This weekend, I stumbled upon a really interesting article stressing the vital importance of a functioning logistics sector for innovation and economic growth to flourish in Africa. Apparently, in East Africa the freight and transport costs are among the highest in the world, with freight logistics costs per km being more than 50% higher in East Africa than in Europe (Source). It goes without saying that this is reflected in reduced competitiveness of goods exported from East Africa. Thus, suboptimal logistics networks create a major barrier for innovation and economic growth.
An additional factor that makes trade across national borders more costly are national taxes that need to be paid when delivering products across borders. As the article states:
„Increasing regional trade, and making it more efficient, leads to natural business development opportunities and for entrepreneurs to trade with each other, across borders. Physical logistics aid this, but governments continue to stymie regional trade by imposing import and export duties. This is an administrative and financial barrier aggravated by trading across multiple currencies.“ (Source: venturesafrica.com)
How can these infrastructure problems be dealt with? As the article states:
“The key is to understand what the African-specific challenges are and work around them to arrive at innovative solutions that work for the continent. For example, the Innovation Prize for Africa 2015 showcased hydrogen-fuelled cabs with adaptable, renewable body shells and a mobile application to book cab rides payable with cash or credit. The minicab service fills the gap for commuters who need organised, safe and affordable micro transport within a three mile radius. This environmentally friendly taxi service also eases traffic congestion in cities without causing pollution.” (Source: venturesafrica.com)
I read up on an interesting project that was mentioned in the article called LIFT (Logistics Innovation for Trade) that aims to match funding for projects that have the potential to reduce the cost and time of transport and logistics in Africa. I was keen to read more about their ongoing projects, but unfortunately they are still in the process of building their website, so I couldn´t find any more information.
All this goes to show that, for innovation to flourish in any given region it is important to establish the necessary preconditions first. This is something that I have been trying to stress in my blogposts for a while. For example, I have recently done a post about the impact of online censorship on innovation (read it here).
The future will show how these challenges will be dealt with. I am guessing that addressing governments for deregulation of financial trade barriers will prove to be an especially difficult challenge. In the meantime, I will try and do more research about this interesting topic.