010), and
Portugal and Wilson (2009)). This is especially debilitating for Africa’s exports because of extreme
delays. This suggests that improving trade facilitation in Africa would significantly boost exports.
But there are different ways to accomplish this, as the time delay has three distinct components:
documentation, transit time, and port handling and customs clearance. In this paper, we explore
whether these delays are equally burdensome or whether one of these binds relatively more, using
detailed data on average trade times from the World Bank’s Doing Business report.
Bureaucratic delays are the longest, taking 19 days on average. There is a lot of variation
across countries. For example, it takes 36 days to process export documents in countries such as
Angola, Zambia and Niger. In contrast, in Swaziland, it takes only 5 days to produce all necessary
export documents. Bureaucratic delays may be especially burdensome if they change often, making
them difficult to predict, or if officials use them as a means to extract rents. In contrast, documentation
procedures may be less problematic if they are predictable and can be done in advance or if there is
learning by doing.
Customs and ports delays are the second longest, taking on average 9 days. They are less
variable than documents. Customs and ports could be especially restrictive if there is a hold-up
problem. Once the goods arrive, customs and port authorities could extract high rents by delaying
goods. In contrast, if customs and ports are reliable (but slow) or if exporters can pay for faster
service they may cause fewer problems.
Transit costs are on average the shortest, taking 7 days. But, again, there is a lot of variation.
For example, it takes 37 days for the goods to be shipped from Bujumbura (Burundi) to Dar Es
Salaam port (Tanzania) and only one day within Gabon. Transit costs may be less burdensome if
economic activity has developed endogenously, close to ports and borders when transit costs are large.
However, they may be more constraining if there is a lot of uncertainty that cannot be avoided.
The main contribution of our paper is to understand whether different types of export costs affect
trade differently. We use a modified gravity equation that controls for importer fixed effects and
exporter remoteness. An important concern with this approach is that the volume of trade may
directly affect trade costs. The marginal value of investment in trade facilitation is higher when trade
volumes are large since cost savings are passed on to a larger quantity of goods. In addition, many
time-saving techniques, such as computerized container scanning, are only available in high-volume
ports. Alternatively, increased trade volumes could increase congestion and lessen the efficiency of
trade infrastructure. Thus, while more efficient trade facilitation may stimulate trade, trade is also
likely to directly influence trade facilitation.
AERC RESEARCH PROJECT ON EXPORT SUPPLY RESPONSE CAPACITY CONSTRAINTS IN AFRICA
RELEASING EXPORT CONSTRAINTS: THE ROLE OF GOVERNMENTS
Over the past two decades, developing countries have progressively increased their share of global
trade from just under one-quarter to about one-third. Increased participation in world trade has been
facilitated by the diversification of exports. The share of manufactures in total merchandise exports
of developing countries has increased from 35.1 percent in 1985 to 65.8 percent in 2004 while the
share of developing countries in world exports of manufactures increased from 14.5 percent in 1985
to 30.3 percent in 2005. Developing countries have also diversified their export markets. The share
of developing country markets in total developing country exports increased from 27.8 percent in
1990 to 39.4 percent in 2004.
These bright figures hide important regional differences. In fact, Asia and particularly China account
for most of the change. While developing Asia's share of total world exports increased from 11.7
percent in 1985 to 21.5 percent in 2005, Africa's share decreased from 4.3 percent to 2.9 percent of
total exports over the same period. Similarly, while the share of manufactures in Chinese exports
increased from 42.2 percent in 1985 to 71.4 percent in 1990 and 90.6 percent in 2004, their share in
African exports increased from 19.9 percent in 1990 to 28.6 percent in 2002 only to fall back to 21.2
percent in 2005 due to the raise in the value of oil exports.
Africa's poor export performance and its failure to integrate in world trade are associated with poor
economic performance and lagging development. Much has been written about the linkage between
exports and growth. While there seems to be almost a consensus that export performance matters
significantly to development in small low-income countries, the nature of the relation between export
performance and growth is not completely clear.1 Empirical evidence suggests that exporting firms
are more productive than non-exporters but the debate over the reasons behind this observation is far
from being closed. On the one hand, exporting could contribute to enhanced productivity. On the
other hand, the higher productivity of exporters could reflect the self-selection of the more productive
firms as exporters.
