Products, commodities that will shape African trade as AFCFTA takes off
Manufacturers, non-oil exporters, banks, Africans within the agricultural value chain, professionals are all enthusiastic with the news that the African Continental Free Trade Area (AFCFTA) will take off in January 2021. When the project fully takes off, it will be the largest free trade area when measured in terms of the number of countries involved.
The African Continental Free Trade Agreement was signed in Kigali, Rwanda in March 2018 by 44 countries and more countries have joined raising the member-states to 55. The trading bloc, which will be a single market for goods and services will have 55 countries, with a combined population of 1.2 billion inhabitants whose gross domestic product (GDP) added up to $2.5 trillion. Countries within the single market are expected to remove tariffs on about 90 percent of goods they produce, in addition to allowing free movement of capital and business travellers.
According to the UN Economic Commission for Africa (ECA), the African continent with a single trading bloc will leverage on $1.4 trillion consumer spending, 128 million African households with discretionary income, and that the proportion of Africans living in cities will likely to rise to 50 percent by 2030 just as Africans within the working-age are projected to reach 1.1 billion by 2040. Discretionary income is an income available to a household or an individual to save, invest or spend having met all the basic necessities. That is, it is spent on non-essential things which include luxury items, vacations, etc.
Envisaging the benefits AfCFTA will generate for African countries and their inhabitants, the World Bank has predicted that the continent will see significant improvement in income growth, poverty alleviation and economic development.
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“In monetary terms, intracontinental trade grows from $294 billion in 2035 in the baseline scenario to $532 billion after implementation of AFCFTA in 2035. By 2035 under AFCFTA, the biggest increase in the value of exports to the regional partners is expected to benefit, in descending order of value, Egypt, Morocco, South Africa, Nigeria, Kenya, and Côte d’Ivoire (between $48 million and $11 billion). Similarly, for the welfare gains, the smallest export expansions are expected in the economies that are already relatively open such as Madagascar, Malawi, Mauritius, and Rwanda, with export increases of less than US$1 billion”, the World Bank said.
“The biggest expansion of exports to regional partners is recorded in manufactures, not elsewhere specified, followed by energy-intensive manufacturing; chemical, rubber, and plastic products; and processed food products. Among services, the biggest expansion to regional partners is expected in health and education services; air, road, and rail transport services; and other business services. However, the volume of export growth is much smaller than in agriculture and manufacturing. The same sectors would also be expected to expand their exports to NON-AFCFTA partners, with significant gains in the exports of several manufacturing sectors and agricultural products’, the World Bank added.
AFCFTA is more or less like the coalescing of the existing trading blocs in Africa. The existing trading blocs on the African continent are the Arab Maghreb Union (AMU) in the northern part of Africa consisting of five countries; Economic Community of West African States (ECOWAS) which has 15 members; East African Community (ECA) which has 6 countries; Intergovernmental Authority on Development (IGAD) with 8 member countries; Southern African Development Community (SADC) with 16 member-states; Common Market for Eastern and Southern Africa (COMESA) which has 21 countries; Economic Community of Central African States (ECCAS) with 10 member-states; and the Community of Sahel-Saharan States (CENSAD) with 28 member states.
As the opportunity to raise incomes in Africa through intra-trade beckons, some products and commodities will shape Intra African trading activities going forward. In 2019, 15.3 percent of Africa’s imports which amounted to $560.5 billion, and 39.2 percent of Africa’s exports, translating to $182.5 billion were mineral fuels, mineral oils, bituminous substances, and mineral waxes, according to the data mined from the African Trade Year Book 2020.
Africa also imported $67 billion worth of nuclear reactors, boilers, machinery, mechanical appliances, representing 12 percent of its imports in 2019. Further, 8.2 percent of Africa’s imports or $45.9 billion were electrical parts, machinery and equipment, television image and sound recorders. Others imports included vehicles other than railway, tramway rolling stock, parts and accessories amounting to $45.4 billion or 8.1 percent of Africa’s imports in 2019.
Cereals worth $23 billion were imported into the African continent last year representing 4.1 percent of its total imports. Plastics, pharmaceutical products, iron and steel worth $21.4 billion; $17.3 billion and $17.2 billion representing 3.8 percent, 3.1 percent and 3.1 percent were imported into Africa in 2019.
On the export side, natural or cultured pearls, precious or semi-precious stones, precious metals, imitation jewellery, coin worth $49.7 billion were exported by African countries in 2019. Same period, export of ores, slag and ash amounted to $22.2 billion while copper and articles thereof worth $15.5 billion were exported.
Some commodities made it on Africa’s export and import charts. Edible fruit and nuts, peel of citrus fruit and melons worth $9.6 billion were exported. Cocoa and cocoa preparations worth $9.2 billion; coffee, tea, mate and spices valued at $5.2 billion; edible vegetables and roots and tubers, worth $4.1 billion, as well as oil seeds and oleaginous fruits, grains, seeds and fruits, industrial medicinal plants, straw and fodder valued at $3.7 billion were exported.
Intra African trade varies across countries when measured by the proportions of exports and imports among African countries. According to Tralac, 20 percent of Nigeria’s exports and 7 percent of its imports were to and from intraAfrican trade. For South Africa, 27 percent of its exports and 12 percent of its imports were to and from intra African trade in 2019.
Zimbabwe is one of the African countries having high intra African trade records in 2019. According to Tralac, 62 percent of Zimbabwe’s exports and 48 percent of its imports were traded with the rest of Africa. The goods were exported to and imported from South Africa, Mauritius, Zambia, Mozambique, Botswana and Malawi.
37 percent of Kenya’s exports and 13 percent of its imports were traded with the rest of Africa in 2019. Ivory Coast’s exports and imports with the rest of Africa amounted to 23 percent each. Also, in West Africa, 43 percent of Senegal’s exports and 13 percent of its imports were with the rest of Africa last year.
Namibia’s 37 percent and 66 percent of its exports and imports took place with the rest of Africa. The only exception being Eswatini, which traded 92 percent and 77 percent of its exports and imports with the rest of Africa in 2019.