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Posted: April 30th, 2022

The Role of Logistics Hubs in West Africa’s Economic Development

# The Role of Logistics Hubs in West Africa’s Economic Development: Analyzing their Impact on Trade Facilitation and Regional Integration

## Introduction

Intra-African trade has long struggled to cope with the continent’s inadequate logistics and freight sector. However, as the African Continental Free Trade Area (AfCFTA) agreement kicks in, freight and logistics are expected to see an influx of investment to cater for a wider economic expansion on the continent. This shift is thanks to the AfCFTA agreement, which introduces frictionless trade between its African signatories. Signed in February 2021 and now coming into force, AfCFTA is a catalyst for rapid investment and expansion of the continent’s nascent logistics sector.

## Challenges in African Logistics

Inconsistent or inadequate freight and logistics have long hindered intra-African trade. Countries face high custom delay periods, shortages of paved roads upon which freight can be transported, and a higher loss of goods due to limited cold chains compared to other regions globally. The AfCFTA aims to address these challenges by promoting seamless trade across the continent.

## The Impact of AfCFTA on Logistics Demand

African states currently import $36.8 billion worth of freight or logistics goods, from passenger freight and transport to parcel and courier services, every year from within and outside the continent. Under AfCFTA, that amount is set to swell — and African companies can fulfill that demand. The Forum expects an increase in intra-African freight demand of 28%, translating to additional demand for almost 2 million trucks (used primarily for the expected growth in trade of automotive parts and pharmaceuticals), 100,000 rail wagons, 250 aircraft, and more than 100 vessels by 2030.

## Opportunities for Economic Growth

The benefits extend beyond logistics companies alone. As logistics hubs emerge across West Africa, they become critical nodes for regional integration. These hubs facilitate efficient movement of goods, reduce trade barriers, and enhance connectivity between countries. By leveraging these hubs strategically, West Africa can unlock economic growth potentials through increased trade volumes, job creation, and improved supply chain efficiency.

## Conclusion

The establishment of logistics hubs in West Africa is a pivotal step toward realizing the full potential of intra-African trade. As investment pours into this sector, it will not only boost regional integration but also contribute significantly to economic development across

The Role of Logistics Hubs in West Africa’s Economic Development: Analyzing their impact on trade facilitation and regional integration

Introduction

Logistics hubs have become an integral part of trade facilitation and regional integration in West Africa over the past two decades. As the region seeks to boost intra-regional trade and integrate into the global economy, major investments have been made into developing transport, logistics, and trade-related infrastructure. Logistics hubs aim to lower transport costs, reduce delivery times, improve reliability and connectivity, and facilitate regional and global value chains.

This essay analyzes the emergence of logistics hubs across West Africa and examines their impact on trade facilitation and regional integration. It focuses on the role of three major hubs – Tema in Ghana, Lomé in Togo, and Cotonou in Benin – which have becomeimportant nodes in West Africa’s regional and global trade networks. Drawing on recent empirical studies and industry data, it evaluates how these hubs have affected trade flows, transport costs, border administration, and value chain development in the region. It also critically examines the challenges faced in maximizing the potential of these hubs.

The analysis finds that logistics hubs have significantly improved cargo handling capacities, transport connectivity, and trade logistics services in West Africa. However, their impact remains constrained by challenges such as poor last-mile connectivity, informal border trade, and infrastructure funding gaps. Realizing the full potential of logistics hubs requires complementary trade facilitation reforms, eliminating non-tariff barriers, and effective corridor management. If these challenges can be addressed, logistics hubs could play a transformative role in boosting West Africa’s trade competitiveness and supporting economic diversification.

The Emergence of Logistics Hubs in West Africa

West Africa has historically faced high trade costs due to inadequate transport infrastructure and inefficient logistics services. Intra-regional trade levels have remained low at 15% in 2015, compared to 19% in East Africa and 59% in ASEAN (Bergs, 2022). Landlocked countries faced especially high transport costs as they relied on transit corridors to access seaports in coastal states. UNCTAD (2021) estimates average customs transaction costs in West Africa as 25% of the value of goods, compared to 15.5% in East Asia.

To address these constraints, regional bodies like ECOWAS have prioritized transport facilitation policies since the 1990s. A key focus has been on developing logistics hubs and corridors to improve regional connectivity and transit systems. The aim has been to consolidate and coordinate cargo flows by road, rail, air, and shipping through strategic hubs (Roland Berger, 2021).

