To telephone Kinshasa, the capital of the Democratic Republic of Congo, residents of Brazzaville, the capital of the Congo Republic, for many years had to pay international call rates.

The calls would be routed via satellite link to Paris, Brussels, and then back across the River Congo to either capital. In 2002, officials of MSI telephone company, which had operations in both countries, decided to shorten the route.

They installed a microwave link across the 7km stretch of the River Congo that separates the two capitals. Overnight, international calls became local calls. The cost of a telephone call dropped by 80 per cent. Two years later, the service was rolled out to pre-paid customers, too.

More than a century after the partition of Africa, the telephone company officials had succeeded in building a virtual bridge over the river.

After a century of endemic war, poverty and disease, things are finally looking up for Africa. According to the African Development Bank (AfDB), economic growth is expected to hold at just under five per cent over the next year, and many countries have recorded more than a decade of year-on-year growth albeit from low starting points.

Some 100 million African households are expected to have annual incomes of more than $3,000 by next year, according to research from Standard Bank. Foreign direct investment into the continent overtook aid in 2003, and has been growing since.

According to the AfDB, there are now 350 million Africans in the middle class (defined as earning between $2 to $20 per day), representing 34 per cent of the continent’s total population.

This is more than double the number from 1980, and four out of every 10 Africans are projected to be middle class by 2060.

However, many economists say economies on the continent, particularly in sub-Saharan Africa, need to sustain double-digit growth over many years if they are to emulate the success stories of China, Brazil, India and other emerging economies.

READ: Africa’s global market approach will see it become next trade frontier

While a lot of emphasis is put on Africa’s relations with the rest of the world, little attention is paid to the internal barriers to trade and growth within the continent.

There is much public debate about access to foreign markets by African firms and countries, but little discussion about access to African markets by Africans themselves.

Where such access exists, it is often mired in bureaucracy, incompetence, protectionism, or sheer lack of common sense.

The telecoms and the airlines sectors offer insights into some of these barriers; they show where there has been progress as well as areas for regulators and policy makers to break down barriers and catalyse growth within the continent.

After its breakthrough in the DRC and Congo Republic, MSI, which had then become Celtel and then Zain through changes in ownership (and is now Airtel), experimented with bringing down barriers on a larger scale.

In 2006, it launched its One Network campaign, starting in East Africa and eventually across 17 countries, eliminating roaming charges for its customers and allowing them to receive calls for free and pay local rates when they travelled to these countries.

“Zain — itself a marginal operator in all three original East African Community jurisdictions prior to its disruption of the market — achieved, with regard to roaming, in weeks what most African regulators had barely contemplated and European regulators had struggled with for nearly a decade,” Alison Gillwald and Muriuki Mureithi noted in a paper published by Research ICT Africa.

“With the high price of communications in East Africa and the premium charges placed on international mobile roaming, the effect of this move was to compel other regional operators to follow suit, and further, to institute various other pricing strategies in an attempt to retain or recover their dominant positions. As a result, not only did roaming charges disappear across all networks, but the prices of various other mobile services also fell as subscriber numbers soared,” the paper stated.

Africa’s telecoms sector remains expensive. It still costs five times more to call Tanzania or Rwanda from Kenya than to call faraway India or China. Part of the problem is the way calls are routed, as the case of the DRC and Congo Republic showed.

High taxes

However, taxation and competition policies are a major factor, too. A 2011 report by Deloitte for the GSM Association, which represents the interests of mobile operators worldwide, noted that taxation, as a proportion of the cost of mobile phone ownership and use in Africa, is comparatively high.

Mobile taxation in 17 African countries, including Kenya, Uganda, Rwanda and Tanzania, was found to be higher than the global average. The more the telecommunications sector grows across the continent, the more governments raise taxes on it and the more expensive telephone calls become.

When Kenya, Rwanda, Tanzania and Burundi imposed a new levy on incoming international calls in 2013, averaging $0.12, this cost was passed on to consumers.

In Congo Brazzaville, the imposition of a new surtax on incoming international calls more than wiped out the earlier gains, with Deloitte finding that costs had risen by 111 per cent between May 2009, when it was introduced, and May 2011. Inbound traffic also dropped by 36 per cent.

In Uganda, the One Network initiative allowed Zain to grow from fourth to second largest operator, and sparked a response from Safaricom in Kenya, MTN in Uganda and Rwanda and Vodacom in Tanzania.

