Trade Opportunities & Regulations in Sub- Saharan Africa
Kemi Arosanyin Trade Development Specialist, Africa World Trade Center Miami
Addis Ababa, Ethiopia Lagos, Nigeria Johannesburg, South Africa
Slide subtitle Outline
. SSA - General Description
. The Business Environment
Do not add objects or . The Economy
. U.S. – SSA Two-Way Trade
. The Risk Profile
. The Opportunities
. Regional Integration Structure –Ethiopia, Nigeria & South Africa
. Trade Facilitation Update
. Recommendation It’s Time for Africa
“We are excited and very positive about Africa. We are Optimists, but we are realistic optimists - our perspective is deliberately a glass half full rather than half empty one. This is mainly because we believe that it takes a positive mind set to Do not add objects or succeed in Africa. If you set out expecting difficulty and risk, you will find it. However, ours is not a point of view informed by anecdotes and wishful thinking-the numbers speak for themselves ”
Ajen Sita, CEO, Ernst & Young Africa
“Africa is where the future is going to be built”
Mark Zuckerberg, CEO, Facebook Sub-Saharan Africa (SSA)
Sub-Saharan Africa (countries below the Sahara desert)
48 countries are categorized Do not add objects or under Sub-Saharan Africa (World Bank)
Total Population – 1.001 billion (World Bank, 2015)
Population Projection by 2050 –
2.5 billion (United Nations)
Population Growth Rate – 2.7% , Urban Population – 37%
Official Languages – English & French Africa is becoming more attractive
The business environment has witnessed significant economic reforms over the last decade…... SSA account for over a quarter of all reforms globally (37 countries in 2016).
5 countries among top ten (10) improvers globally – (WB “doing business” 2015)
Do not add objects or Restored macro-economic stability
Greater predictability & increased reliability of policy & regulatory framework
Reduced corruption
Investment protection & promotion
intra and inter –regional initiatives towards trade facilitation
Young and growing workforce
• High returns on investment, spinoff on trade
Source: World Bank development indicators 2011 Sub-Saharan Africa Economy
GDP: $1.59 trillion (World Bank, 2015)
Do not add objects or 18% Average GDP Growth: 4.5% 17% 16% (IMF, 2010 - 2016) 15% 21% 13% 21% 11% 21% 21% Some economies remain one 8% 21% 21% 23% 10% of the fastest growing 23% 25% FDI inflow to Africa was about $54 billion in 2015 (UNCTAD, 2016) SSA GDP Growth Outlook
Do not add objects or SSA GDP per capita Growth Trend
Increasing per capital income
Growing middle class
Do not add objects or Infrastructure Investment
Growing Technology
- Mobile Phones: 80%
- Internet Access: 224 million
Rate of Urbanization – 4.1%
› Source: www. trading economics.com (World Bank) U.S. – SSA Two-Way Trade Stats
Do not add objects or Why the declining trend?
Lack of Awareness/Limited Understanding
“Africa: One of the few bright spots on the gloomy global economic horizon”
George Soros, Chairman of Soros Fund Management Do not add objects or Hungarian-American business magnate, Investor , and philanthropist
Negative Perception
“I had low expectations because usually what you read in the U.S. press about Nigeria is only bad news, violence, terrorism and lots of other bad stuff. I was actually positively surprised.
Africa has come as a positive surprise and all in all, I think over the last 20 years, the macro framework for many of these frontier economies has improved.”
Nouriel Roubini, American Economist Professor of Economics & International Business at Stern School of Business, New York University Sub-Saharan Africa – Risk Profile
Africa is seen as a high-risk zone for trade and investment
Ernst and Young (2014) Survey on Africa Attractiveness identified the following top risks:
- Unstable Political Environment
Do not add objects or - Corruption - Weak Security
“People perceive a lot more risk in Africa than there really is” Rob Hersov, Chairman & CEO, Invest Africa
Political Environment is more stable – Successful elections and smooth transfer of power (Nigeria, Ghana)
Regional powers aggressively pursuing peace – ECOWAS efforts in Gambia Reduced corruption – Increased demand for good governance and accountability Where is the Growth?
These 8 countries account for 51% of the region’s population and 72% of its GDP
Do not add objects or Angola Kenya
Cote d’Ivoire Nigeria
Ethiopia South Africa
Ghana Tanzania Where is the Growth?
Do not add objects or Where are the Opportunities? Opportunities for trade and investment in sub-Saharan Africa exist in 3 main areas Infrastructure o Power
Do not add objects or o Transportation Systems o Healthcare o Housing
Natural Resources Consumer Goods . Abundant Land and Water Huge Population . Rich in Mineral Resources Urbanization Rate . Agriculture Growing Middle Class Key Economic Growth Indicators
World Bank Group earmarks $57 billion for SSA over the next three years
McKinsey’s Report
Do not add objects or Household consumption projected to grow from $1.4 to $2.1 trillion by 2025
Business spending projected to grow from $2.6 to $3.5 trillion by 2025
Total spending would increase from $4 to $5.6 trillion by 2025
35 million housing units required in Nigeria, Egypt and South Africa by 2025
EXIM Bank (U.S.) has supported export transactions worth over $7 billion to Africa in the last eight years Trade Facilitation Progress in SS Africa
There’s greater efficiency and improvement in cross border trade in SSA.
Stronger regional integration and economic communities are emerging
Customs administrations have become more efficient due to reforms
Implementation of computerized risk management systems and the extension of operating hours by customs Do not add objects or
Harmonization of customs procedures with neighboring countries and at sub-regional levels resulting in substantial reductions in clearance time.
