Africa plays a marginal role in global trade. The continent’s trade in goods and services in 2019 amounted to 3% of global imports and exports. African countries rely heavily on imports that are not subsequently sufficiently balanced by exports.
In the same year, the region recorded exports of goods valued at US$ 462 billion and corresponding imports worth US$ 569 billion. North Africa (specifically 5 countries) is responsible for ⅔ of the continent’s exports.
Exports from the continent are dominated by primary products/raw materials such as: fuel, ores and metals and agricultural products while a big share of its imports is manufactured consumer goods.
An economic model akin to the colonial era. Primary products exporters are susceptible to shocks due to fluctuating demand. Countries that benefit from globalization are those that through industrialization (hence creating jobs) transform raw materials to finished “value-added” products.
Intra-regional trade in Africa, albeit on the rise, is the lowest at circa 15% compared to other regions such as Europe and Asia. The cost of intra-African trade is also higher than in any other developing region. Africa trades more with the rest of the world; making it more integrated with the rest of the world than itself.
This under trading can be explained by ‘lack of product diversification, historical relationships, poor or inadequate infrastructure and small, fragmented markets with low purchasing power’. African countries produce similar goods at the same time of year. The lack of product diversification causes limited trade complementarity and causes competition against each other in common external markets.
Having mentioned this, integration in the continent. Compounding all this is a labyrinth of Non-Tariff Barriers (NTBs that causes difficulties in trade facilitation. These include constraints such as cumbersome customs procedure. complex procedures regulating business, restrictive rules of origin. poor transit regimes, informal roadblocks along trade routes and corruption.
In this context, empirical evidence has shown that integration is a pivotal propeller for economic growth, industrialization, and sustainable development in the continent. It brings significant gain in wealth and welfare and consequently meeting the Sustainable Development Goals (SDGs).
Recent global events such as Covid-19, post-pandemic supply disruptions and the Russian – Ukrainian war exposed the continent to severe vulnerabilities. Further giving impetus to intra-continental integration.
The pandemic and ensuing restrictions led to demand decline of exports from Africa and therefore prices of the merchandise. Adjustments post-pandemic included a sharp increase of demand for goods and unmatched supply. Supply chain disruption led to inflation, by extension leading to sudden food protectionists policy by some countries that Africa relies on for exports.
For instance, Indonesia’s temporary ban on crude palm oil impacted Nigeria negatively. The over-reliance of the region to imports was further exacerbated by the threat of food insecurity because of the war that interrupted supply of wheat, fertilizer, and cooking oil from the region.
A flagship project of the Agenda 2063: The Africa We Want; the Africa Continental Free Trade Area (AfCFTA) has been heralded as a game changer in creating inclusive and sustainable development in the continent.
One of 16 flagship projects, AfCFTA is the largest intergovernmental project aimed towards the world’s largest free trade area, uniting 8 Regional Economic Communities (REC) to create a single market for goods and services for 1.3bn people and a combined GDP of 3.4$ trillion. At its full potential, the trade pact promises to lift 30m Africans from poverty and a 7% income boost, an equivalent of $450bn by 2035.
As of August 2022, 54 out of 55 AU states (excluding Eritrea) have signed the AfCFTA agreement and 43 have submitted their instruments for ratification. An indication of commitment to deepen intra-continental economic integration.
AfCFTA has eight strategic intents: creating a single market for goods and services, facilitated by the movement of people; contributing to the movement of capital and people and facilitating investment; creating a continental customs union; expanding intra-African trade; resolving the challenges of overlapping memberships in REAs; promoting sustainable and inclusive economic development; boosting industrial development; and enhancing competitiveness.
Africa has often been presumed as a continent of unfulfilled potential. Paradoxically, despite enormous wealth in the endowment of natural resources, the continent remains underdeveloped. AfCFTA promises to unlock this potential.
Political consensus exists on the need for deeper economic integration. Questions linger on whether member states will uphold the agreement, even when regional integration arrangements have underperformed and whether AfCFTA secretariat will have the capacity to effectuate the agreement.
The writer is the Strategic and Technical Advisor/Gender Mainstreaming Lead Never Again Rwanda (NAR)
The views expressed in this article are of the writer.
