By Onome Amuge.
Africa’s total exports are expected to increase at an annual growth rate of 3 per cent from now to hit $1 trillion by 2035, buoyed by the implementation of the African Continental Free Trade Area (AfCFTA), according to a recent report by Standard Chartered.
The report titled “Future of Trade: Africa Report”, projects that rising regional trade and improved connectivity will create high-growth trade corridors across Africa and beyond, with intra-Africa trade expected to reach $140 billion by 2035, accounting for 15 per cent of the continent’s total exports.
The report also notes that East Africa-South Asia, Middle East-North Africa and Middle East-East Africa corridors will experience higher growth than the global average of 4.3 per cent, and could reach almost $200 billion in combined trade volume by 2035.
According to the report, the AfCFTA is not the first attempt to promote greater cohesion among Africa’s markets, but previous attempts often had overlapping or conflicting objectives, leading to a “spaghetti bowl effect”. There are eight major Regional Economic Communities (RECs) recognised by the AU, with most AU markets belonging to two or more RECs, which increases the costs of compliance and administration and makes intra-African trade less competitive.
The report argues that the AfCFTA could help overcome previous challenges by implementing common rules of origin that grant preferential trade access for all 54 AfCFTA members to each other’s markets, as outlined in the agreement.
The report, which surveyed over 100 African business leaders, also highlights some of the challenges that the continent faces in realising the full potential of its trade opportunities. 63 per cent of respondents cited complex and uncertain trade rules as a key challenge, followed by 53 per cent who cited underdeveloped transportation infrastructure.
The report notes that around 90 per cent of respondents believe that the AfCFTA can address most of the challenges identified. It also notes that progress has already been made, with the AfCFTA introducing initiatives such as a reporting mechanism and a guided trade initiative to boost trade. It also highlights the role of digitalisation in facilitating intra-African trade, and found that adopting digital supply chain financing solutions could unlock $34 billion of export value in five key African markets by 2035.
Notably, almost all (97 per cent) of respondents indicated their interest in digital SCF solutions but cited resource constraints, a technology gap and interoperability challenges as key barriers to adoption.
José Viñals, group chairman of Standard Chartered PLC, said that the AfCFTA, if implemented effectively, has the potential to radically reshape Africa’s future growth and development. It could allow member states to create higher-value supply chains and diversify their exports, reducing historical reliance on commodities and making significant progress towards multiple Sustainable Development Goals.
“Through our global footprint, local expertise and innovative solutions, we are committed to supporting the development of the right policies, securing cooperation, and applying technology and capital in order to build better connections within the continent, and beyond,” he said.
Sunil Kaushal, regional CEO of Standard Chartered Africa Middle East, said that recent supply chain disruptions in Africa have increased the urgency of implementing the AfCFTA, and that the findings of Standard Chartered’s report highlight the need to significantly increase Africa’s exports, which would be greatly aided by the AfCFTA.
He said that this opportunity could become a reality with the right regulations, collaboration, and governance.
“For over 150 years, Standard Chartered has supported Africa’s growth and progress, actively contributing to the continent’s infrastructure development and economic advancement. We will continue to work with the relevant stakeholders in driving trade throughout the continent and ensuring Africa’s sustainable economic development,” Kaushal added.
