PAN-African financial institution, Afreximbank projects that the continent’s trade performance will rebound strongly in 2021 driven by demand for African exports and global economic recovery.
The bank believes increased intra-Africa trade is key to cushioning the continent from the blow of global trade tensions and external shocks.
“The outlook for 2021 is positive and Africa’s trade is expected to rebound strongly in 2021 as global economic activity picks up and demand for African exports increases,” said Afreximbank in its latest trade report. It noted that the share of Africa’s exports to Asia, for instance, increased to 30,79 percent in 2019 while the EU’s share decreased to 24,6.
China and India have been the main drivers of the rising trade relationships between Africa and Asia, with China and India accounting for 27 percent of Africa’s total merchandise exports in 2019, said the bank.
A similar pattern was also observed in the sourcing of imports by African countries. While the EU has historically been the largest market for Africa’s imports, its share of total African imports has been decreasing steadily and Asia has become as important as the EU, said Afreximbank.
With global trade expected to contract by 9,2 percent this year, having fallen by 2,9 percent in 2019, Africa’s share of global trade remains lower, at 2,7 percent in 2019, below the four percent figure of the 1970s, it noted. The adverse impact on trade has been compounded by Covid-19, which has disrupted global value chains as countries adopted strict lockdown measures.
Afreximbank says informal cross-border trading is a key component of intra-African trade and could be worth as much as 80 percent of value of formal trade in some countries.
South Africa, for instance, was the biggest contributors to Intra-African trade, accounting for 23 percent of total trade, in 2019. The biggest jump came from DRC, which became the second intra-African trading nation, accounting for 10,4 percent of total intra-African trade and Nigeria was third with seven percent.
Afreximbank released its annual African Trade Report (ATR) last week, which examined trade and economic developments in Africa in 2019, a year dominated by trade wars and escalating tariffs that resulted in a sharp deceleration of global trade growth.
The report notes the continent remain overly dependent on export of raw commodities, with oil and gas accounting for over 37 percent of total exports, according to the bank with the African commodity index down 20 percent year on year.
The ATR conducted an extensive study of informal cross-border trade (ICBT), the first attempt at measuring in a detailed manner the size and composition of informal trade.
Despite regional variations, the report highlighted the importance of ICBT for generating employment and income.
The report estimates that it serves as a source of income for about 43 percent of Africa’s population and is dominated by women.
In Southern Africa, female traders account for about 70 percent of ICBT while in Africa, food and agriculture products account for 30 percent of intra-regional trade.
Commenting on the report, Professor Benedict Oramah, the president of Afreximbank, said while ICBT accounts for a significant proportion of domestic absorption and has become a major source of income for consumption smoothing, “its contribution to gross domestic product (GDP) is hardly recognised.”