Africa

‘Factory Africa’? Time to get serious about red tape at Africa’s borders

A general view shows activities at Somalia's port of Mogadishu September 21, 2013.

Image: REUTERS/Feisal Omar

Philippe Isler
Director, Global Alliance for Trade Facilitation; Executive Committee Member, World Economic Forum
Share:
Our Impact
What's the World Economic Forum doing to accelerate action on Africa?
The Big Picture
Explore and monitor how Africa is affecting economies, industries and global issues
A hand holding a looking glass by a lake
Crowdsource Innovation
Get involved with our crowdsourced digital platform to deliver impact at scale
Stay up to date:

Africa

International investment remains a critical, and often underappreciated, part of the global economy. Nearly two million jobs were created directly by foreign direct investment (FDI) in 2015, according to a Financial Times analysis. These employment gains in turn support many more jobs indirectly and, as a new paper from the Global Alliance for Trade Facilitation points out, can lead to productivity improvements throughout the wider economy.

The unbundling of modern production into regional and global value chains provides opportunities for economies to attract investments specialized in specific segments of the manufacturing chain. Morocco, for instance, has attracted over US$ 3 billion in FDI into its manufacturing sector since 2011, about two-thirds of this into automotive components. Sri Lanka—another lower middle income country—attracted over US$ 1 billion in manufacturing FDI over the same period across a number of sectors focused on export markets. During this period, FDI into manufacturing accounted for less than one-third of total investment in Sri Lanka, but more than two-thirds of total jobs created by foreign investment.

Only 5% of FDI into Africa goes into manufacturing, but even with the limited levels of FDI into this sector, it has been a major driver of formal employment in countries such as Ethiopia, Tanzania and Uganda. A number of factors drive the complex foreign investment decision-making process, but the ability of manufacturers to move goods quickly across borders is critical, especially for modern value chains.

If shipments are consistently delayed at ports or if the paperwork needed to clear goods for export is overly cumbersome, investors will turn towards other opportunities. Indeed, as the Alliance’s analysis shows, the more complex the manufacturing sector, the better the border environment must be.

A joined-up approach

Investment promotion agencies—key players in facilitating investment into priority sectors—must make the link between trade and investment. Similarly, customs and border agencies must understand the impact that improving service delivery has on productive sectors. Ambitious implementation of the WTO Trade Facilitation Agreement (TFA)—which came into force in February—sends a clear signal to both domestic and international investors that countries are committed to making trade easier and will prove influential in unlocking FDI opportunities, especially in the context of growing south-south trade and investment ties.

African countries are investing heavily in trade facilitation projects aimed at accelerating the movement of goods. This is a difficult task and a fine balancing act as they also have to preserve and secure government revenue. Yet - to maximize the yield of these investments, successfully achieve TFA objectives, and in the end increase FDI, it is essential that such projects are implemented in a coordinated, structured and sustainable way. It is for this reason that the Global Alliance for Trade Facilitation and other similar initiatives have been established. A lot of work still needs to be undertaken but Africa is moving in the right direction.

Have you read?
Don't miss any update on this topic

Create a free account and access your personalized content collection with our latest publications and analyses.

Sign up for free

License and Republishing

World Economic Forum articles may be republished in accordance with the Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International Public License, and in accordance with our Terms of Use.

The views expressed in this article are those of the author alone and not the World Economic Forum.

Related topics:
AfricaTrade and Investment
Share:
World Economic Forum logo
Global Agenda

The Agenda Weekly

A weekly update of the most important issues driving the global agenda

Subscribe today

You can unsubscribe at any time using the link in our emails. For more details, review our privacy policy.

Two-thirds of Africa’s birds of prey are on the brink of extinction. Here's why that could be bad news for humans

Madeleine North

February 15, 2024

About Us

Events

Media

Partners & Members

  • Join Us

Language Editions

Privacy Policy & Terms of Service

© 2024 World Economic Forum