By Geoffrey White

Nigeria, Benin, Togo and Ghana are collectively a close knit, English speaking, trade block with a population that exceeds 250 million people, 40% of which are below 30 years old.

The economic development of this important region in West Africa is being driven by a range of positive macro trends:

• A renewed impetus in energy sector resources is enabling improved power availability and less dependency on imported energy. Ghana’s oil production is forecasted to rise to 500,000 bpd by 2030 and the Atuabo gas plant is expanding output to 220 million standard cubic feet of gas per day (mmscfd) by 2024.
• In Nigeria the gas sector is expanding significantly combined with a new focus on domestic infrastructure, a move away from imports, as well as the world’s largest refinery – USD 14 billion Dangote refinery in Lekki – coming online in 2021.
• Ghana has overtaken South Africa in the volume of gold production and a new focus on improving domestic agricultural production, efficiencies and yields is reducing expensive imports and creating new employment.
• Rural depopulation and the transition to increasing urbanization, combined with increasing local manufacturing are enabling local and regional markets while an expanding middle class are driving growth and prosperity.

However, the lack of the essential infrastructure to facilitate and support this growth is increasingly a constraint to progress.

Warehouses tend to be one of the most ignored elements of infrastructure and logistics, but are a fundamental part of the supply chain as they provide storage, distribution, packing, processing, assembling and light manufacturing of goods – all of which are the foundations of any economy, and support domestic and international trade, imports and exports.

To reach its true potential, Africa needs a fundamental warehousing transformation from low-quality makeshift warehouses that tend to lack basic security and safety features to facilities that meet international standards with consistent, reliable IT connectivity and power.

A warehousing transformation in Africa can make a difference in five key areas:

1. Providing a platform for African manufacturing and the Fourth Industrial Revolution (4IR)

Many multinationals are hesitant to invest in African facilities because of the perceived risks. A warehouse park that is ready to move into, with de-risked land acquisition, reduces the capital required for companies to enter the African market, and helps businesses get to market faster.

With the 4IR under way, tech innovations like 3D printing and real-time connectivity are stimulating local manufacturing, increasing the need for secure, environmentally responsible warehousing platforms.

2. Enhancing agricultural value chains and reducing food losses

According to the UN’s Food and Agriculture Organization (FAO), roughly one-third of food produced for human consumption gets lost or wasted globally.In Africa, wastage is particularly high at the agricultural production and post-harvest handling and storage stages.

Modern warehouses with security and pest and temperature control could radically reduce this loss. Consolidated warehousing for commodities and agriculture – allowing for local processing and packaging to take place under the same roof as storage – reduces wastage, and allows far more value to be captured in-country.

3. Enabling the growth of African SMEs

Seventy-five percent of growth in Africa will come from small and medium-sized enterprises, according to McKinsey, that struggle to get access to finance for infrastructure. Flexible warehousing models that allow for lower upfront payments give SMEs easy entry to quality warehouses that meet the standards required by international customers.

For example, a Ghanaian entrepreneur was struggling to expand her food processing business to supply the formal sector because the loan costs to set up a processing and packaging facility were prohibitively high. By leasing warehouse space in Agility’s Ghana warehouse park, she could use her capital to grow her business instead of having to buy land and build a facility.

4. Accelerating e-commerce

African e-commerce is booming, with projected annual sales of $75 billion by 2025. In April, African e-commerce company Jumia listed on the New York Stock Exchange. Shares soared 75% on the first day of trading, valuing the company at more than $1.9 billion.

E-commerce fulfilment requires four times the warehouse capacity in the destination market compared to the traditional logistics model. The expansion of e-commerce relies on the availability of international standard warehousing fulfillment centers, allowing for the automation and racking.

5. Driving economic growth, regional trade and skilled job creation

Large-scale warehouse parks allow for logistics and manufacturing clusters to form across Africa as an interconnected network, enabling more intra-regional trade. Currently, intra-regional trade accounts for just 17% of Africa’s exports, compared to 59% in Asia and 69% in Europe. The AfCFTA will create the world’s largest single market, of 1.2 billion people.

