New African Continental Free Trade Area is potential $2.5 trillion target market

Created: 10 May 2018
In March a Rwanda conference of 44 African heads of state produced a framework for trade unity among 54 African countries. The proposed African Continental Free Trade Area (AfCFTA) would be the world's largest free trade area since the WTO was formed. 
 
The aim is to eliminate tariffs on intra-African trade in a market of 1.2 billion people with a gross domestic product (GDP) of $2.5 trillion. If the tariff-removing objectives are met the organisers claim they could boost intra-African trade by 53.2 percent.  
 
The trade dividend will come from the removal of non-tariff barriers too, such as customs procedures and excessive paperwork, through the imposition of technical and sanitary standards, transit facilitation and customs cooperation. 
 
Can it work? Exporters should get themselves in position because this has enormous potential, says Tusha Shar, owner of Hull-based Integrated Power Solutions, which supplies diesel generators and solar panels to Africa.
 
According to Shar, British engineering is well respected in African nations and former colonies, but he warns that the competitive advantage is being eroded as China stakes a claim to the regions. Nevertheless, AfCFTA offers a significant opportunity for British exporters in the years ahead. It will take many years to reap the full benefits of an open market free of tariffs and restrictions practises, but companies should not stand on ceremony. 
 
In the meantime, exporters should target the more developed nations in Africa with efficient ports. Shar targets West African nations, such as Nigeria and Ghana, as well as Kenya in the East. Each has a port that can be a gateway to landlocked, less developed nations. But therein lies the problem that needs to be addressed by AfCTFA. There are restrictions on movement inland to nations such as Eritrea, which make trade unprofitable. If non-tariff barriers can be removed - and the richer nations will be a priority for action - these will become strategically important bridgeheads into landlocked central African countries whose fortunes will benefit from market liberalisation. 
 
"We sell to West Africa in particular but there are blockages now when you want to move goods across from Nigeria to Ghana. There is free movement but it could be better," says Shar. "There is massive bureaucracy involved in getting customs clearance for moving goods from a port on a coastal nation to a landlocked destination like Zimbabwe or Eritrea."
 
Many countries in central Africa are neither rich nor resourceful, says Shar, but he thinks neighbours could emerge as increasingly significant gateways which will bring economic benefits and knowhow.
 
Egypt, he predicts, will become an increasingly important bridgehead between Africa and the Middle East. 
 
As one set of barriers is lifted, another may be put in place, Shar fears. "Africa is definitely the next big growth market but China is in place before us. In some cases, the Chinese can veto what comes in. For example, we used to supply solar panels to one country but a Chinese contractor was the primary source. Once we'd provided the designs, suddenly all their future orders were put through China," says Shar.
 
Still the positives are that British engineering is widely respected across the region. "Our products are in demand but if you are dealing in single digit margins in can be very risky. A single bad order can set you back two years," says Shar.
 
Africa will be a huge market for fisheries too, says Shar. But it all depends on whether liberalisation can take place. "Even getting letters of credit is very difficult at the moment," says Shar. 
 
Tate's Export Guide will bring you regular updates on the changes in customs procedures. 

No such thing as a Bad Brexit - just the wrong clothes

Created: 16 March 2018

London seems to be preparing for Brexit the way it plans for snow. Wait for it to happen, then cancel everything and wonder why nobody was ready.

Those from sturdier parts of the country say there is no such thing as bad weather - just the wrong clothes. We should apply these principles to Brexit. We know events are going to happen, and we don’t know when, or how, or where. But we can at least get some sensible foundations in place. 

IOE&IT Business Member, The Tate Group, has provided us with some tips for surviving market conditions.

 

Don’t get lost in the blizzard of mixed media messages

In the blizzard conditions caused by the gathering Brexit media storm it has become very hard to tell the wood from the trees. It often seems like emotions, rather than facts, are the main currency of mainstream news organisations. It’s no longer enough to report, they now want to interpret events. Encouraging export figures are always tempered with the reminder that this is happening ‘despite Brexit’.

At Tate’s Export Guide we don’t make these judgements. We just concentrate on facts and let you decide what it all means.

Our mission is to provide you the details you need to know about everything from consulates to corruptibility to cargo insurance. We bring you the boring but essential intelligence. We’ll leave the flights of fancy to Newsnight where the ‘experts’ often get their EU terms confused.

There’s no middle ground in the media. We’re either sleep walking into isolation or embracing a brave new world. Our advice is to stick to the facts.

