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The benefits of importing into Africa & why you need an Importer of Record

The benefits of importing into Africa & why you need an Importer of Record

19/11/2021 00:00:00

Entrepreneurs who're interested in joining the import-export business rarely give Africa much thought. This is likely because of assumptions they have about the continent's commercial potential.

These misconceptions couldn’t be farther from the truth.  Africa's yearly GDP accounts for a significant portion of global statistics. In fact, the continent is home to six of the world's fastest-growing economies, so it is a great place to invest in.

We’ll discuss everything you need to know about importing to Africa in this guide, along with the benefits of using an Importer of Record service. 

 

Insights and projections for Africa’s tech industry

If you're in the I.T. sector, this is one of the best times to invest in Africa. There are multiple opportunities you can take advantage of, as you'll see below. 

 

Start-ups will take a large share of Africa's informal economy.

Research conducted by the African Development bank suggests that over 50% of Africa's economic activity is informal. It is a large commercial base without access to essential services like small business banking, business enterprise software, internet access and third-party logistics.  It is expected that Venture-Capital backed start-ups will attempt to meet this need by developing scalable applications.

It's already happening in countries like Nigeria. There are tech companies for everything from e-commerce logistics, real-estate listings, online auto sales, eCommerce logistics, and so on.

There are several opportunities for innovation, and they will only increase as internet connectivity and smartphone penetration rates improve.

 

State-to-state ICT competition will increase

The accomplishments made by countries like Botswana, South Africa, and Kenya have encouraged other African governments to overhaul their ICT infrastructure and make other ambitious ICT plans.  Countries like Ghana and Ethiopia are making significant strides towards digitisation. This trend will increase demand for large IT infrastructure like data centres and so on.

 

There will be Disruptive innovations

I.T. will provide solutions to long-standing African socio-economic problems. Aid agency grants previously handed to NGOs are currently being channelled to African tech organisations focused on social ventures. An example of this is IBM's Lucy project, which aims to solve African problems that were previously relegated to the development sector.

 

African technological innovations will have global applications.

Tech solutions developed for Africa are being implemented in other parts of the world at an increasing rate. M-Pesa, for example, has become a case study for global digital payment systems. The solar-powered BRK Wi-Fi device developed in Africa is bringing internet connectivity to dead spots in the United States. Most of Africa's tech innovations are designed to solve local challenges, but they're creating unexpected opportunities for other markets.

 

Why Africa is growing

Africa has generally enjoyed significant social and economic growth over the last few years. Here are a few reasons for this trend

 

Growing middle class

The middle class have high spending power due to relatively high incomes. They constitute the largest part of the consumer market and present significant business opportunities.

Policy changes

Most African countries have eased regulations to encourage international trade.  There has also been a remarkable decline in political instability. The continent isn't considered a high-risk market anymore, and investors are more willing to get involved. 

Agricultural economy

The African economy is primarily driven by agricultural activity and natural resource extraction. These activities are the most significant sources of employment and foreign exchange. Most countries are now striving to diversify, and their efforts have created several trade opportunities.  

Since they currently have low industrial capacity, there is a very high demand for manufactured products in domestic markets. Other reasons for the rapid growth of African trading include high population growth rates, high urbanisation rates, and price reduction for technological goods.

 

Best countries to invest in on the African continent

South Africa 

South Africa is usually considered the best place to start for foreign investors, as it is one of the continent's most advanced economies. It shares several similarities with western markets and holds the highest trade potential.  It has a robust financial system, good infrastructure, and business-friendly legal policies.

Nigeria

Nigeria is not as developed but has significant natural resources in the form of crude oil.  It also boasts a high consumption rate since it is the most populous country on the continent. Statistics show that it is one of the largest importers.

 

Top I.T. products imported into Africa

Servers and networking equipment

The I.T. import sector is one of the most underrated in the African import-export business. It has lots of untapped potential, mainly resulting from the digitisation trend that has gripped the continent. Although there are several I.T. equipment manufacturers, they can’t match the current demand levels. Most traders prefer to import as a result. Multinational manufacturers have targeted the market by producing significant quantities of items specifically designed for the African market.

The computer market in South Africa, for example, is valued at more than a billion dollars.  One of the reasons for this sector's growth is that many African organisations are shifting from using conventional desktop computers to more portable ultra-books and laptops.

Also, the rapid pace at which innovations enter the sector, combined with significant price reductions, have boosted demand.  The United Arab Emirates currently accounts for the largest portion of the market due to its advantageous position relative to the African continent. It costs much less to transport goods from the UAE to Africa than elsewhere in the world.

Furthermore, regulatory requirements between the UAE and South Africa have favoured trade between the two countries.

 

Mobile phones

Africa is the second-largest market for mobile phones, behind china. The continent has more mobile device users than fixed telephone lines. Mobile phone sales have been growing consistently every year, with figures reaching record levels every time manufacturers bring improved models onto the market. Sales are expected to grow as internet access becomes cheaper. 