International standard warehousing will also create a wide variety of jobs, building skills and prosperity and adding to the continent’s competitiveness as it develops its export potential for global markets.

The writer is CEO, Agility Africa.

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By UDN

The informal sector has in many ways superseded the formal sector and is now the face of modernity rather than its antithesis. By informal economy we mean an amalgamation of unregistered and unlicensed self/family-owned micro, small and medium enterprises not protected by the State. They don’t enjoy any social benefits, and often have no titled or registered assets. This means they are inherently vulnerable, highly mobile, and insecure. As a consequence, these unregulated entities don’t pay taxes, their employees are excluded any social safety nets and they lack the protection accorded by formal labor contracts. It is easy to underestimate the contribution this sector makes to the Ugandan economy.

Uganda’s large informal sector is a cache of untapped revenue potential

Despite government’s recognition of the informal sector, there is need for clarity on the strategic direction for addressing informality. According to the National Strategy for Private Sector Development, FY 2017/18, the informal sector contributed a significant share to GDP (43.9%) in FY 2014/15 which is sizeable posing a big challenge in competition to formal enterprises. The private sector economy is largely characterized by Micro Small and Medium Enterprises (MSMEs), with low productivity and high informality. Up to 80 % of the economy is comprised of informal businesses, who transact in cash making it difficult to track and asses them for tax leaving much of the tax burden to the formal sector.

Many informal small enterprises are family owned and often do not have a fixed address and a range of factors have further stifled the MSME growth, including the high level of informality, over protection of foreign investors, long procedures for starting a business, low innovation and productivity, government’s domestic borrowing and credit access challenges.

Informal sector, channel for depriving government of tax collection

The World Bank (2017) noted that the majority of informal firms are evading taxation and therefore depriving formal firms of their hard-earned profits. On the other hand the informal economy is conducive channel for providing a good blend for illicit activities, including illicit financial flows which deprive government of tax collection. MSMEs typically have a high mortality rate with 90% operating for less than 20 years.

Many informal small enterprises (manufacturers, wholesalers, retailers, agricultural produce dealers) are family owned and often do not have a fixed address. The construction sector for example is one of the fast growing sectors but the service is provided informally implying loss of Government revenue. The transport sector also remains unregulated with no clear records of ownership. This means that a lot of taxable transactions are not traced. This is where the real economy thrives. By their nature, it’s difficult for tax authorities to track them hence lower revenues realized than the potential. Stringent measures by URA further frustrate small businesses and the difficult registration process marked by burdensome compliance procedures, complex tax regulations, and corruption also causes many to prefer informality in Uganda.

Recommendation

Government should;

Devise a strategy of tracking all economic activities contributing to growth and drawing them into the tax bracket by implementing an effective process of business registration. A conducive atmosphere for all businesses to thrive must be availed through making access to credit cheaper and supportive registration measures to boost investment in local enterprises. These approaches will enable the mobilization of revenue into the consolidated fund for service delivery.

Adopt an effective measure to regulate economic activities and no enterprise should be permitted to operate without a Taxpayer Identification Number (TIN). URA should devise a mechanism of providing tax clearance certificates to business owners which should be presented before renewing a license to encourage compliance.

Government needs to set up lawful associations within the transport business to coordinate and regulate the industry as well as collect taxes.

Widening financial reach has great input on economic growth and this calls for a deliberate policy transition of the role of sub-national government, from merely being a regulator of businesses to a facilitator of private sector growth and job creation. Therefore, investing in coordinated transport and economic infrastructure together with land use management, empowering domestic firms to improve productivity, and capacitating institutions and coordination structures should be implemented to stimulate growth.

UDN (Uganda Debt Network) is a civil society organisation that tracks Uganda’s debt transactions.

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