According to a report by Standard Chartered, the AfCFTA has the potential to boost Africa’s total exports by 29 per cent by 2035, reaching USD 952 billion. This represents an annual growth rate of 3 per cent from now until 2035. The report also highlights the outlook for African trade and provides a view of the AfCFTA as a key proponent of optimising intra-African trade.
The report finds that intra-Africa trade is expected to reach USD140 billion by 2035, equating to 15 per cent of Africa’s total exports. This is a significant increase from the current level of around 10 per cent, which is much lower than other regions such as Europe (68 per cent) and Asia (59 per cent). The report identifies several factors that will drive the growth of intra-Africa trade, such as:
- The implementation of common rules of origin, which will grant all 54 AfCFTA members preferential trade access to each other’s markets, to the extent set out in the agreement. This will reduce the complexity and uncertainty of trade rules and lower the costs of compliance and administration.
- The harmonisation of trade policies and regulations, which will eliminate or reduce non-tariff barriers such as customs procedures, technical standards, sanitary and phytosanitary measures, and intellectual property rights. This will facilitate the movement of goods and services across borders and improve the efficiency and transparency of trade facilitation.
- The development of regional value chains, which will enable African countries to diversify their exports and increase their value addition. This will also foster industrialisation and innovation, as well as create more jobs and income opportunities for African people.
- The improvement of transportation infrastructure, which will enhance the connectivity and accessibility of African markets. This will also reduce the time and cost of transporting goods and services within the continent and beyond.
- The adoption of digital solutions, which will leverage technology to streamline trade processes and improve access to information and finance. This will also increase the resilience and inclusiveness of African trade, especially for small and medium-sized enterprises (SMEs) and women entrepreneurs.
The report also reveals that rising regional trade levels and greater connectivity will unlock high-growth corridors across Africa and beyond. Africa’s corridors with some of the world’s most dynamic regions will grow faster than the global average of 4.3 per cent. The East Africa-South Asia corridor is expected to emerge as the fastest-growing major corridor, at 7.1 per cent 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) recognised by the African Union (AU), and most AU markets are enrolled in two or more RECs. The AfCFTA could help overcome this by creating a unified framework that encompasses all RECs and aligns their goals and standards.
However, the AfCFTA still has barriers to overcome to realise its full potential. Based on a survey conducted with over 100 of Africa’s business leaders, 63 per cent polled said complex and uncertain trade rules are one of the top challenges of intra-African trade. 53 per cent of respondents noted that underdeveloped transportation infrastructure is a key barrier. 51 per cent cited ineffective trade facilitators as another hurdle, whilst 46 per cent noted that limited and/or costly access to capital is a challenge.
Around 90 per cent 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 amongst countries.
Digitalisation 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 per cent) of respondents are interested in digital SCF solutions but cited resource constraints, a technology gap and interoperability challenges as key barriers to adoption.
The report concludes that the AfCFTA is a game-changer for African trade and development, but it requires strong political will, effective coordination, and adequate investment to succeed. The report also emphasises the role of the private sector, especially banks, as a key partner in supporting the implementation and operation of the AfCFTA. As a leading international bank with over 150 years of experience in Africa, Standard Chartered is 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.