Imperfections in the Market for Information High Transactions Costs

OVERVIEW
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resources, let alone the incentives, to engage ineffective skill transfers to local workers. At the same time, because of inadequate education or training, Africans are often ill-equipped to adopt the new skills even when such transfers are being attempted.
Of importance, Chinese and Indian governments are providing or investing in resources for greater technical cooperation with African countries so as to facilitate such technological transfers, among other objectives.
Greater participation by African firms in international network production increasingly being carried out by Chinese and Indian investors on the continent is another way for Africans to effectively capture opportunities for the acquisition of advances in technology and modern skills (this will be described in greater detail below).
Chinese and Indian firms (as well as other foreign investors) operating in Africa—not to mention African firms themselves—are being hampered by the inadequate and costly transport and logistics services currently found in Africa see table 4. Enhancing trade-facilitation infrastructure systems and related institutions could offer tremendous opportunities for reducing the direct and indirect transactions costs of African-Asian trade and investment. Evidence from the business case studies illustrates the point. A Chinese firm in South Africa finds that sending products from
Angola to South Africa is as expensive as shipping them to China. An
Indian firm in Ghana reports that shipping costs and tariffs within the Economic Community of West African States (ECOWAS) are very expensive.
It costs $1,000 to send a container from Accra to Lagos. For that reason,
the firm decided to do a cross-border investment rather than export. For firms operating in Africa to be able effectively to compete in today’s global marketplace will require dramatic improvements in the complex chain of trade-supporting services that include customs and border procedures,
management and control of freight movements, transaction documentation, and banking instruments. Indeed, the weaknesses in the continent’s trade support services undermine the international competitiveness of
African products, and constrain the ability of otherwise internationally competitive African firms to take advantage of new global market opportunities, including those in China and India.
Both domestic and foreign-invested firms in Africa face major problems in accessing local trade financing, which is particularly serious among small and medium enterprises. At the same time, investment by
Chinese and Indian firms in Africa is being significantly aided by public
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AFRICA
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S SILK ROAD
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CHINA AND INDIA
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S NEW ECONOMIC FRONTIER
trade finance programs offered by the export-import banks of the two countries.

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