However, although many operators now allow pre-paid customers to roam, many of the benefits have been rolled back as the dominant players recovered their market share; roaming prices have inched back upwards on many networks.

READ: Cross-border calls, Internet to cost less in new single network agreement

Strong regulation can reduce prices. The reduction in mobile termination rates in Kenya in August 2010 led to an immediate reduction of retail prices, allowing smaller operators to compete favourably.

According to a study by Christoph Stork of Research ICT Africa, in Namibia, lower retail prices led to an expansion of the market, which in turn led to higher investment and profits for the dominant operator.

Namibian operator MTC had opposed the liberalisation of the sector and the capping of termination rates, arguing that its EBITDA (earnings before interest, tax, depreciation and amortisation) margin would drop to 36.8 per cent, and that it would have to reduce investments, increase retail prices and pay less in dividends and taxes to government.

Instead, the research shows, the margins rose as did dividends, tax payments, investments and subscriber base. Competition and strong regulation had allowed a win-win situation for consumers and the telco alike.

Closed skies

The lack of competition and effective regulation is also notable in the air transport industry. Although Africa has 12 per cent of the world’s population, only one per cent of global air traffic takes place on the vast continent.

This can be attributed to lack of availability, high costs, high taxation, and poor regulation. Take the case of the Entebbe–Nairobi route. A 55-minute flight over 521km, economy class ticket on Kenya Airways costs an average of $295, but can rise to more than $390.

In comparison, flights from Nairobi to Dubai are on average twice as expensive, at an average of $600, although the distance is almost seven times longer than to Entebbe. This can be attributed to taxation, fuel costs, and protectionism.

Taxes are easier to see. A typical economy class return ticket from Nairobi to Entebbe costs $322. Of this, the base fare is only $100. The rest includes a security charge of $10, a passenger service charge levied by the Ugandan government for the use of Entebbe Airport of $47.2, a similar fee levied by the Kenyan government of $40, insurance of $4 and a fuel surcharge levied by the airline of $100.

Taxes thus comprise 62 per cent of the total cost of the air ticket; the percentage is generally the same for Air Uganda, which also flies on the same route but charges $30 less for its fuel surcharge.

On a typical Kenya Airways ticket from Nairobi to Dubai, taxes are only 41 per cent of the total cost. This helps explain why the cost-per-mile of flying between Entebbe and Nairobi is much higher.

“We consider three key factors when pricing — cost, competition and value. Each route is completely independent from the other,” a spokesperson for Kenya Airways told The EastAfrican in response to a question about the relatively high fare on the Nairobi–Entebbe route.

Protectionism is more insidious. In the early 2000s, Ethiopian Airlines introduced a stopover in Nairobi on its Entebbe – Addis Ababa route and started selling return tickets from Entebbe to Nairobi. Prices plunged by about 50 per cent and Kenya Airways, which had hitherto enjoyed a monopoly on the route, had to slash its own prices in response.

A few weeks later, however, Ethiopian Airlines quietly stopped the Nairobi stopover and service, and prices returned to their previous highs. It later transpired that Ethiopian Airlines had failed to secure rights from Kenyan aviation authorities for the stopover.

This knocked them out of the skies, and, whether deliberately or by coincidence, helped protect a lucrative route for Kenya Airways.

Such protectionism is not uncommon. RwandAir flies into Entebbe and Juba, among other routes, out of Kigali. When the airline asked for rights to fly from Entebbe to Juba (and therefore sell that sector), it failed to get approvals from Ugandan aviation authorities, allowing Air Uganda to retain its lucrative route to the South Sudan capital.

The problem of protectionism is historical. It goes back to the early 1960s, when many newly independent African states set up national airlines, mainly out of pride rather than economic considerations.

Domestic markets were often ring-fenced for the national carriers, which also received other forms of regulatory protection from competition, but this lack of competition led to poor air safety records, high airfares, and stifled the growth of the air transport industry across Africa.

In 1999, some 44 African governments adopted the Yamoussoukro Declaration, named after the city in Ivory Coast where it had been agreed a decade earlier; it was adopted by the Organisation of African Unity, the precursor to the African Union, in 2002.

Under its “open skies” ethos, the pact requires the countries to deregulate air services and open up the air industry to transnational competition.

Privatisation and the collapse of many national airlines has seen a correction in the industry that has left a few major transnational airlines — in particular Kenya Airways, Ethiopian Airlines, EgyptAir, and South African Airways — to compete with international carriers operating on the continent.

