44
External Barriers
In terms of external barriers, and as identified in Chapter 2, we can find a mix of:
a) procedural barriers;
b) governmental barriers;
c) customer and foreign competition barriers;
d) general business environment barriers; and
e) tariff and non-tariff barriers.
These are discussed below in the context of sub-Saharan Africa. International barriers which were
reported to the USTIC, include, tariff-rate quotas, and export taxes. This suggests that significant barriers
are found in the operational area of exporting and internationalisation. Domestic barriers include labour
market policies, domestic price regulation, business regulations, and the inability to meet international
standards, all of which represent a mix of governmental and general business environment barriers.
According to the USTIC, domestic barriers represent the greatest type of barriers for most of the
“eligible” African countries.
Governmental and Business Environment Barriers
When we look at the domestic barriers that the sectors with the greatest export growth potential face, we
find labour and labour market issues, an uncertain business environment and infrastructure to be common,
and by implication, the biggest barriers to exports growth in those countries. Uncertainty in business
environment is often tied up with the absence of skilled labour and inadequate technical capability as it is
with infrastructure problems. Poor infrastructure can impede mobility of both goods and services as well
of talented people. Trade policy as in the coffee export tax in Uganda coupled with weak institutional
arrangements hinders development and progress. The combination of all three elements often has a
bearing on governance. These problems are also high on the agenda of constraints identified by SMEs.
According to the IFC (2006) there is a correlation between a well-functioning business environment and
the number of SMEs per capita. However, there are certain regulatory elements that are more important to
the SMEs than others. For example, red tape linked with starting a business would have a strong
relationship with SME density because the process involved in starting a business is the very first hurdle
that new entrepreneurs face. Regulations on hiring and firing are of vital importance to the SMEs in
developing countries. Many SMEs struggle with developing a steady flow of business, especially within
their first year.
Electricity and access to finance are the two highest ranked adverse factors affecting businesses in Sub-
Saharan Africa. While electricity is considered the most important by close to 25%, access to finance is
ranked as the most important hindrance by about 18%. Africa is the only region where electricity is
considered the most important barrier. Infrastructure related barriers, often outside the control of SMEs,
are a major hindrance to a firm’s ability to operate effectively in both local and international markets.
Uganda, for example, faces a number of challenges in terms of infrastructure, particularly energy and
transport that represent major binding constraints to economic growth. Electricity shortages need to be
addressed through improvement in electricity generation capacity, reduction of transmission losses, and
adjustment of electricity tariffs to cost-reflective levels. Only a quarter of its national road network is
paved.
For land- locked countries such as Burkina Faso, geography-related barriers, which have more to do with
actual physical access to different markets, could be considered to be an extension of business
environment barriers. The land-locked physical geography of the country makes it dependent on
neighbouring country infrastructure for the movement of goods (Trading Economics, 2012). Relatively
limited road air transport facilities and networks together with a weak telecommunications infrastructure
exacerbate the problem of physical access to markets. Other African countries such as Kenya, Ghana,