Intra African trade and DUTY-FREE shopping
May 10, 2021840 views0 comments
By Ekelem Airhihen
Africa needs some smart solution in the face of changes around the globe. The threat to globalization as seen in trade restrictions with tariffs and disruptions of supply chains, the fears over inflation post pandemic and the dangers of poverty and “illegal” migration call for Africa to think through strategies for recovery.
Globaldata, a leading data and analytics company, states that low cost airline model will lead post-COVID recovery and help revitalize demand. It states that frugal cost-cutting measures which these airlines would adopt as well as operational responsiveness will put these airlines in a position to move quickly to absorb pent-up demand and capitalize on any opportunities ahead of other high cost model airlines.
UNCTAD in its Economic Development in Africa Report 2019 states that intra-African exports were 16.6 per cent of total exports in 2017, compared with 68.1 per cent in Europe, 59.4 per cent in Asia, 55.0 per cent in America and 7.0 per cent in Oceania. It further defined intra-African trade as the average of intra-African exports and imports. This was about 2 per cent during the period 2015 – 2017, while comparative figures were 47 per cent for America, 61 per cent for Asia, 67 per cent for Europe and 7 per cent for Oceania.
Duty-free is widely understood to mean the shopping experience at an airport prior to an international flight. This concept has evolved over the years. Arrivals duty-free shopping is a recent development. This has been found to be successful around the world wherever it has been implemented according to European Travel Retail Confederation. Here, sales take place to passengers on arrival and before they clear customs control, while goods bought are considered a part of the personal luggage of the passenger.
Duty-free shopping as a part of intra African trade will carry along the benefits to African companies and SMEs seeking to make inroads to fellow African countries. Increased sales will lead to creation of more jobs; will assist in the recovery of the aviation sector and, indeed, other sectors post pandemic giving a boost to efforts at growing GDP across African countries.
McKinsey expects that as the pandemic subsides, the rise in leisure trips will outpace the recovery of business travel. Evidence from 9/11 and global financial crisis seems to suggest that leisure trips or visit to relatives and friends rebound first. Africa has opportunities for tourism and the surge in demand for travel after various lockdowns is an opportunity that the transport and tourism industry will have to work with the various chambers of commerce to ensure all benefit from it.
Leisure passengers are the main purchasers of duty-free shopping. Travellers going on holiday or to visit friends and relatives make up the majority of customers in Duty Free and travel retail, says the European Travel and Retail Confederation.
Introducing Arrivals Duty Free, it suggests further, in airports, will increase the exposure products can achieve with an international audience. It will also create a new market and a new high-profile shop window for locally produced goods.
In achieving intra African trade leveraging on duty free shopping, the issues to think through will be: Competition with local retail outlets, competitiveness of local production, effects on tax practices among African countries, size of the aviation market in member countries, the impact of e-commerce and technology, as well as other government regulations, and the enforcement of rules of origin across African countries in the implementation of the African Continental Free Trade Agreement.
I was elated at the Zambia–Zimbabwe border shops on a visit to Victoria Falls to see fabric on sale made in Nigeria. With improved air connectivity across African countries, as we are beginning to see with the acquisition of cost effective airplanes by airlines, and government support for the transport and tourism industry, along with collaboration by the private sector, the statistics on intra African trade is likely to head up north in the medium to long term.
Ekelem Airhihen is a chartered accountant and airport customer experience specialist. He can be reached on firstname.lastname@example.org