 

Get your paperwork ready for the money lenders - any papers will do

Global corporations can afford to have their ducks in a row by the time Brexit materialises, says corporate banking veteran Ben Martin, founder of Brexit Tracker. But you can emulate them by spending wisely.

Corporations have the advantage of a budget for risk analysis. This is outside the capacity of most importers or exporters. Unless you can afford to pay PWC £2000 a day per consultant, for a number of weeks. But you do need to compile a comprehensive list of all the variables that affect your business, then apply complex mathematical models to simulate the various outcomes.

The money markets dislike uncertainty and venture capitalists are loathed to lend money to companies that don’t obviate risk and display due diligence to their partners in planning for the unknown. 

A food importer from Leicester, for example, won’t be able to calculate in advance the various options that they may be forced to choose from. So strategists cannot pre-plan their responses. They are less likely to be certain, for example, how shifts in wages and exchange rates and tariffs are likely to affect them if international trading condition X, Y or Z is imposed on them.

So they will have to wait until events unfold and embark on day 1 of their research into a response. 

Brexit Tracker is an online service that aims to make risk analysis affordable. We can’t guarantee its predictions, but it can buy peace of mind for your investors. If financiers can see you have analysed risk and shown due diligence, they are far more likely to fund your survival strategy.

“Anyone who does not prepare to have a Brexit strategy will find it difficult to get funding,” says Martin.

 

Dare to be dull

Brexit will be the least of the problems for many SMEs, says Guy Shone, CEO of researcher Explain The Market

“Our research team says business owners up and down the country are concerned about Brexit but it’s not the top concern,” says Shone. Cyber-security, winning new customers, getting investment to grow and launching into new markets are all more important.

“It’s a long time since the referendum result and the UK is still in campaigning mode,” says Shone. 

So stick to your core activities and outsource the legislation regulation to experts - such as Tate’s Export Guide - who can provide you with the precise details you need to solve each problem. As it happens. It’s worth paying an expert to cut to the chase because it’s expensive studying to be a legislation expert. 

 

Get Your Story Straight Then Stick to it

Don’t be panicked into making rash decisions based on crowd anxiety. 

What’s good for you might not be good for the economy “What exporters want or need isn't necessarily what is best for the economy as a whole or what is most conducive to free trade,” says Laragh Widdess, at the Institute of Free Trade. 

For instance, exporters who export mainly to the EU need the future UK-EU relationship to be as similar as possible to EU membership in order to avoid losses. So in their case they want something like EEA membership (the "Norway" option), which would of course rule out the ability to change our trade relationships with third countries. 

On the other hand, exporters who mainly sell in non-EU markets would welcome a looser trading relationship with the EU if it means being able to strike trade deals with non-EU countries that could make their trade into those countries easier and cheaper. 

The extent to which exporting businesses use foreign imports in their processes and where those foreign imports come from will also affect what they need from Brexit. This will differ widely between, say, a business whose inputs mainly come from the EU and a business whose inputs mainly come from outside the EU. So advice needs to be tailored to your circumstances, which is what Tate’s Export Guide’s experts can do. 

 

Keep up with trade news - but only the bits you need to know

Once new trading arrangements are in place, it’s imperative that government out-reach to exporters is extensive, to help them understand the new arrangements. For example training in new customs procedures or rules of origin paperwork. 

“If and when we do trade deals with third countries, government must follow up on those with exporters in a similar way, explaining what the new arrangements are and what procedures must be followed in order to benefit from them,” says Widdess.

Are you confident that they will? Neither are we!

Many exporters don’t use preferential tariff rates afforded by trade deals because they don't know how to adhere to rules of origin requirements, warns Widdess.

“The UK will have to play a major catch-up game to the EU where proliferated trade negotiations are concerned after Brexit. Maybe it will be able to do them faster but the EU has a hell of a head start,” says Allie Renison, head of Europe and Trade Policy at the Institute of Directors. 

So everything is going to move very fast. 

If you tap into Tate’s Export Guide’s experts you can make sure you are one of the exporters getting the full preferential rates.

The Tate Group

Our a range of products and services is design help exporters and importers operate effectively within the complex world of International Trade. We assist companies by providing essential skills and knowledge in trade procedures, enabling employees to handle export orders and international product procurement successfully. Our workshops, trade reference, documentation and software applications form a unique suite of 'tried and tested' services. We are associate members of the Institute of Export and British International Freight Association.