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Research suggests a boom in intra-African trade

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Research suggests a boom in intra-African free trade. Image credit: Leon Louw for WhyAfrica

Research suggests a boom in African trade

Unveiled yesterday at the World Economic Forum, held in Davos, Switzerland, new research commissioned by DP World and led by Economist Impact forecasts a booming African trade landscape in 2024.

Many  senior executives are predicting a surge in intra-African trade, fueled by new trade pacts and tech investments.

However, African firms remain cautious as inflationary pressures, economic uncertainty and political instability threaten to impact growth.

Over 26% of the executives surveyed identified heightened inflation and economic uncertainty as the primary limitations on expanding imports, a 7% increase on the previous year. Additionally, nearly 20% pointed to political instability in crucial source markets as their primary constraint, up 4% year-on-year.

The latest Trade in Transition study captured the perspectives of African trade experts and senior executives during a period of unprecedented transformation, as heightened global geopolitical risk, climate change and significant advancements in technologies create both challenges and opportunities.

African business poised for intra-African trade growth

In light of the African Continental Free Trade Area (AfCFTA), executives across the continent expect intra-regional trade to grow in 2024. Some 28% of the surveyed business leaders expect sub-Saharan Africa to be their largest export market this year, up from 19% of respondents the previous year.

Only Europe (38%) and North America (34%) rank higher in the list of regions expected to provide the greatest contribution in terms of export sales.

Almost three-quarters agreed that government actions, like enhancing regional trade agreements, have positively impacted their supply chain strategies. This highlights the significant role governments can play in creating a favourable environment for business growth and trade expansion.

Technology set to increase resilience and efficiency

In the face of persistent challenges posed by systemic issues and political instability, businesses across Africa are strategically embracing technology as a transformative investment.

While the AfCFTA should help to reduce a significant amount of tariff barriers, long transport times and high costs due to significant border control and long waiting times, complex customs and bureaucracy remain a concern.

High transport costs were cited as the second biggest challenge facing businesses when increasing both their import and export sales.

In responses, businesses in Africa are increasingly investing in technology to adapt. Notably, 38% of executives identified the use of digital tools for improved inventory management as the primary strategy to reduce overall trade and supply chain costs in Africa.

Further, 45% of executives plan to implement advanced automation and robotics to gain real-time insights and forecast disruptions in their supply chains in 2024.

This aligns with global findings, which reveal that executives across all sectors and regions found technologies that improve supply chain efficiency and resilience to be, by far, the main source of optimism for the future of global trade.

Public and private sector partnerships

According to Mohammed Akoojee, CEO & Managing Director, sub-Saharan Africa at DP World regional trade agreements, exemplified by AfCFTA, stand out as powerful tools to address the intricate challenges within the region’s trade and supply chain infrastructure.

‘’The nine-percentage-point increase in the proportion of Africa-based executives projecting that sub-Saharan Africa will be their biggest export market is a case in point. The synergy of public and private sector partnerships to enhance investment, strengthened trade agreements, and technological advancements also positions the continent for growth and resilience.”

John Ferguson, global lead, new globalisation, Economist Impact, adds: “The findings of this report reveal a remarkably positive outlook for African trade in 2024 and shed light on the beneficial effects of trade agreements like AfCFTA. Through such regional co-operation, economies can leverage scale, enhance competitiveness, and attract significant investment across the continent. The report also reflects a profound optimism regarding technologies’ potential to address systemic and economic challenges, showcasing adaptability and confidence in its role in enhancing supply chain efficiency and resilience.”

To view the full report, please click here.

Research suggests a boom in African trade

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Research suggests a boom in African trade

 

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