Tariff barriers, sluggish growth weaken intra-Africa trade to $190b

Intra-African trade’s value has declined to $190.9 billion, demonstrating persistent challenges the regional economies continue to face in trading with one another under the continental common market, blamed on both tariff and non-tariff barriers.

As a result, the share of intra-African trade in total has declined to 14.4 per cent, from 14.7 per cent in 2022, according to a report by African Export-Import Bank (Afreximbank).

In 2022, intra-Africa trade made an impressive growth of 20.6 per cent but since then, has depleted, instead of improving. The report notes that Southern Africa recorded the highest share of trade within the continent, at 41.1 per cent, followed by West Africa (23.4 per cent), East Africa (16.4 per cent), North Africa (12.3 per cent) and Central Africa (6.8 per cent).

The biggest trading nation, South Africa, continues to be the largest intra-African trading country, with its trade within the continent valued at $39.2 billion, though a slight decrease from $39.9 billion.

Côte d’Ivoire came in second at $9 billion, accounting for about five per cent of the continent’s total intra-African trade. Mali emerged third, with its trade within the region growing by 18.1 per cent to $8.9 billion from $7.6 billion, accounting for 4.7 per cent of total intra-African trade. Egypt followed, with its trade within Africa growing by 11.4 per cent to $8.3 billion, accounting for 4.3 per cent of total intra-African trade.

Additional contributors to intra-African trade are Nigeria, the Democratic Republic of Congo, Zimbabwe, Zambia, Namibia and Uganda, which collectively accounted for 22.4 per cent of the intra-African total trade.

The report notes that major African exporting countries were confronted with significant challenges arising from a difficult global environment characterised by heightened geopolitical tensions, subdued global demand and sluggish economic growth.

Following the remarkable growth of 20.6 per cent to $1.4 trillion in merchandise trade in 2022, Africa’s trade dipped, contracting by 4.6 per cent to $1.3 trillion at the end of 2023 and less than a trillion last year. “The contraction can also be partly attributed to various factors, including the war in Ukraine and an escalation of the conflict between Israel and Gaza, which led to increased policy uncertainty and persistently restrictive interest rates with dampening effects on investment and trade,” the report said.

Africa’s merchandise exports declined to $695.2 billion in 2023 from $705.2 billion in 2022 while merchandise imports contracted by 1.1 per cent to $702.7 billion from the strong growth of 17.1 per cent recorded the previous year.

According to the United Nations Economic Commission for Africa (UNECA), African countries continue to trade with the rest of the world more than among themselves and the envisaged benefits of Africa’s trade agreement are yet to be felt by member countries as evidenced by the declining intra-Africa trade as a share of global trade.

In June 2024, trade experts reviewed the progress on the implementation of the AfCFTA framework which is facing headwinds as a result of persistent tariffs and NTBs, over three years since the implementation of the Common Market.

The Economic Commission for Africa (ECA), African Union Commission (AUC), African Development Bank (AfDB) and the United Nations Conference on Trade and Development (UNCTAD), along with regional and national stakeholders concluded that Africa’s path to economic integration is paved with opportunities and challenges that require collective action and innovative solutions.

According to the report, FDI inflows to Africa declined by 3.5 per cent to $52.6 billion in 2023, from $54.5 billion in 2022, largely due to reduced investments in South Africa and Egypt, two of the region’s largest FDI recipients. North and West Africa emerged as the largest recipients of FDI, with each sub-region attracting $13 billion in 2023, even though that amount represents a 12 per cent contraction for North Africa, while it is a one per cent contraction for West Africa compared to 2022. In West Africa, key contributors to FDI inflows to the region included Côte d’Ivoire ($1.8 billion), Ghana ($1.3 billion), Nigeria ($1.9 billion) and Senegal ($2.6 billion).