- The African Continental Free Trade Area (AfCFTA) has potential to further boost exports by around 30 per cent
- Barriers such as complex and uncertain trade rules and ineffective trade facilitators remain
- AfCFTA will help overcome the “spaghetti bowl effect” of existing Regional Economic Communities (RECs)
MARRAKESH, Morocco, Oct. 11, 2023 /PRNewswire/ — Standard Chartered has today published its Future of Trade: Africa report, highlighting the outlook for African trade and providing a view of the African Continental Free Trade Area (AfCFTA) as a key proponent of optimising intra-African trade.
The report finds that Africa’s total exports will reach USD952 billion by 2035 and the AfCFTA, once fully implemented, has the potential to increase this figure by a further 29 per cent. This represents an annual growth rate of 3 per cent from now until 2035.
Rising regional trade levels and greater connectivity will unlock high–growth corridors across Africa and beyond. Intra-Africa trade is expected to reach USD 140 bn by 2035, equating to 15 pe rcent 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 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 USD200 billion by 2035.
The AfCFTA is not the first attempt made by Africa’s markets to promote greater cohesion, but the 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. Based on a survey conducted with over 100 of Africa’s business leaders, 63 per cent polled said complex and uncertain trade rules are one of the top challenges of intra-African trade. 53 per cent of respondents noted that underdeveloped transportation infrastructure is a key barrier. 51 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. Progress has been made in this regard, with the AfCFTA taking steps to address barriers through various initiatives, such as a reporting mechanism and a guided trade initiative to accelerate trading[1] amongst countries.
Digitalisation also plays an important role in bolstering intra-Africa trade. The report demonstrates that adopting digital supply chain financing (SCF) solutions could unlock USD34 billion of export value in five key African markets by 2035. Almost all (97 per cent) of respondents are interested in digital SCF solutions but cited resource constraints, a technology gap and interoperability challenges as key barriers to adoption.
Dr José Viñals, Group Chairman of Standard Chartered PLC, said: “Implemented effectively, the African Continental Free Trade Area can radically reshape future growth and development. It will enable higher value-add 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 in order to build better connections within the continent, and beyond.”
Sunil Kaushal, Regional CEO, Standard Chartered Africa Middle East, 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 sustainable economic development.”
Read the full report here: https://www.sc.com/en/banking/banking-for-companies/future-of-trade-2023/
Note to editors
About the Future of Trade: Africa
This report, commissioned by Standard Chartered and prepared by PwC Singapore, provides a view on the impact of The African Continental Free Trade Area (AfCFTA) on intra-Africa trade.
This report is based on an analysis of qualitative and quantitative information from both internal and external sources. All trade figures used in this report are for trade of goods only and do not include trade in services. The impact of AfCFTA is based on a report published by the World Bank, The AfCFTA: Economic and Distributional Effects.
A survey of 103 Africa’s C-level and senior leaders was conducted to understand the current challenges of intra-Africa trade as well as the trade opportunities that the AfCFTA can bring to the continent. It also captures respondents’ views on the most effective trade facilitation measures and the impact of the Pan-African Payment and Settlement System (PAPSS) on the reduction of costs of cross-border payments. Beyond this, the survey provides insights into Africa’s business leaders’ perspective on the growth of e-commerce as well as the significance of supply chain finance in the context of regional trade.
Here is the link for the report https://www.sc.com/en/banking/banking-for-companies/future-of-trade-2023/
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