An integrated logistics framework to accelerate reshoring,
job creation, and trade.
For Africa to achieve significant economic growth requires a rethink of its logistics infrastructure. Existing transportation involves a traditional truck-rail-air-sea service capability unsuited to today’s needs.
The competitiveness of the continent has further been impacted by its predominant export of raw materials with the importation of manufactured product.
This is characterized by China becoming Africa’s major trading partner with bilateral trade at $185 billion USD (2018) and a major negative trade impact. South Africa’s trade deficit with China alone was approximately $8.5 billion (2018).
Africa’s accelerated growth, therefore, requires a competitive environment motivating the reshoring of manufacturing and processing activities.
This involves the creation of a multimodal transportation network connecting a new generation of sea-air-land port, logistics gateways, and development zones.
Reshoring and Intra-Africa Trade
The reshoring of manufacturing to the continent as part of a new model is motivated by:
- the top 5 imported products from China being electrical machinery, vehicles, articles of steel, plastics, and articles thereof (manufactured items).
- the recent logistics infrastructure in Africa being shaped by the Chinese Belt and Road Initiative, without a focus on intra African trade.
Consequently, a new development solution incorporating both the physical (hard) and virtual (soft) infrastructure must consider:
- the creation of an integrated network of manufacturing/processing locations, connected by efficient intra African and International transportation services
- making use of the knowledge gained from other transcontinental trade agreements such as Mexico, the USA, and Canada
This approach benefits from the synergies gained through collaborative manufacturing / processing and agricultural / food-driven activities. Cross border efficiencies being achieved through improved Customs and Regulatory techniques and functions.
Integrated Transportation and The Supply Chain
Transportation options were originally designated by mode (sea-air-truck-rail), while today’s manufacturing and distribution activities require the use of multiple modes as a continuous process.
Product is moved according to a designated level of service and cost, which can be time critical or time definite. This is an integrated operational function.
In addition, today’s manufacturing and distribution requires higher levels of response and flexibility. This was initially recognized by the Integrators (DHL-FedEx-UPS) followed by other transportation providers.
Today’s world markets further include a focus on e-Commerce and omnichannel logistics, both of which require a broadband capability.
Reshoring manufacturing to Africa, therefore, requires the rethinking of the existing situation.
Catalyst Development Zones
The first Special Economic Zones established at coastal locations, such as Shenzhen-China, focused on export-driven industrial development. These made use of Hong Kong’s deepwater harbour and international airport.
Subsequently, the internationally driven Belt and Road ventures established State Supported Free Trade Zones and Industrial Parks. Some of these were in Ethiopia, Nigeria, and Zambia, not always achieving significant levels of success.
These were based on traditional concepts, not part of an integrated multimodal solution.
To achieve accelerated economic growth, new developments must be part of an integrated cross border solution, including:
- logistics gateways
- manufacturing and processing centers
- agro-industrial production areas
- associated sea-air-land ports
- secure and bonded transportation corridors
- broadband infrastructure-connectivity
- a common set of standards/protocols
- new business incubator/training ventures
This approach would make use of free trade agreements on a regional, continental, and intercontinental basis.
Benefits of Trade Agreements
The benefits of a free trade agreement go beyond the facilitation of the customs and regulatory process, by the integration of cross border manufacturing and production activities.
While initial criticisms of the Mexico, USA, and Canada arrangement included potential losses to the lower labour cost locations, this has evolved into a win-win situation.
NAFTA (North American Free Trade Agreement), created 20 years ago, successfully expanded trade between the countries meeting a secondary goal to make the participants more competitive in the global market place.
Benefits over this period include:
- an increase in trade from $290 billion (USD) to 1.23 trillion (a quadrupling)
- a lowering of prices including energy and food with reduced inflation
- increased economic growth particularly in the fields of manufacturing, including automotive, agriculture, and services
- creating jobs through synergistic activities (cars manufactured in the USA sourced components from all)
- increased FDI (Foreign Direct Investment), where US entities invested $391.2 billion into Canada and 109.7 billion into Mexico (2017).
Further to government involvement, the majority of the investment was by the private sector. This was motivated by opportunities created within a competitive environment with direct market access.
An African Development Scenario
For Africa to benefit from its existing trade agreements, taking advantage of its reshoring opportunities, requires the implementation of a new development model.
This would build on its present infrastructure and capabilities creating a competitive cross border capability.
An objective would be improving the connectivity between individual elements of the program. These would incorporate sea-air-land ports, manufacturing/processing zones, and agro-industrial locations.
Private sector involvement and investment in the infrastructure and development zones would be motivated by:
- creating a new manufacturing/ transportation/logistics capability
- addressing human resource issues including labor availability
- considering the regulatory environment with associated benefits or incentives
- achieving financially sustainable opportunities
Examples of developments which would be an integral part of such an initiative would be:
- the Dube TradePort and King Shaka International Airport as part of a KZN Triport (sea-air-land) capability
- the Tambo Springs Logistics Gateway, with cross border rail connections twinned with the OR Tambo International Airport and other ports (as a prototype development)
- other existing cross border inland-sea ports such as Walvis Bay and the Trans-Kalahari Corridor
- a new generation of additional inland ports and industrial zones (not the traditional container depots) connected by efficient intermodal rail.
The goal would be to involve the private sector as participants and/or investors in individual ventures as part of the program. This reduces the public sector’s capital involvement while seeking financially viable opportunities.
Such a development framework would stimulate job creation on the continent, while offsetting budget deficits generated by the importation of large amounts of manufactured product and foodstuffs.
By Franco Eleuteri
Franco Eleuteri is a recognized specialist in the development and implementation of internationally competitive solutions in the fields of manufacturing, distribution, sea-air-land transportation and master developments. This is a result of knowledge and expertise gained on projects in North-South America, Europe, Asia, and Africa, working with both the public and private sectors.