The relevance of coordinated regional trade logistics for the implementation of regional free trade area of Africa

Abstract

Background: Logistics will play a vital role in the process of boosting intra-regional trade among member states. Despite logistics integrating role in trade between countries, generally, African countries had faced with formidable challenges in logistics infrastructures development, and customs and border clearance.

Objectives: The main objective of this article was to analyse the effect of trade logistics performance on the intra-regional trade of Africa. African countries’ logistics performance in international trade was measured using the World Bank Logistics Performance Index (LPI) and its components. The article emphasized examining the relevance of trade logistics for the implementation of the Continental Free Trade Area of Africa.

Method: Descriptive analysis was undertaken to analyse African countries’ trade logistics performance, based on 2010–2018 LPI measures. The gravity model of international trade with Heckman maximum likelihood regression was used to explore the effect of trade logistics performance on the intra-regional trade of Africa.

Results: African countries experience lowest average LPI score relative to its trading partner regions, particularly in terms of quality of trade- and transport-related infrastructures, customs, and border clearance, and competency and quality of logistics services. The study on gravity model estimates shows that improvement in any of LPI components, that is, infrastructures development, customs clearance, competence and logistics service quality, international shipments, tracking and tracing, and timeliness, can lead to significant growth on the trade between African countries. However, being geographically landlocked has a statistically significant negative effect on bilateral trade flow.

Conclusion: Successful improvement in African countries’ trade logistics performance including logistics infrastructure, customs clearance, and logistics service quality will enhance trade between African countries. This, in turn, will have a paramount contribution to the effective implementation of the Continental Free Trade Area of Africa.