Intra-African trade – trade between African countries – has significantly grown over the last five years, but it is still a very low base and remains vastly below par when compared to other developing regions of the world.
This is according to Standard Bank, Africa’s largest bank by assets and market capitalisation.
Exports by African countries to their peers on the continent surged by 32% since the 2008 economic downturn, compared to growth of just 5% in exports to the rest of the world, according to statistics.
Nevertheless, in 2011, intra-African trade accounted for merely 9% of the continent’s total trade with the world, compared to 25% for Latin America and almost 50% for Asia.
Anne-Marie Woolley and Megan McDonald, joint heads of Standard Bank’s Structured Trade and Commodity Finance (STCF) business in Africa said that given the right focus, intra-African trade can be a driving force for growth in Africa.
More needs to be done to boost intra-African trade to take advantage of the increasing commercial depth of Africa’s rapidly expanding consumer markets, they said this week.
The Johannesburg-based bank cited the following challenges, which it said were still impeding African countries to regularly trade between each other:
• Poor road and rail infrastructure
• Restrictive tariff structures
• Unavailability of foreign exchange and the lack of trade-related financial solutions
However, Wooley said while there are challenges, there are also substantial opportunities that can arise from boosting intra-African trade, particularly when one considers that sub-Saharan Africa is expected to grow by more than 6% this year, outpacing most of the developed world in terms of growth.
While African governments are well-placed to assist in addressing the structural barriers to trade on the continent, equally so are financial institutions able to take the lead in attending to the problems impacting the availability of financial services, the bank said.
“With many international banks having reviewed their risk appetite and subsequently withdrawing from, or limiting their exposure, to trade finance in Africa, an opportunity exists for local banks to step into the vacuum,” McDonald said.
Much of the growth in regional trade can be attributed to finance provided by African banks, being able to leverage off their local market knowledge and ‘on the ground’ presence and thereby acting as important catalysts in driving regional trade activity, she added.
(Final editing by Issa Sikiti da Silva). Image: Foreignpolicyblogs.com