An intra-African free trade deal could help earn more than $84 billion in untapped exports, going by a new report by the African Export-Import Bank (Afreximbank).
Intra-continental trade could grow to over $231 billion or around 22 percent of African commerce if the potential is leveraged under the pact, even where all other conditions remained constant, said Afreximbank.
Commercial activities under the African Continental Free Trade Agreement (AfCFTA) are timed to commence in January. That could make the bloc the biggest free-trade zone in the world by area with a potential market of 1.2 billion people and a consolidated gross domestic product of $3 trillion, when the deal is operating at full throttle in ten years’ time.
Southern Africa will provide most of the untapped gains, from industries “already proven to be internationally competitive and which have good prospects for export success in other African markets,” like machinery, mineral commodities, vehicles and spare parts, food products, rubber, and plastics, according to Afreximbank.
The bigger export potential Southern Africa and North Africa are benefitting from “largely reflects the complexity and sophisticated nature of the South African and Egyptian economies in a region where industrial products and manufactured goods are the leading drivers of cross-border formal trade,” the bank said.
South Africa and Egypt contribute approximately 50 percent of their respective regions’ export potential.
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Nigeria eyes increased exports
Africa’s biggest economy, Nigeria, consented to ratify the pact last month and now aspires to double its export trade, particularly to African countries, in the next ten years. Currently, only Ghana and South Africa make its top ten list of exports destination.
In 2019, goods with a value of around $60 billion were exported from Nigeria but that figure represents a fall in the value of its exports over the last five years, from $97.6 billion in 2015. As a whole, Abuja shipped 20.4 percent of its total exports to fellow African nations.
Just as global trade tapered by 2.89 percent last year on account of the conflict between the United States and China, Africa’s total merchandise trade shrank by just 0.13 percent to around $1 trillion, Afreximbank data showed.
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Meanwhile, The share of intra-African exports as a percentage of total African exports increased from about 10 percent in 1995 to around 15 percent in 2019, but it remains low compared to levels in Europe (69 percent), Asia (59 percent), and North America (31 percent).
The little drop affirms actions taken to stimulate intra-continental trade and “draw on the diversification of trading partners to sustain economic growth and trade expansion,” the lender said.
All the 55 countries on the continent recognised by the African Union except one have signed to join the bloc and 34 have ratified the accord.
