The African promise: A look into the future of intra-Africa trade
18 Sep 2018 - by Devlyn Naidoo
The growth and development of intra-Africa trade is no longer just a dream, it is a most certain reality.
According to the World Bank, Africa has six of the world’s ten fastest-growing economies. The list is led by Ghana (8.3%), which we should point out is boosted by oil and gas expansion, Ethiopia (8.2%), Côte d'Ivoire (7.2%), Djibouti (7%), Senegal (6.9%) and Tanzania (6.8%). A growing economy is directly dependent on trade and the lifting of trade barriers will not only lead to a rise in intra-Africa trade but also increased participation and liberalisation.
July 1 saw the signing of the African Continental Free Trade Area (CFTA) by President Ramaphosa at the 31st African Union Summit in Mauritania. This was a significant step towards increased intra-African trade and growth in regional value chains on the continent.
The elimination of trade barriers and relaxed duty structures will ensure more liberalised and enhanced participation as well as increased business participation from logistics service providers. The objectives of the CFTA include the creation of a single market for goods and services and movement of people in order to deepen the economic integration of the African continent. The agreement includes undertakings by member states to progressively eliminate tariffs and non-tariff barriers to trade in goods; progressively liberalise trade in services; cooperate on investment, intellectual property rights, competition policy, customs matters, and all other trade-related areas between member states; and to establish a dispute settlement mechanism. Under the continent-wide agreement, nations commit to cut tariffs on 90% of goods with the aim of increasing intra-Africa trade. The historic document creates the largest free trade zone since the creation of the WTO in 1995.
Africa’s intra-regional trade lies well below that of other regions. In 2016, intra-African exports made up 18% of total exports, compared to 59 and 69% for intra-Asia and intra-Europe exports, respectively. The figures for imports are similar. There have been slight improvements in the past 10 years, though, as the share of African countries’ exports within the continent have slightly increased. The share of imports, on the other hand, have remained stagnant, despite the increase in total import volume.
As seen in the figure below, though total exports stagnated and even decreased after 2011, the total volume of intra-Africa exports increased. While Africa has increased its aggregate trade volume, the share of intra-Africa trade remains stagnant. With the reduction in tariffs, the CFTA has the potential to increase the share of intra-Africa trade.
Figure 1: Africa’s intra- and extra-regional trade
In terms of intra-regional trade, Africa has yet to reach its full potential. The implementation of the CFTA could be the catalyst that moves the region toward high levels of intra-regional trade.
And while the CFTA is still in its infancy, we, as active participants in international trade, need to take full advantage of the business opportunities that present themselves in terms of transport, customs clearing and freight forwarding, infrastructure development, systems design and project management. Furthermore we need to educate our youth and shape young minds to be the driving force behind sustainable development and growth of our intra-Africa trade landscape.
Devlyn Naidoo is currently a facilitator and customs mentor at the SA Maritime School and Transport College (SAMS), a privately owned college that provides training and skills development in international trade, freight handling and customs compliance.