Africa's Hidden Wealth of Business Opportunities
It's hard to feel upbeat about Africa. The continent seems perpetually mired in poverty. Some of its "leaders" rank among the most corrupt and brutal on earth. Infrastructure barely exists in many areas. Politically manipulated famine and genocide threaten some populaces. Disease runs rampant, and the ability to treat it remains rudimentary.
And forget about business. Indeed, even if you read the business and financial press carefully, every issue, front to back, you won't find more than an occasional story about African businesses—or business in Africa. Business just doesn't seem to be a priority in Africa.
Or does it? While most of us have trained our eyes in recent years on the rapidly developing economies and companies of China, India, Eastern Europe, and Latin America, parts of Africa also have surged.
Some African economies, thanks to economic and political reforms, are growing impressively, bringing new wealth to the region and making local companies attractive merger-and-acquisition targets. During the July-September quarter of 2010, for example, Japan's NTT (NTT) announced plans to purchase Dimension Data, a South African-based IT powerhouse with operations in 47 countries, and Wal-Mart (WMT) made known its intention to buy a controlling share of Massmart (MMRTY), the South African operator of nine wholesale and retail chains in 14 sub-Saharan countries and the third-largest distributor of consumer goods on the continent. (Massmart shareholders approved the Wal-Mart takeover in mid-January.)
SUB-SAHARAN AFRICA HAS AN HISTORIC OPPORTUNITY TO EXPAND SIGNIFICANTLY IN THE COMING YEARS
The objective of this report is to showcase the existing and coming business opportunities in sub-Saharan Africa (SSA), as well as provide input on how these can be captured. The report is based on approximately 90 interviews with organizations and companies, reports of the region, and the Swedish Trade Council´s experience from projects in the region.
The sub-Saharan economic environment has become increasingly interesting for companies in the last decade. GDP (Gross Domestic Product) has tripled for the region in average and some countries have shown an even stronger growth. Improved stability and political reforms have meant increased prosperity across the region. The positive development with strong growth could very well follow the pattern seen in Asia.
Seven out of the ten fastest growing countries in the world are currently located in sub-Saharan Africa. Angola is the fastest growing country in the world, closely followed by Mozambique, Ghana and Zambia.
South Africa is the most mature market with the greatest number of interesting industry sectors and has the largest economy. It is also a common choice as a hub for the whole sub-Saharan region. Nigeria is the most populated market with substantial future possibilities, and is currently experiencing strong growth based mainly on oil and gas. Kenya is a fast growing hub for the eastern Africa region with diverse economies from agriculture to the upcoming ICT-industry. Also smaller countries should be considered, as stability and ease of doing business make market access easier; examples of those are Botswana, Namibia and Ghana.
Despite the overall positive development in the region, there are still risks, mainly associated with political risks and in some parts also corruption. The strong dependency of global raw material prices is both an opportunity and a risk for future development
Boom time for Africa's mobile phone connections
No longer a one-trick pony, investors are turning their attention away from mineral extraction and focusing on the burgeoning demand for mobile technology
TAGS: Africa, applications, business growth, cellular connections, ICT, mobile phones, smartphones, subscribers
According to The Economist,in the past decade six of the world’s ten fastest-growing economies were in Africa. Investors are flooding into the continent from all corners of the world as the untapped business opportunities in Africa become more apparent. And while mining and oil remain high on the local business agenda, infrastructure investment, the consumer market, and ICT have become ‘hotbeds’ of activity.
In the middle of this mobile explosion, Africa has overtaken Asia Pacific as the world's fastest-growing region in terms of cellular connections. Mobile phones have become increasingly sophisticated featuring applications that revolutionise the way we live and work. IBM has estimated that by the end of 2012, there will be an estimated 735 million mobile subscribers in Africa.
Smartphones and internet-enabled feature phones are providing a platform for innovation and creativity that allows for new opportunities for business growth in Africa. Let’s examine how some of these platforms have transformed the continent.