Electronic Single Windows (SW), linking the various stakeholders in the international trade chain. Customs, customs brokers, banks, traders and several government agencies.
Customs Declaration Document - Customs modernization and automation program which has replaced 32 documents in the COMESA community.
Advance Cargo Information System (ACIS) - Integrated transport logistics management tool for tracking transport equipment and cargo. Regional Integration Network in SS Africa
Do not add objects or ETHIOPIA (EAST AFRICA)
Population: 99.4 million
Area: 1,104,300 Sq. km
GDP (2015): $61.5 Billion
Do not add objects or GDP Growth Rate (2015): 6.9%
GDP per Capital (2015): $1,629
Capital City: Addis Ababa
Ethnic groups: Amharic, Oromo, Somali Languages: English (Business), Traditional (Amharic) ETHIOPIA – Trade Regulations Product Conformity Assessment - Food and food products - Chemical products - Textile, leather, plastic and rubber - Mechanical materials, Electrical & electronics Pre-shipment Inspection Requirement Do not add objects or - Certificate of Inspection (CoI) - Product Certification (Physical inspection at origin or Pre-shipment Verification of Conformity (PVoC) by SGS - Laboratory Testing by ISO/IEC 17025 - Product marking/Labeling
o Certificate of Conformity fee - Minimum of $350 or 0.5% of the FOB value
o Both Value-Added Tax (VAT) and excise taxes are imposed on imports
o Value Added Tax (VAT) of 15% apply on all imports NIGERIA (WEST AFRICA)
Population: 182.2 million Area: 923,768 Sq. km GDP (2015): $481.1 Billion Real Growth Rate (2015): 2.7% Do not add objects or GDP per Capital (2015): $2,640 Capital City: Abuja (Political), Lagos (Commercial Hub) Ethnic groups: Hausa (29%), Yoruba (21%), Igbo (18%) Languages: English (Official), Traditional (Hausa, Yoruba, Igbo) NIGERIA – Trade Regulations
Nigeria runs a Conformity Assessment Program called SONCAP. Product Verification in country of export
- Issuance of Product Certificate (valid for one year) – Flat fee of $300
Do not add objects or Product Certificate is required by importer to open Form M (Import Application Form) - Issuance of SONCAP Certificate per shipment – Flat fee of $300
SONCAP Certificate is required for customs clearance
- SGS appointed to carry out physical inspection /laboratory test
Labeling and Marking
Third party testing must be handled by ISO 17025 accredited laboratory
› Labeling and Marking requirements, all items must be labeled in metric terms exclusively.
› Nigeria uses common external tariff in line with ECOWAS framework
› Goods exempted from SONCAP such as food, drugs and beverages are regulated by NAFDAC SOUTH AFRICA (SADC) Population: 54.9 million Area: 1,219,090 Sq. km GDP (2015): $314.6 Billion Real Growth Rate (2015): 1.3% GDP per Capital (2015): $5,724 Do not add objects or Capital City: Pretoria (Executive); Bloemfontein (Judicial); Cape Town (Legislative) Ethnic groups: Black Africa (79%), White (9.6%), Colored (8.9%), Indian/Asian (2.5%) Languages: English (Official business language), Traditional (11 official local languages) SOUTH AFRICA – Trade Regulations
› The import/export procedure in South Africa is a bit complex involving some administrative hurdles and the following basic requirements: – Uses Single Administrative Document to declare all imports, exports, cross border and transit movements – Importer registration and importer’s code from South African Revenue Service is required Do not add objects or – Import licenses are required for restricted items – Strong regulatory standards for labeling and marking › South Africa has free trade agreement (FTA) with the EU under the umbrella of SACU and it applies common external tariff to third parties including the U.S.
› Tariff schedule has almost 40 different rates and protective tariffs exist
› VAT is about 14% and payable on nearly all imports except some exemptions
› Strict implementation of “equity equivalent” programs which emphasize training and development of local companies - Knowledge/skill transfer - Mandatory industrial localization requirement for foreign firms Sub-Saharan Africa – Trade Challenges & Risk Management Strategies Import/Export controls and regulations can change with little notice or warning; » Focus on Awareness and Compliance Violations are punished by fines, seizures, export bans and can lead to Do not add objects or negative publicity; » Understand Rules and Exemptions and use them effectively Companies need to evolve their own practices to fit each unique business environment; » Use Tools & Resources that aid Robust Compliance Program General Recommendations
Overcoming challenges related to trade in Africa require a long term approach
Use available resources to find the right local partners and clients - U.S. Exim Bank, World Trade Centers Association global network, U.S Embassy, AMCHAM, Chambers of Commerce and Trade Organizations Do not add objects or Participate in trade missions and be open to two-way trade with Africa
Build long lasting business relationships
Engage the services of a competent and experienced clearing/customs agent to help navigate regulatory requirements
Exporting US companies must comply with all regulations locally and abroad
Lastly, be prepared to navigate trade facilitation complexities without losing sight of inherent opportunities in the region. On a Final Note
One of the four pillars of the U.S. strategy toward Sub-Saharan Africa is to “Encourage U.S. companies to trade with and invest in Africa”. The region’s huge population and improving business Do not add objects or environment continue to offer rewarding market opportunities. Do not add objects or Let’s go to Africa Contact Information
Kemi Arosanyin Trade Development Specialist, Africa Do not add objects or World Trade Center, Miami 1007 N. America Way, Suite 500 Miami, FL 33132 Phone: 305-871-7910 Mobile: 786-406-9384 Email: [email protected] Do not add objects or Thank you!