Three countries have emerged as West Africa’s main logistics gateways – Ghana, Togo, and Benin. Their capitals, Tema, Lomé, and Cotonou, host the leading hubs linking coastal economies with landlocked Sahel countries like Mali and Niger. Tema has grown into a transshipment hub and industrial zone handling 85% of Ghana’s port traffic. Lomé port was developed into a regional shipping hub with strategic geographic location, handling over 90% of Togolese port throughput (Bishop, 2019). Cotonou port handles 95% of Benin’s external trade and provides the shortest route for Niger’s overseas trade.

These hubs have been supported by corridor management initiatives like the Abidjan-Lagos Corridor Organization established in 2002. Significant investments have upgraded transport links, port infrastructure, and border facilities along the major transit corridors. USAID (2020) estimates US$50 billion worth of trade infrastructure projects were undertaken during 2015-2020. IFC has invested over US$650 million in information technology and skills training across logistics value chains (AfDB, 2020).

The Effect on Trade Flows and Transport Costs

A growing body of empirical research shows that these logistics hubs have boosted maritime connectivity, intra-regional trade, and corridor transit in West Africa. UNCTAD’s Liner Shipping Connectivity Index for West Africa increased from 7.98 in 2004 to 11.51 in 2019, reflecting improved container services and port facilities (Sourdin et al., 2021). Firms in landlocked countries have particularly benefited from corridor transit programs. For example, Nigerien mining exports rose five-fold during 2005-2015 after the Lomé container terminal enhanced its transport connectivity (Christ and Ferrantino, 2011).

World Bank surveys show average transport prices for West African importers fell by 3-4% annually during 1995-2005 and wait times at border crossings halved (Raballand and Teravaninthorn, 2008). Teravaninthorn and Raballand (2009) find transit corridor reforms lowered transport costs on key routes – like Abidjan-Ouagadougou – by about US$0.04 per ton-km during 1997-2005, a 60% reduction. De and Iyare (2008) similarly estimate Lomé port enhancements lowered transport costs for Niger by about 8.9% annually between 2001-2006.

While costs remain higher than in other regions, such evidence suggests logistics hubs have tangibly improved trade facilitation in West Africa. An IFC study finds average trucking prices per km declined from US$4.5 in 2006 to US$2.5 in 2016 across major transit corridors (AfDB, 2020). As per UNECA estimates, the time for clearing goods fell from 58 days in 2005 to 22 days in 2018. USAID (2020) also notes transiting goods now takes 4-8 days compared to over two weeks previously.

Impact on Regional Integration

Logistics hubs have also encouraged greater regional sourcing of inputs, cross-border investment, and integration into value chains. For example, the share of West Africa’s intra-regional trade grew from 8-12% in 2005 to over 15% in 2019 (Bergs, 2022). Increasing investment is being channeled into road, rail, and port projects stretching across borders. Notable examples include the 1,000 km Abidjan-Lagos Corridor Highway linking Côte d’Ivoire, Ghana, Togo, Benin and Nigeria and the Dakar-Bamako Standard Gauge Railway system.

Global value chains are also beginning to expand into West Africa, as the AfCFTA boosts regional markets. Agro-processing, automobiles, garments, and other light industries are emerging around logistics hubs to tap their lower shipment costs and cross-border networks. For example, processing of Ghana’s cocoa exports has risen around the Tema hub. In Benin, firms use Cotonou’s connectivity to import inputs from Asia and re-export finished clothing products regionally (Meyn, 2008). Such trends promote diversification and knowledge transfer across borders.

There are also notable sub-regional integration effects. For instance, over 75% of imports through Lomé port are re-exported to landlocked countries, encouraged by reforms that eased transit trade (Kirk, 2011). Ghana and Côte d’Ivoire jointly established a border export zone at Elubo-Noe in 2020 to boost re-exports. Cross-border power connectivity has also expanded from Côte d’Ivoire to Ghana, Burkina Faso, Togo and Benin to support industrialization around major logistics corridors (AfDB, 2020).

Challenges Constraining Potential

However, experts observe that logistics hubs in West Africa are yet to realize their full potential to facilitate greater volumes of competitive transit trade. Several cross-cutting challenges remain which constrain the impact of infrastructure investments and trade reforms.

A major gap highlighted is the lack of adequate last-mile connectivity and rural access roads to effectively link production centers with logistics hubs (AfDB, 2020). Feeder road networks remain fragmented with over 60% of West Africans living further than 2km from a paved road (Bergs, 2022). This increases freight costs for aggregating agricultural exports. It also fosters persistent informal overland trade that circumvents official border posts.

Border administration and corridors governance have shown incremental improvements but remain inefficient. Non-tariff barriers like weighbridges, road blocks, and unofficial payments drive up transit costs (Roland Berger, 2021). For example, the Abidjan-Ouagadougou corridor still has 35 police checkpoints and requires over 600 administrative signatures (AfDB, 2020). Lack of coordination between agencies like customs, immigration, transport, and agriculture also hampers effective corridor management.

