Unpacking the AfCFTA and Looking at West African Logistics
Category Newsletter: 1 - Head Office
Broll Property Intel, Research division of Pan-African Broll Property Group, takes a closer look at the African Continental Free Trade Agreement (AfCFTA), and the state of the West African logistics sector (focusing specifically on Ghana and Nigeria), in their latest research report titled AfCFTA and Logistics Ghana and Nigeria - H2: 2019.
The Broll Property Intel report reveals that, as of July 2019, 54 African Union states had signed the ground-breaking free trade agreement. Market experts predict that it will comprise a combined GDP of more than US$2.5 trillion, and a total population in excess of 1.2 billion people. With intra-African trade currently limited to around 15%, mainly due to underdeveloped economies and tariff barriers, the AfCFTA is anticipated to increase this to more than 50% by 2022. However, a trade agreement of this magnitude would require a generally robust logistics environment.
When zoning in on West Africa, countries such as Ghana and Nigeria are investment locations which tend to be focussed on. The report unveils that since the discovery of oil in Ghana, the country's logistics sector has flourished. While efforts are being made to develop logistics in other regions, Ghana's key logistics hubs are Tema, Accra and Takoradi. The expansion of the country's logistics sector can be attributed to the increasing demand from retailers and consumer goods manufacturers for quality space. Government initiatives to improve the logistics sector include the Ghana Beyond Aid agenda, and the One District One Factory initiative. With the World Bank rating Ghana 106th out of 160 countries in its 2018 Logistics Performance Index, weaknesses still remain in terms of tracking, timeliness and international shipments.
Ghana is however undergoing a number of infrastructural improvements, with upgrades taking place across road, rail and sea transportation sectors. An answer to the above-mentioned weaknesses is the Tema port upgrade, with phase one of the expansion project now allowing for the world's largest container vessels to enter the terminal.
The Ghana Free Zone Authority (GFZA) was established to promote economic development and regulate activity in the nation's free zones. GFZA parks cover a total of 7,699 acres and include the likes of the Tema Export Processing Zone located in the Greater Accra Region. Other free zone parks include the Ashanti Technology Park, and the Shama and Sekondi Export Processing Zones. Private industrial park developments include the Dawa Industrial Park and Agility Logistics Parks, while Appolonia Industrial Park and the new 405-acre WestPark industrial business enclave are also looked at.
The report further shows that investment appetite in Nigeria's industrial sector remains low, due to infrastructure gaps and policy challenges. The nation's logistics industry ranked 110th on the 2018 World Bank Logistics Performance Index. With the country's industrial market predominantly comprising of lower grade (C/D) stand-alone tenant-serviced warehouses. Multiple industrial facilities have come onto the market, following Nigeria's current economic, policy and regulatory difficulties. This has caused increased vacancy rates, prompting landlords to find alternative uses for their industrial spaces in certain instances.
Nigeria's infrastructure developments span road, rail and air transportation. According to the report, infrastructure has been largely neglected in recent years. However, plans for upgrades within Lagos and Abuja are underway, which will grow port capacities and greatly improve road networks. Two such road infrastructure projects are the Lekki-Epe Expressway development and the redevelopment of the Lagos-Badagry Expressway. Railway developments include the Lagos Rail Mass Transit (LRMT), and the Lagos-Kano Standard Gauge Railway which will connect the Port of Lagos to Kano. Other Nigerian road, rail and air logistics improvements are also discussed.
Serviced industrial parks are new to Nigeria, with only a few operators currently in the country. The majority of Nigerian industrial clusters are spread across key commercial sectors including Lagos, Kaduna, Kano, Abuja, Port Harcourt, and Plateau. Since most facilities in these regions were built over 20 years ago, a lack of modern features is a deterrent. The few modern facilities in Nigeria tend to be owner-occupied and built to specification. Nigerian industrial parks briefly discussed in the Broll report include Alaro City, Agility Logistics Park and the mixed-use Agbara Estate.
As far as Nigerian special economic zones go, there are a total of 17 active free zones - found in Kano, Jigawa, FCT, Lagos, Ogun, Adamawa, Cross Rivers and Akwa Ibom States. These zones offer investors tax exemptions from all federal, state and local taxes, duty-free importation and 100% repatriation of capital, dividends and profits. The report takes a brief look at three of Nigeria's main special economic zones, specifically the Calabar Free Trade Zone, the Lagos Free Trade Zone, and the largest free zone in West Africa - the Lekki Free Zone.
Visit www.broll.com/publications to download the full report.
Author: Broll Property Intel