Internet connectivity
Mobile phones are providing people who cannot afford computers, access to the Internet. Connectivity is the basis of all communications and has helped bring Africa to the rest of the world. Farmers are able to get tips on when to plant their crops and when the next rainfall will be. Business owners can decide when or where to sell their goods by researching the market conditions. Oxford University is even using mobile technology to help improve access to water in rural communities by using ‘smart hand pumps’. Many rural communities rely on hand pumps to receive water and they often break or are left unrepaired. In August this year, a pilot project will be undertaken to install data transmitters that work by sending a message to the national water managers, so that they may know where faulty pumps are. This type of connectivity is empowering people and creating a better standard of living that previously did not exist.
Healthcare
Mobile phones can provide real-time advice and diagnosis to people who do not have access to doctors. There has been a variety of mobile health (m-health) projects on the continent. These mobile applications and platforms can monitor disease outbreaks and provide diagnosis and treatment to users all over Africa.
Banking
Mobile banking was born in Africa and used for the first time in Kenya. It creates new jobs and business opportunities, promotes entrepreneurship, and brings a better life to people all over the continent. In the past, the unbanked were forced to rely on carrying cash, but now they have the option to transfer money more securely via their mobile phones giving them peace of mind that they can transfer cash to family when and where needed. The growth has not only bridged geographical divides, but has helped overcome challenges of inequality and restrictions to access valuable information and services.
Education
M-learning enabled by wireless access, offers new opportunities for engaging learners. It is convenient, collaborative and instantaneous learning. MXit, the popular chat application, created an app “Dr Math” which has allowed tutors to support students over their mobile phones. The possibilities for M-learning are endless and can help to overcome problems of textbooks being unavailable, lack of electricity and poor infrastructure in classes. M-learning can also be used by teachers and tutors in a variety of ways including quizzes, tests, learning games and peer-support.
Smartphones have led this revolution by allowing the continent to meet the rest of the world. And they are becoming more affordable with some smartphones costing as little as $100. TNS Global Market Researchrecently conducted a study that found that cost conscious Chinese smartphones have started to force the rest of the mobile manufactures to follow suit by lowering their price points in countries like Nigeria, where there are the highest numbers of smartphone users in Africa. But not only Nigerians are cost-conscious. For Africans who cannot afford smartphones, internet-enabled feature phones also offer access to services at lower costs.
Africais revolutionising how the rest of the world thinks about mobile technology by utilising every available means of mobile technology. But more research is still required to assist investors in understanding the unique needs of each of the countries in Africa. The benefits that mobile growth has brought, and will continue to bring to Africa will far outweigh any operational costs. Mobile operators and stakeholders from around the world are coming to invest in the continent and the benefits are slowly becoming visible. By continuing to improve the quality of life in some of the world’s poorest countries, mobile phones will provide inexpensive access to mobile content that can offer innovative solutions to local problems.
Yaron Assabi is the founder and CEO of Digital Solutions Group, offering communication and technology solutions for businesses http://www।dsg.co.za/
UK export and import in 2011: top products and trading partners
Which products does does the UK export, and where does it export them to? Read on to find out
Last week, figures from the automotive industry showed a decline in UK car sales. They also shone a light on the UK's third biggest export - eight out of 10 cars built in the UK are exported.
HM Revenue and Customs releases monthly figures for UK trade. According to the latest figures from October 2011, the UK's biggest export in the year to date was nuclear reactors, boilers, machinery and mechanical appliances (including parts thereof). Mineral fuels, mineral oils and products of their distillation,bituminous substances and mineral waxes followed in second place, although incidentally it was also the most highly imported product in 2011 rising by 46% on the year.
Vehicles other than railway or tramway rolling-stock, and parts and accessories thereof ranked as both third highest import and export. In the year to date (October 2011) the UK exported £23bn worth and spent £32bn on importing these items.
The United States received the most British export goods last year, followed by Germany and France. The top trade partner for imports was Germany, followed by the United States and China. The UK exported £31.7bn worth of products to the US.
Check out the tables below for top trading partners or download the spreadsheet for the full data on the UK's top exported and imported goods year on year.
What can you do with this data
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