Africa’s total exports are expected to hit close to $1-trillion by 2035, with SA expected to grow its annual exports to $165bn for the same period while maintaining its Africa net-exporter status, a Standard Chartered report finds.
Standard Chartered published its “Future of Trade: Africa” report last week, highlighting the outlook for African trade and providing a view of the African Continental Free Trade Area (AfCFTA) as a key proponent for optimising intra-African trade.
The report finds that Africa’s total exports will reach $952bn by 2035 and the AfCFTA, once fully implemented, has the potential to increase this figure by a further 29% while intra-Africa trade is expected to reach $140bn by 2035.
This represents an annual growth rate of 3% from now until 2035, Standard Chartered regional CEO for Africa and the Middle East Sunil Kaushal said.
Africa’s corridors with some of the world’s most dynamic regions will grow faster than the global average of 4.3%.
Kaushal said the East Africa-South Asia corridor is expected to emerge as the fastest-growing major corridor, at 7.1% 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 $200bn by 2035.
“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 from. With the right regulations, collaboration and governance, this opportunity can be made a reality,” Kaushal said.
But crafting trade policies that work for all markets is a challenging process in Africa. Compared with other free trade areas, the AfCFTA member markets exhibit the highest divergence in market sophistication, and among the highest disparities in infrastructure and institutions.
With AfCFTA’s ambitious objectives and vast coverage, this wide divergence among members poses significant challenges to effective trade policymaking.
“Take SA for example, one of the largest exporting economies in Africa with a relatively sophisticated market structure and developed infrastructure and institutions. It will likely see trade policies as a tool to increase the market reach for its products, thus advocating for greater tariff liberalisation,” Kaushal said.
“Other less developed Africa markets, on the other hand, might prioritise domestic industrial developmental needs, which could potentially require trade tariff protection.”
According to the report, AfCFTA has the potential to further boost exports by an additional 17% in SA. Kaushal said as the second-largest economy in Africa behind Nigeria, SA is a leading economic powerhouse with a highly diversified economy.
He said once reliant on commodity exports from its mining sector, SA has successfully built a competitive manufacturing sector and established itself as a regional financial hub.
“Besides its economic prominence, SA is a key political player as one of Africa’s G20 economies and a member of Brics. The market has [also] forged numerous free trade agreements, such as that with the UK that came into effect in 2021, as well as non-reciprocal preferential tariffs with Norway and Turkey.”
In 2020, to boost SA’s economic growth and modernise its core industries, the government initiated a series of structural reforms under Operation Vulindlela.
One of the key initiatives is the implementation of the Energy Action Plan, which aims to achieve energy security through the deregulation and acceleration of energy generation, thereby lowering the costs for businesses and bolstering their growth and competitiveness.
Kaushal said on the infrastructure front, the SA government has committed up to $50bn in rail infrastructure to boost passenger and freight transport. In parallel, the government has partnered with the private sector to further develop the port of Durban, Africa’s biggest harbour, which handles about 60% of SA’s exports.
“These infrastructure upgrades will facilitate SA’s future export growth, including greater intra-Africa trade through the AfCFTA,” he said.
Given the tariff liberalisation set out in the AfCFTA, SA could also substantially boost its key agricultural exports such as maize and citrus fruits, benefiting from a larger continental market, he said.
Kaushal added that neighbouring markets such as Botswana, Zambia and Mozambique will continue to drive SA’s intra-AfCFTA exports in the years ahead.
“Moving beyond Southern Africa, Nigeria is expected to remain SA’s largest source of imports in Africa by a wide margin; export growth from SA to Nigeria is also forecast to pick up,” he said.
Standard Chartered group chair Dr José Viñals said Africa’s unique challenges require policymakers to craft trade policies that align with the region’s developmental needs.
“To achieve this objective, we propose an integrated framework that focuses on developing Africa’s industries through national industrialisation and regional value chain formation policies,” Viñals said. “These policies must be accompanied by structural improvements in trade facilitation, cross-border infrastructure and payments.”
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