However, the letter and spirit of open skies has often been ignored in favour of protectionism.

“A historic opportunity is being missed,” Charles Schlumberger, a World Bank expert who has studied the implementation of the Yamoussoukro Declaration and is the author of Open Skies for Africa, said.

“Ten countries have not signed on to or completed proper ratification of this decision, and many others that are signatories have not implemented it. Meantime, most countries in Africa that have abandoned their ailing carriers and opened up to foreign operators now have air services, both passenger and freight, that are more efficient, safer, and with more competitive prices.”

Got visa, won’t travel?

In West Africa, where countries have liberalised their air spaces more than elsewhere on the continent, the collapse of national airlines, including the iconic Air Afrique, has created opportunities for the emergence of new, smaller, airlines, as well as the entry of transnational ones, particularly Kenya Airways and Ethiopian Airways.

Flight connections remain difficult in many places in Africa, but the emergence of regional hubs in Nairobi, Addis Ababa, Johannesburg, Lagos, Accra and Dakar, as well as stronger continental airlines, has put paid to the days, not so long ago, when one had to fly via Paris or Brussels in order to go from Tanzania to Ghana, for instance.

The impact of this has been increasing air safety and traffic, coupled with lower prices and stiffer competition.

The Schlumberger study found that competitive air carriers with more frequent flights and lower fares can open the door to trade in perishables and high-tech manufactures.

“Reliable, safe and competitively priced air services are essential to better integrating Africa with the global economy,” noted Jamal Saghir, the World Bank director for sustainable development in Africa.

Ironically, the countries whose airlines have benefited from the open skies across the continent have often been reluctant to liberalise their national operators or open up their own skies to full competition.

Africa’s air space still remains relatively unsafe. Drawing on statistics from the International Air Transport Association, Schlumberger found that the accident rate on the continent was six times higher than that of Asia and Latin America, and more than 12 times higher than in Europe and North America.

Stronger competition would not only reduce prices, it would save lives. A lot is made of African emigration to the West and the often frustrating search for visas. Less discussed are restrictions Africans find when travelling within the continent.

Although 60 to 80 per cent of the air traffic is between countries on the continent, African countries remain closed off to each other.

An AfDB study notes that the continent has one of the highest visa requirements in the world, and that it is easier for Europeans and North Americans to travel within the continent than it is for Africans.

While an American passport holder can fly almost anywhere in Africa and apply for a visa at the airport, only five African countries — the Seychelles, Mozambique, Rwanda, the Comoros and Madagascar — offer visa-free access or visas on arrival to citizens of all African countries.

On the other hand, the DRC, Equatorial Guinea, São Tomé, and Sudan require citizens from every African country to apply for a visa. The AfDB found that, on average, African citizens require visas to visit 60 per cent of African countries.

There has been progress within regional economic co-operation blocs, including the recent move to allow the use of national IDs for East Africans to cross borders.

Such initiatives have created silos rather than opened up Africa to Africans. Central Africa is the least open, and the Economic Community of West African States is the most open.

However, while East Africa is the second most open sub-region in the world based on how many nationalities can apply for visas on arrival, East Africans, on the other hand, require the most visas to travel within Africa, data shows.

Opening up borders pays. The number of African tourists visiting Rwanda rose 24 per cent after the country implemented visas-on-arrival and online applications to all Africans in January 2013.

Seychelles, which doesn’t require entry visas, has seen its tourism numbers grow by 7 per cent. Mauritius, which required visas, remained stagnant, and has since relaxed entry requirements for citizens, including those from 30 African countries.

The World Economic Forum estimates that easier visas and more open borders will double tourist arrivals in Africa. However, according to the AfDB, progressive labour migration policies can generally spur faster growth on the continent.

“In the long term, policy-makers have to address restrictions to the mobility of various groups such as professional service providers, seasonal workers and cross-border traders — which are impeding competitiveness in African countries and affecting the private sector’s ability to quickly source skills,” the Bank notes.

It proposes some quick solutions such as offering more visas on arrival, simpler application processes, longer-term visas, reciprocal programmes to unlock other countries to Africans, and encouraging more visa-free regional blocks.

Amidst all the talk of finding African solutions to African problems, opening up Africa to Africans is a good place to start.

Additional reporting by Maryanne Gicobi.

In Part II next week, we examine internal barriers to intra-African trade and capital.