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In the period from January to August, Africa’s merchandise trade contracted by 12 percent compared to the same period last year.
By Our correspondent
December 17, 2020: Afreximbank’s Annual African Trade Report (ATR) examined trade and economic developments in Africa in 2019, a year dominated by trade wars and rising tariffs that resulted in a sharp slowdown in world trade growth . This has been exacerbated by Covid-19 and as a result, after a 2.8 percent drop last year, world trade is expected to shrink by 9.2 percent in 2020.
The share of exports from Africa to Asia increased to 30.79 percent in 2019, while the EU’s share decreased to 24.6 percent. China and India have been the main drivers of increased trade relations between Africa and Asia, with China and India accounting for 27 percent of Africa’s total merchandise exports in 2019.
The ATR carried out a comprehensive study of informal cross-border trade (ICBT), the first attempt to measure in detail the size and composition of informal trade. Despite regional variations, the report highlighted the importance of ICBTs for generating employment and income. The report estimates that it serves as a source of income for about 43 percent of Africa’s population and is dominated by women. In southern Africa (the SADC bloc), female traders account for about 70 percent of the ICBT. In West Africa, food and agricultural products accounted for 30 percent of intra-regional trade.
Commenting on the report, Benedict Oramah, president of Afreximbank, said: “Although ICBT accounts for a significant proportion of national absorption and has become an important source of revenue to smooth consumption, its contribution to GDP is hardly recognized.”
By bringing an evidence-based approach to measuring ICBT, the report highlights areas that can be targeted for growth in intra-African trade and the transition from ICBT to formality. For example, removing technical and non-tariff barriers to trade, as well as streamlining processes, increasing access to finance, and creating payment systems that leverage digitization to mitigate risks, will help merchants scale and move up the chain of value. ICBT is currently a cash business.
Many recommendations emerge from the report that will become even more relevant with the advent of the African Continental Free Trade Agreement (AfCFTA). Afreximbank, for example, is implementing its Pan African Payment and Settlement System (PAPSS) to allow buyers and sellers to trade in local currency, as well as reduce the security risk associated with trading in cash.
In the period from January to August, Africa’s merchandise trade contracted by 12 percent compared to the same period last year, with April and May being the period with the largest contractions. The outlook for 2021 is positive and Africa’s trade is expected to recover strongly in 2021 as global economic activity recovers and demand for African exports increases.
A similar pattern is also observed in the import supply of African countries. Although the EU has historically been the largest market for African imports, its share of total African imports has been steadily declining and Asia has become as important as the EU.
The value of total intra-African trade fell 5.23 percent in 2019, reducing its overall contribution to overall African trade, from around 15 percent in 2018 to 14.4 percent in 2019.
South Africa maintained its position as the nation with the highest intra-African trade, accounting for 23.1 per cent of total intra-African trade in 2019. The Democratic Republic of the Congo (DRC) consolidated its position as a major contributor to intra-African trade, registering an increase of 10 , 4 percent in total trade with the continent to emerge as the continent’s second-largest intra-African trade economy in 2019. Despite declining by 4.7 percent, Nigeria’s share of intra-African trade remained constant at about 7 percent and Nigeria emerged as the third largest intra-African trade country.
