Unlocking Africa’s agriculture potentials through Intra-African Trade.

 

Photo Credit: Lukman Yusuf

Africa is blessed with an abundance of natural and human resources and it is imperative to leverage these resources to create sustainable wealth and improve the living standards of its people. One effective method is through intra-African trade. According to UNCTAD, in 2021, intra-African trade accounted for only 14.4% of total African exports, which is significantly lower compared to the European Union (50-80%), Asia (59%), and North America (31%). To maximize its potential, the government should focus on boosting intra-trade, especially in the agriculture sector.

Agriculture is the most important economic activity in Africa, providing employment for two-thirds of the continent’s working population and contributing an average of 30 to 60% of the gross domestic product and 30% of the value of exports. There are numerous challenges limiting intra-trade in Africa, including poor transportation infrastructure, currency exchange complications, poor access to trade and supply chain financing, insecurity, the low pace of industrialization, and slow implementation of AFCFTA.

According to ECA’s projections, by 2040, the AfCFTA will increase intra-African trade in agricultural products by 20-30%, with the highest gains in sugar, vegetables, fruit, nuts, beverages, and dairy products. To unlock the continent’s agricultural potential, the government and all relevant stakeholders should take the following steps:

Restructure Africa’s security architecture: The growing rate of insecurity in African states poses a major risk to trade activities in the region. The government should deploy the best technology and mobilize sufficient personnel to combat insecurity, guaranteeing the safety of lives and properties during trade, which would boost the confidence of existing and potential players in the market and encourage more trade.

Invest in the creation of inland transportation routes and infrastructure: While emphasis has been placed on creating more ports to facilitate international trade, the government should also prioritize the creation of more inland transportation routes, such as roads, railways, and dry ports. This will make transportation within the continent much easier, boosting intra-trade across multiple regions.

Establish or promote an efficient payment system within Africa: Payment challenges often arise during trade between African countries, such as exchange rate complications, delays, or fraud. The government should work towards creating or promoting a cross-border payment solution, such as PAPSS, to minimize or solve trade settlement challenges, reduce costs and time associated with payment and money transfer, and encourage more trade.

Provide expanded access to trade and supply chain finance for MSMEs: A recent report by IFC showed that lowering trade finance costs could provide billions in economic benefits in four West African countries. The government should coordinate with the private sector and multilateral to build the capacity of local and international lenders to improve access to finance for SMEs, thereby increasing trade volumes in the continent.

FastTrack the Implementation of the AFCFTA: Several issues are delaying the implementation of the AFCFTA, including rules of origin. The governments of Africa should work together towards rapid implementation of AFCFCTA, The World Bank estimates that, if implemented properly, by 2035 the AfCFTA is set to lift 30 million Africans out of extreme poverty and 68 million from moderate poverty. The same study finds that the AfCFTA has the potential to increase intra-African trade by 81% and boost wages by 10% by 2035. Cameroon, Egypt, Ghana, Kenya, Mauritius, Rwanda, Tanzania, and Tunisia have already made the required implementation changes in their customs and regulations necessary to begin trading. It is only reasonable that other countries in Africa follow suit.