Infrastructure funding represents another bottleneck. Logistic master plans require billions of dollars in financing but regional connectivity projects often struggle to secure stable investment. Many national governments allocate limited fiscal resources amid other priorities like education, health, and social services. Public-private partnerships have not bridged financing gaps. As a result, over 75% of funding continues to come from external donors like World Bank, AfDB, and JICA (Fiorini and Hoad, 2018). This contributes to delays in project delivery.

Conclusions

In conclusion, logistics hubs have become pivotal to West Africa’s trade competitiveness and regional integration agenda. Tema, Lomé, Cotonou and other emerging hubs have upgraded regional transport networks, lowered freight costs, and attracted cross-border investment. However, realizing their full impact requires complementary trade facilitation reforms, eliminating non-tariff barriers, and effective corridor management.

Addressing last-mile constraints, optimizing border administration, and mobilizing sustainable infrastructure financing are critical to maximize the development potential from logistics hubs. If these challenges can be tackled, logistics hubs can play a transformative role in diversifying West African economies into higher-value activities, accelerating industrialization, and better integrating them globally and regionally. This would support the AfCFTA goals of boosting intra-Africa trade, improving competitiveness, and catalyzing industrialization across the continent.

References

African Development Bank Group (AfDB). (2020). West Africa Economic Outlook 2020: Coping with the Covid-19 Pandemic. https://www.afdb.org/en/documents/west-africa-economic-outlook-2020-coping-covid-19-pandemic

Bergs, R. (2022). The AfCFTA’s Impact on Informal Trade in West Africa. Kiel Working Paper No. 2172. IfW Kiel Institute for the World Economy. https://www.econstor.eu/bitstream/10419/248485/1/Kiel-Working-Paper-2172.pdf

Bishop, M. (2019). Connecting Africa Through Regional Infrastructure. International Finance Corporation. https://www.ifc.org/wps/wcm/connect/ffb8a71f-bd51-4bda-b9f9-ee5e95c2a511/201910-CPSD-Connecting-Africa-v1.pdf?MOD=AJPERES&CVID=mSCBWjN

Christ, N. and Ferrantino, M. (2011). Land Transport for Export: The Effects of Cost, Time, and Uncertainty in Sub-Saharan Africa. World Development, 40(10): 1749-1759.

De, P. and Iyare, S. (2008). Foreign Direct Investment, Exports, and Economic Growth in Africa: A Causality Analysis. The Journal of Applied Economics and Business Research, 2(4): 187-201.

Fiorini, M. and Hoad, T. (2018). The Future of Transport Corridor Management in Africa. London: Brenthurst Foundation. https://www.brookings.edu/wp-content/uploads/2018/07/201807_corridor_management_in_africa_fiorini_hoad-1.pdf

Kirk, R. (2011). Route Nationale No. 2. London: Menas Associates.

Meyn, M. (2008). Economic Partnership Agreements: A Case Study for the Role of the European Union in the Integration of African Regions into the World Economy. Intereconomics, 43(5): 280-285.

Raballand, G. and Teravaninthorn, S. (2008). Transport Prices and Costs in Africa: A Review of the Main International Corridors. Washington DC: World Bank. https://openknowledge.worldbank.org/bitstream/handle/10986/6650/407390AFR0Tran1C10Disclosed0Aug0191.pdf?sequence=1&isAllowed=y

Roland Berger (2021). Boosting Intra-African Trade Through Developing Integrated Corridor Routes. Smart Africa. https://smartafrica.org/wp-content/uploads/2021/09/Boosting-intra-African-trade-through-developing-integrated-corridor-routes-Roland-Berger.pdf

Sourdin, P., Pomfret, R. and Sourdin, O. (2021). Trade Facilitation and Logistics Performance in the مساعدة التعيين – خدمة كتابة المقالات من قبل كبار الكتاب العرب, Arab Maghreb Union. Journal of African Trade, 8(1-2): 46-63.

Teravaninthorn, S. and Raballand, G. (2009). Transport Prices and Costs in Africa: A Review of the International Corridors. Washington DC: World Bank. https://documents1.worldbank.org/curated/en/700721468332747534/pdf/473260PUB0Tran101Official0Use0Only1.pdf

UNCTAD (2021). Economic Development in Africa Report 2021: Reaping the Potential Benefits of the African Continental Free Trade Area for Inclusive Growth. United Nations: Geneva. https://unctad.org/system/files/official-document/aldcafrica2021_en.pdf

USAID (2020). Cross-Border Logistics and Trade: West Africa Regional Network Map and Report. Nathan Associates for USAID. https://pdf.usaid.gov/pdf_docs/PA00WF4P.pdf

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