Africa Economic Recovery: The role of digital technology in efficient ports and free trade

As Africa’s economy recovers from the impact of the pandemic, how are ports keeping up? Not quickly enough — according to The Star’s (Kenyan Newspaper) report “Africa’s Ports: Rapid Transformation“. The report points to the fact that the existing infrastructure at many ports is insufficient for current demand. At the same time, port congestion is a critical challenge for ports across the continent.

In August, Nigeria’s main port experienced server failure, which slowed port operations, including goods clearance. The Seaport Terminal Operators Association of Nigeria (STOAN) estimated losses of up to US$55 million per day. In July 2021, South Africa shut down its ports following an attack on Transnet’s network systems. The Port of Lagos in Nigeria is experiencing so much congestion that ships were waiting up to 80 days to enter the port during the first quarter of the year. The Port of Mombasa in Kenya, the Port of Dar es Salaam in Tanzania, and Cape Town Port in South Africa are also lagging in terms of infrastructure.

(TOP: A freighter entering the port of Lagos, Nigeria).

Port congestion causes millions in losses, compounding the challenges of economic recovery in Africa. Even so, the outlook for the continent’s economy looks positive, thanks to the momentum generated by the African Continental Free Trade Area (AfCFTA) — a free trade area that commenced trade on January 1, 2021. World Bank’s Africa’s Pulse forecasts that the sub-Saharan Africa economy will grow by 3.4% in 2021. The report cites appropriate pandemic control, a growing digital economy, and a faster-than-expected recovery in commodity prices as factors helping the region’s economic recovery. It also notes the crucial role of free trade over the next 12 months, with African economies expected to rapidly integrate into regional and global industrial and value chains. The World Bank estimates that by 2035, with AfCFTA in full effect, Africa’s gross output will grow by nearly US$212 billion above the baseline with manufacturing exports up 62% and internal trade in manufactured goods up 110%.

Within the AfCFTA context, how can ports keep up with demands, particularly in terms of customs and efficiency?

The answer is digital technology. Mr. Mene, Secretary General of AfCFTA, explains that digital platforms play a significant role in improving trade efficiency and reducing costs, noting that the effective use of digital technology will enhance the operational capacity of AfCFTA. As Fikile Majola, South Africa’s Deputy Minister of the Department of Trade Industry and Competition, said: “Digital technology is essential for the recovery of productive capacity, trade, and supply chain building in various countries.”

On October 15, Huawei hosted the Smart Customs Online Summit themed “Technology-enabled Smart Customs, Driving Port Modernization Through Digitalization”. Industry experts, including representatives from Huawei, Deloitte, and NucTech, agreed that following the pandemic and considering global digital transformation, most countries are actively digitizing their customs processes. This is building more resilient global supply chains, using technologies such as big data, AI, cloud computing, IoT, and digital twins. Ultimately, the industry is becoming more robust while customs offer better supervision and enhanced services.

“In the last 18 months, we have seen the impact of COVID-19 on customs and other government sectors,” said Augustine Chiew, Huawei’s global government industry expert and Director of Customs and Tax Industries. He highlighted the main features of a future-oriented smart port, including intelligent customs clearance, collaborative command, e-services, and integrated port administration.

In March this year, Huawei launched its global smart customs solution. Yue Kun, President of Huawei’s Global Government Business Unit, said that in the face of globalization, customs offices will play an increasingly important role in promoting national economic and trade development. However, this requires a fine balance of strengthened trade security supervision alongside optimized customs clearance. Going digital can deliver both security and convenience. “We aim to build a secure, convenient, and efficient smart customs solution with our ecosystem partners by capitalizing on our strengths in ICTs such as cloud computing, big data, and AI,” said Yue Kun.

More efficient customs processes will have long-term benefits for Africa’s economy. Studies predict that once fully implemented, AfCFTA economic value-add from tariffs alone will be significant. Currently, African countries impose an average of 6.1% in tariffs, with enterprises trading within Africa facing higher tariffs that those exporting outside Africa. After AfCFTA policies are implemented, 90% of the tariffs on goods traded within Africa will be lifted, increasing trade by 10% to about US$16 billion in the next two to three years.

The region is aiming toward secure, convenient, and efficient customs processes. Following the pandemic, digital technologies will continue to play a key role in generating economic prosperity. There is no doubt that they will be crucial for Africa’s economic growth as well.

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