The future of trade in Africa

Columnists

The future of trade in Africa

Wednesday November 01 2023

A ship offloads cargo at the Mombasa port. Africa has a bright future in international trade given its vast resources and abundant labour. FILE PHOTO | NMG

When the African Continental Free Trade Area (AfCFTA) was set up in 2018, member States aimed to enhance the region’s economic growth via inclusion and integration. Five years later, the deal has spearheaded trade in services, investment, and use of technology.

Additionally, there has been an increase in technical sophistication in manufacturing. This has created competitiveness and accelerated the pace of digitalisation that is driving productivity.

An upcoming (AfCFTA) conference, set to take place in Cairo next week, comes at an auspicious moment in Africa’s history. Given the bright and promising future of trade in Africa, the event’s timing is ideal. This exhibition is a testament to the collaborative efforts of critical stakeholders, including the African Union Commission (AUC), the African Continental Free Trade Area (AfCFTA) Secretariat, and the African Export-Import Bank (Afreximbank).

Together, they are working within the framework of AfCFTA to facilitate the exchange of trade and investment information among African nations. The trade landscape in Asia, Africa, and the Middle East is undergoing dynamic changes, with annual growth rates expected to outpace the global average. This anticipated growth is set to surpass that of Europe and the Americas within the current decade.

These three regions, collectively accounting for roughly three-quarters of the world’s population, boast some of the planet’s most substantial and rapidly expanding economies. As a result, they are poised to play a pivotal role in shaping a more connected and resilient global trade model.

A recent report by Standard Chartered Bank highlights the shifting tides of global trade. The report predicts that by 2030, Africa and the Middle East will be central to global business, with an estimated total trade value of $32.6 trillion. Asia, Africa, and the Middle East will anchor global trade, driving $14.4 trillion in exports and $13.4 trillion in imports, with Asia leading.

The report envisions a future where trade in the region is more interconnected and resilient. Landmark agreements like the Regional Comprehensive Economic Partnership (RCEP) and AfCFTA are expected to strengthen intra-regional business and foster greater cooperation among nations in Asia, Africa, and the Middle East.

Consequently, employment within these markets is projected to grow at a higher rate than the overall trade growth in the region, with intra-regional exports expected to grow at 5.8 percent and imports at 5.6 percent from 2021 to 2030.

Transformation of supply chains is expected to bring production closer to the point of consumption, enabling businesses to respond more effectively to market changes. The reshaped supply chains will be less susceptible to disruptions.

They will be more transparent, allowing adherence to environmental, social, and governance (ESG) criteria and fostering a sustainable global trade model.

The report estimates that exports are expected to exceed $758 billion in Africa, with imports totalling $842 billion. While exports and imports with Europe will remain substantial, they are expected to grow at a slower rate relative to other corridors, such as South Asia, where both exports and imports are projected to nearly double by 2030.

It further highlights the potential for robust growth in two African countries, Nigeria and Kenya. Both countries have ratified the AfCFTA, positioning them to experience significant economic expansion in the coming decade.

For Kenya, key initiatives to drive economic growth include the establishment of an intelligent technology hub that stimulates innovation, manufacturing, trade, and digitalisation. Additionally, enhancing SMEs’ digital literacy and global competitiveness through vocational education and training programmes is vital. Improving agricultural yield and adapting to climate change using sustainable and adaptive farming practices will drive the country’s economic growth.

Most important are structural policy changes for future trade growth, particularly in areas such as improving infrastructure quality to facilitate trade flows deepening trade integration by removing tariff and non-tariff barriers. Supportive industrial policies are crucial to boosting manufacturing outputs and exports.

It also enables contract enforcement, dispute resolution, foreign investor recourse, and integration of financial markets to facilitate cross-border exchanges and the flow of capital.

Intra-Africa Trade Fair and the broader trends in trade within Asia, Africa, and the Middle East signal a promising future for these regions. These developments reflect the collective efforts of governments, organisations, and businesses in promoting interconnectedness and resilience in the world of trade.

Therefore, strategic policy measures, such as improved infrastructure, trade integration, and supportive industrial policies, are essential to realise this potential fully.

The writer is Kenya’s Ambassador to Belgium, Mission to the European Union, Organization of African Caribbean and Pacific States and World Customs Organization. The article is written at a personal level.