- AfCFTA and Digitalisation key players for Africa’s Trade growth
CEM REPORT, TRADE | African Continental Free Trade Area (AfCFTA) has been identified as a key proponent of optimising intra-African trade which will potentially increase Africa’s total exports by 29 per cent reaching $952 billion by 2035.
A recent report states that for the predicted figure to be achieved, Africa’s Trade should maintain a steady minimum growth of three per cent from now until 2035. Adding that Africa’s corridors with some of the world’s most dynamic regions will grow faster than the global average of 4.3 per cent.
“Intra-Africa trade is expected to reach $140 billion by 2035, equating to 15 per cent of Africa’s total exports. Africa’s corridors with some of the world’s most dynamic regions will grow faster than the global average of 4.3 per cent.”
The report compiled and published by Standard Chartered titled ‘Future of Trade: Africa report,’ highlighted digitalisation as also a key player in bolstering intra-Africa trade. The report elaborated that adopting digital supply chain financing (SCF) solutions could unlock $34 billion of export value in five key African markets by 2035.
It further stated that the East Africa-South Asia corridor is expected to emerge as the fastest growing major corridor at 7.1 per cent per year through to 2035, while the Middle East-North Africa and the Middle East-East Africa corridors combined trade volume is expected to reach almost $200 billion by 2035.
“The East Africa-South Asia corridor is expected to emerge as the fastest-growing major corridor, at 7.1 per cent per annum through to 2035.
“The Middle East-North Africa and the Middle East-East Africa corridors will also be substantial, with their combined trade volume expected to reach almost $200 billion by 2035.”
The report further stated that 97 per cent of over 100 of Africa’s business leaders surveyed were interested in digital SCF solutions but cited resource constraints, technology gap and interoperability challenges as key barriers to adoption. While 63 per cent polled said complex and uncertain trade rules are one of the top challenges of intra-African trade.
“Fifty-one per cent cited ineffective trade facilitators as another hurdle, whilst 46 per cent noted that limited and/or costly access to capital is a challenge. Around 90 per cent of respondents believe the AfCFTA can address most of these issues.”
Furthermore, the report stated that the AfCFTA was not the first attempt made by Africa’s markets to promote greater cohesion, noting that existing agreements often have overlapping or contradicting objectives – creating a “spaghetti bowl effect”.
“There are eight significant Regional Economic Communities (RECs) recognised by the African Union (AU), and most AU markets are enrolled in two or more RECs, with the high costs of compliance and administration making intra-Africa trade less competitive.
“AfCFTA could help overcome this by implementing common rules of origin, which grant all 54 AfCFTA members preferential trade access to each other’s markets, to the extent set out in the agreement.
“Africa however still has barriers to overcome to realise the full potential of its trade opportunity,” it added.
Group Chairman of Standard Chartered Plc, Dr José Viñals, said: “Implemented effectively, the African Continental Free Trade Area can radically reshape future growth and development. It will enable higher value-added supply chains and more diversified exports, allowing member states to reduce historical commodity dependence and achieve meaningful 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 to build better connections within the continent, and beyond.”
Also, the Regional CEO, of Standard Chartered Africa Middle East, Sunil Kaushal said: “The disruptions to Africa’s supply chains over the last few years have amplified the urgency to implement the AfCFTA.
“At the same time, the findings of our report outline the requirements to exponentially bolster Africa’s exports, which the AfCFTA would benefit greatly. With the right regulations, collaboration, and governance, this opportunity can be made a reality.
“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.