Nigeria is the continents biggest importer of mobile handsets, and it is closely followed by South Africa. If you’re planning to invest in the handset business, these markets might be the best places to start.

That said, even less developed countries like Somalia present significant business opportunities. Mobile money platforms have impacted this growth by providing services that could typically only be obtained from financial institutions. People who did not have bank accounts can now enjoy several financial services through their handsets. The mobile handset market has remarkable growth potential, and it is an excellent investment opportunity for entrepreneurs in the import-export business.

 

Tariffs and restrictions on goods imported into Africa

Tariffs, also known as import or customs duties, are taxes levied on imported goods by governments to generate revenues and shield young industries from competition. Using tariffs has several benefits for the destination country as it protects domestic employment and encourages growth.

You will likely encounter several types of tariffs when importing to Africa. The most common include; 

 

Specific tariffs.

These are fixed fees levied on each unit of an imported product. The value changes with the product type. For instance, a specific country may charge a $10 Tariff on an imported box of sweets but levy a 50 dollar tariff on each smartphone unit that enters its borders.

Ad valorem tariffs

These are fixed percentages issued in accordance with the value of goods. A great example would be Gabon, which charges a 30% customs tax on onions, but 10% on paper ream.

Besides tariffs, there are other restrictions on imported products. They include 

Import quotas: these are restrictions placed on the quantity of a good imported to control its presence in the destination country.

Licenses: these are an authorisation by the government to specific companies to import products. These products are usually restricted.

Voluntary export restraints: these mutual agreements between the exporting and importing countries to limit the quantity of product allowed into the destination country. They're meant to reduce competition and protect local industries.

Local content requirements: government-imposed restrictions force businesses to utilise locally produced alternatives and imported products.

 

Import duty valuation methods

Most African countries use Cost Insurance and Freight (CIF) to determine import taxes. The calculation is determined by several parameters, including the nature of imported goods, country of origin, insurance, and currency. Furthermore, Value Added Tax differs from one country to another.

 

Important facts about importing into Africa

#1 your destination countries may not have similar tariffs

there are countries whose regulations and tariffs are identical. This may be because they're in the same geographical area or because they belong to economic and political blocs. That said, it would be unwise to make such assumptions when shipping to Africa.  Each country has a unique taxations system, developed in accordance with unique trade agreements to suit its economic and political agenda. This means all the rates, rules, and authorisations required to import products will differ by country.

#2 Ensure you have current tariff data

Most importers assume tariffs to be steady rates, but they aren't. Import duties can change at any time. The errors resulting from miscalculations may attract fines, which will reduce your profit margins.

#3 don’t abuse the system

New traders often make serious first-time mistakes that can lead to heavy fines and penalties. In most situations, those mistakes ( like undervaluing merchandise or incorrectly declaring items) result from insufficient knowledge. Sometimes, traders will do these things on purpose. 

Either way, it will harm your business, as most African customs authorities have highly sophisticated tools for detecting misevaluated items. The repercussions for these offences can be as dire as having the items confiscated, so you need to ensure that you have the proper documentation and that all forms are correctly filled.

#4 You may need an IMPORTER OF RECORD

International trade is a complex process. It gets even more complicated when there's a sudden change or overcharges for workloads, so there are times when you will need the expertise of a reliable third party like an importer of Record. You should choose a reputable partner and a convenient mode of transportation for your consignments.

Why you need an importer of Record

An importer of Record is an entity or person entrusted with the duty of documenting and valuing imported goods in accordance with the destination country's requirements. Since each country has unique customs requirements, you will likely need a local partner familiar with all the technicalities and can deal with them immediately. An Importer of record  ensures every part of the logistics process happens in the most efficient way possible. Let’s discuss that in more detail.

Compliance assessments

An importer of Record's primary duty is to ensure that shipments comply with all the destination country's rules. This prevents unnecessary delays that would be caused by misunderstandings. 

Easier customs clearance

the customs clearance process for most African countries can be complicated if you don't have proper documentation. A third-party importer of Record can expedite this process and minimise the risk that something will go wrong.

Cost-efficiency

Hiring an importer of Record will spare you the need to establish a legal entity in the destination country, as it can cost a significant amount of money. 

Clearance of taxes and import duties

besides cost savings, working with an importer of record service means you won't need to worry about cargo payments. Your partner will handle all these issues in the most efficient manner possible. 

I.T. support

Most importers of Record will have local technicians and infrastructure to support your operations. Besides handling the shipping process, they can help you install and maintain your I.T. infrastructure.

 

Are you planning to import to Africa?

Blackthorne has served as a reliable Importer of Record for companies selling technology merchandise for over 10 years. If you need the support of a pattern with practical experience in this kind of activity, we’re here to help! Contact us today for a friendly discussion about your needs.