Report: Africa exports could hit $1 trillion by 2035

Dar es Salaam. Africa’s exports could potentially hit almost $1 trillion in 2035, propelled by ongoing connectivity initiatives, a new report says.

The report by Standard Chartered Group says Africa’s exports, currently at $645.3 billion, will reach $952 billion by 2035, with connections with South Asia, East Asia and the Middle East growing swiftly.

The figure could rise further if the African Continental Free Trade Area (AfCFTA), which is estimated to boost trade on the continent by 29 percent, is well implemented.

Titled “Future of Trade: Africa Spotlight on the African Continental Free Trade Area”, the report says intra-Africa trade is also expected to flourish, with flows within East and West Africa projected to grow by 15.1 and 13.2 percent respectively, far outpacing the global average of 4.2 per cent.

The report forecasts a robust intra-regional trade growth for West and East Africa.

 While the West Africa’s markets hold great potential for forming value chains downstream in agricultural products such as shea butter and cocoa beans, in East Africa, the growth will be fuelled by the ongoing large scale cross-border infrastructure developments such as the Lapsset Corridor Project connecting Ethiopia, Kenya, and South Sudan will drive greater trade in the coming decades.

The Tanzania-DRC and Kenya-DRC corridors are expected to drive growth in the East Africa-Central Africa corridor, the report says, banking on recently signed deals and joint infrastructure development projects.

Tanzania and the DRC were constructing a $2.2 billion rail network, which upon completion in 2026, will connect the two markets through Burundi.

 Besides, Kenya and the DRC recently signed 18 agreements to strengthen bilateral ties.

The report projects that regional trade with Southern Africa is expected to grow at a moderate rate, noting however that it will still account for approximately two-thirds of total intra-Africa trade by 2035.

This will be driven by higher integration.

Trade between Africa and Asia will be among the fastest growing into 2035, with India leading the trade growth between the African continent and South Asia.

The East Africa-South Asia corridor is expected to emerge as the fastest-growing major corridor, at 7.1 percent per annum through to 2035.

Geographical proximity will remain a key driver of Africa’s trade, the report says.

Unfinished business

Backed by a research that involved 100 business leaders on what needs to be done for Africa to realise its huge potential in trade, the report says that the continent will have to work on several issues to realise the projected rise in exports and trade.

“There’s work to do to guarantee this expansion, though.

 African markets face complex and uncertain trade rules, poor governance, underdeveloped infrastructure, and high costs of capital.

 These are all a concern for – on average – half of the business leaders in the region,” says the Standard Chartered Plc Group Chairman, Dr José Viñals.

During the interviews, the report says, 63 percent of the business leaders highlighted complex and uncertain trade rules as the major impediment to trade growth in Africa while 59 percent cited corruption as their major challenge.

Fifty-three percent of the business leaders cited underdeveloped infrastructure while 51 percent and 46 percent highlighted ineffective trade facilitation and costly access to capital as key challenges that need immediate redress.

Implemented effectively, Dr Viñals says, the AfCFTA could radically reshape future growth and development by enabling higher value-add supply chains and more diversified exports, allowing member states to reduce historical commodity dependence.

And, according to the CEO for Africa and Middle East at Standard Chartered Group, Mr Sunil Kaushal, the intra-Africa exports, which are forecast to reach $140 billion by 2035, could be boosted by an additional 81 percent as a result of AfCFTA.

However, governance and cooperation remain key to achieving the goal, calling on a concerted effort to put into place policies that promote regional value chains which include coordinated industrial and trade policies.

“At the same time, more needs to be invested in cross-border infrastructure development and trade facilitative measures.

 Finally, Africa needs to continue developing its financial infrastructure including local payments systems such as the Pan-African Payment and Settlement System,” says Mr Kaushal.

Strike a balance

According to the report, Africa’s challenges require trade policies that strike a balance between national industrialisation objectives and the formation of regional value chains.

“Structural improvements in trade facilitation, cross-border infrastructure and a standardised payments system are critical requirements for more efficient and cost-effective trade.

These goals require stronger governance and cooperation,” the report reads in part.

While headline growth in Africa’s exports has been robust at 7.7 percent per annum over the past two decades, the report notes that much of the growth has been predominantly been driven by commodities.

This, the Standard Chartered Group’s report says, will have to be reduced for the continent to realise the best out of the projected trade growth.

In one of its recent studies, the United Nations Conference on Trade and Development (Unctad) says 45 countries in Africa are considered to be commodity dependent, with commodities accounting for 90.1 percent of their goods exports.

Due to the dependence on commodities, Africa is disproportionately exposed to global price volatility and loses out on opportunities for local value-addition.

On the contrary, in the Americas, Asia and Europe, the number of markets that depend on commodities are 22, 18 and four respectively.

Besides, Africa will also have to try to raise intra-Africa trade which fell by one percentage points during the past 20 years.

“Africa lags behind other regions such as Asia, where policies that incentivise industrialisation, export growth and regional integration have transformed economies, and enabled increased participation in global value chains,” the report says.

While the share of intra-continental trade in Europe, Asia and North America stands at 67 percent, 56 percent and 50 percent respectively, the same stands at only 13 percent in Africa.