Africa’s total exports expected to hit close to USD1 trillion by 2035, Standard Chartered report reveals
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- The African Continental Free Trade Area (AfCFTA) has the potential to further boost exports by around 30 percent
- Barriers such as complex and uncertain trade rules and ineffective trade facilitators remain
- AfCFTA will help overcome the “spaghetti bowl effect” of existing Regional Economic Communities (RECs)
Nairobi, 12 October 2023 – Standard Chartered has today published its Future of Trade: Africa report, highlighting the outlook for African trade and providing a view of the African Continental Free Trade Area (AfCFTA) as a key proponent of optimizing intra-African trade.
The report finds that Africa’s total exports will reach USD952 billion by 2035 and the AfCFTA, once fully implemented, has the potential to increase this figure by a further 29 percent. This represents an annual growth rate of 3 percent from now until 2035.
Rising regional trade levels and greater connectivity will unlock high‑growth corridors across Africa and beyond. Intra-Africa trade is expected to reach USD 140 bn by 2035, equating to 15 percent of Africa’s total exports.
Africa’s corridors with some of the world’s most dynamic regions will grow faster than the global average of 4.3 percent. 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. The Middle East-North Africa and the Middle East-East Africa corridors will also be substantial, with their combined trade volume expected to reach almost USD200 billion by 2035.
The AfCFTA is not the first attempt made by Africa’s markets to promote greater cohesion, but the existing agreements often have overlapping or contradicting objectives – creating a “spaghetti bowl effect”. There are eight significant Regional Economic Communities (RECs) recognized by the African Union (AU), and most AU markets are enrolled in two or more RECs, with the high costs of compliance and administration making intra-Africa trade less competitive. AfCFTA could help overcome this by implementing common rules of origin, which grant all 54 AfCFTA members preferential trade access to each other’s markets, to the extent set out in the agreement.
Africa however still has barriers to overcome to realize the full potential of its trade opportunity. Based on a survey conducted with over 100 of Africa’s business leaders, 63 percent polled said complex and uncertain trade rules are one of the top challenges of intra-African trade. 53 percent of respondents noted that underdeveloped transportation infrastructure is a key barrier. 51 percent cited ineffective trade facilitators as another hurdle, whilst 46 percent noted that limited and/or costly access to capital is a challenge.
Around 90 percent of respondents believe the AfCFTA can address most of these issues. Progress has been made in this regard, with the AfCFTA taking steps to address barriers through various initiatives, such as a reporting mechanism and a guided trade initiative to accelerate trading[1] among countries.
Digitalization also plays an important role in bolstering intra-Africa trade. The report demonstrates that adopting digital supply chain financing (SCF) solutions could unlock USD34 billion of export value in five key African markets by 2035. Almost all (97 percent) of respondents are interested in digital SCF solutions but cited resource constraints, a technology gap, and interoperability challenges as key barriers to adoption.
Dr José Viñals, Group Chairman of Standard Chartered PLC, said: “Implemented effectively, the African Continental Free Trade Area can radically reshape future growth and development. It will enable higher value-add supply chains and more diversified exports, allowing member states to reduce historical commodity dependence and achieve meaningful progress towards multiple Sustainable Development Goals. Through our global footprint, local expertise, and innovative solutions, we are committed to supporting the development of the right policies, securing cooperation, and applying technology and capital in order to build better connections within the continent, and beyond.”
Sunil Kaushal, Regional CEO, of Standard Chartered Africa Middle East, said: “The disruptions to Africa’s supply chains over the last few years have amplified the urgency to implement the AfCFTA. At the same time, the findings of our report outline the requirements to exponentially bolster Africa’s exports, which the AfCFTA would benefit greatly. With the right regulations, collaboration, and governance, this opportunity can be made a reality. For over 150 years, Standard Chartered has supported Africa’s growth and progress, actively contributing to the continent’s infrastructure development and economic advancement. We will continue to work with the relevant stakeholders in driving trade throughout the continent and ensuring Africa’s sustainable economic development.”
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