by Vincent Matinde

5 key ICT infrastructure challenges for Africa’s AfCFTA free trade zone

Nov 03, 2021
Critical InfrastructureInternetTransportation and Logistics Industry

The Africa Continental Free Trade Area (AfCFTA) is the largest free trading zone in the world. Here are the 5 key technology and communications developments needed to make it s쳮d.

tradelens blockchain supply chain
Credit: IBM, Maersk

The Africa Continental Free Trade Area (AfCFTA) is the largest free trading zone in the world in terms of the number of participating countries. Although governments and enterprises have been working to ensure smooth collaboration among countries and regions ever since AfCFTA commerce started in January this year, there is much work to be done on technology infrastructure to ensure the free trade area lives up to its promise of improving the economy of the 55 participating states.

Cross-border payment platforms, telecommunications networks and internet access are ingredients needed to ensure the success of the trade area.

“If inter-market connectivity, data access, and soft infrastructure are critical to the success of trade agreements, then, by addressing these issues early and head-on, the AfCFTA can gain much more traction than past trade agreements,” Wamkele Mene , secretary general of the  African Continental Free Trade Area Secretariat, said in Foresight Africa 2021 report.

Technology adoption has not advanced evenly throughout the continent, however, and lack of reliable ICT infrastructure in certain areas has the potential to strangle the progress of the new trade area. But if planning is done well by government and private enterprise stakeholders, the following communications and technology and communications systems will boost trade within the continent.

Stronger supply chain systems

For goods to move easily across borders, a well-established supply chain needs to be in place. But challenges around supply chain management, including poor communications and transportation infrastructure, have been a pain point for Africa.

The good news is that a fresh generation of enterprises have deployed emerging technology to facilitate the flow of goods across borders.

Start-ups such as Nigerian freight-management company OnePort365 and Kenya-based e-logistics platform Amitruck are seeking to ease the movement of goods through digital tools. These African supply-chain logistics and digital freight-management startups could open up more commerce among member nations.

Amitruck uses analytics and an IoT network to track vehicles and goods, and is supporting supply chain companies such as Twiga Foods, which supplies 8,000 vendors with produce from approximately 17,000 farmers.

On its part, OnePort365 uses digital tools for online booking, management and tracking of international and local shipments. Its data tool gives cargo owners transparent pricing of shipping services, end-to-end.

 African e-logistics companies play a key role in AfCFTA by “reducing transport costs and delays, and improving the quality of service along transport corridors,” said Vera Songwe, executive secretary of the United Nations Economic Commission for Africa in an IFC report.

Already thousands of cargo owners now have an opportunity to take advantage of digital tools, for comparing prices, ordering transport, making payment and tracking deliveries. These modules can make goods cheaper in the market.

A white paper by the World Economic Forum cited the African Medical Supplies Platform’ (AMSP) success in procuring medical equipment from verified manufacturers. Its implementation was done between the African Union and various foundations, corporations and governments globally.

“Its unique interface allows for volume aggregation, quota management and payment facilitation as well as logistics and transportation to ensure equitable and efficient access to critical supplies for African governments,” the World Economic Forum said.

Interoperable payment platforms

Mobile money has become a staple in more advanced regions such as East and Southern Africa. However, it is a direct child of telecom companies passing on the cross-border telecom challenge down to mobile payments.

For businesses to easily pay for goods, digital payments need to be harmonized and interoperable. This challenge has opened up opportunities for startups such as Flutterwave, Eversend and Chipper Cash, which offer digital payments for merchants and cross border money transfers.

Mobile money applications have also opened up opportunities for businesses in Africa as they allow people who do not have traditional bank accounts to transact business. These mobile money apps are now turning into mature payment platforms.

Big players in the field, such as Safaricom’s M-Pesa, for example, have built robust mobile money payment systems. M-Pesa, for example, will allow third party players will be able to use its API in their programs and also launch e-stores within the M-Pesa application.

For the banking sector, the African Export-Import Bank (Afreximbank) and AfCFTA Secretariat launched the roll-out of the Pan-African Payment and Settlement System (PAPSS), a system that will ease cross border payments, keeping in mind the various local currencies in each country.

The system will also save the continent over US$5 billion in payment transaction costs each year, lowering the cost of goods overall.

 “The implementation of the Agreement establishing the AfCFTA will improve intra-Africa trade, necessitating in this regard, the establishment of a payment system to facilitate affordable and efficient cross border trade transactions,” said Wamkele Mene, secretary-general of the African Continental Free Trade Area, in a statement announcing the PAPSS launch.

Cross-border telecommunications

Seamless telecommunications are necessary for facilitating cross-border trade under the AfCFTA and interconnection agreements and rates should be negotiated for ease and affordability, according to an UNCTAD (the UN Conference on Trade and Development) report.

Telecommunications is key to facilitating trade. However, differing cross border calling rates place a cost on businesses across Africa. In East Africa, the implementation of the One Network Area has been seen as a way to reduce roaming costs for the region.

Lowering cross-border telecommunications rates for services in East Africa (Burundi, Kenya, Rwanda, Tanzania, Uganda and South Sudan) could inform the rest of the continent on how to put in place such initiatives to ensure support trade.

By 2025, the GSMA expects unique mobile users in Africa, with an estimated population of 1.3 billion people, to reach 615 million. This means that mobile communication will be critical in doing business and low-cost, cross-border or mobile roaming packages are needed to enhance communication.

Broad internet penetration for cloud services

A stable and reliable internet access that can support is needed to be the backbone of a digitized trade system for the region. Although data centres are being built to support African SaaS and cloud services that can enable trade, broadband penetration in Africa is still lopsided however, with some countries like Kenya, South Africa, Mauritius and Nigeria outpacing their peers.

Regions with low internet penetration or unstable connections are poised to lose out on trade across the country, says Lamah’s Elraaid. Elraaid insists that reliability, not simply providing an internet connection, is key.

“So, while step one is ensuring that the internet can facilitate cross border trade, the (poor) reliability of the internet access is perhaps a more important barrier we need to overcome,” he added.

With regular and consistent access to high-speed internet, communication can go uninterrupted, and allow individuals and businesses to conduct business faster and more regularly.

Nevertheless, sustainable development is needed to achieve world level broadband penetration in Africa.

“To achieve universal broadband internet access in Africa — which could help the continent leapfrog infrastructure constraints in a number of sectors, much like cellphones did with landlines 20 years ago — an estimated $100 billion in investment is needed over the next decade, with a third of it in infrastructure,” said the Foresight Africa 2021 Report.

Unified postal address system

Reliable postal address systems in Africa are non-existent in most countries. Yet, having an addressing system in Africa can ensure easier trade between countries, according to Taha Elraaid, the CEO of Lamah Technologies, a company that is working on a digital addressing system that can support trade in physical goods.

“When it comes to post, deliveries and other forms of communication, we need to be able to contact one another physically, not just digitally. Regions that are lacking in consistent and reliable addressing and postal services should look to others’ successes and find what data or technology can improve this,” he said.

He added that for trade purposes, companies need to know where their target clients live in addition to what choices they’re making. With that information, companies can build more effective infrastructure and services. Having an address ensures that you’re reaching your full target audience, which can then lead to increased and more sustainable trade.