AfricaNews

African Nations Trade More outside the continent than amongst themselves

The African share of global trade remained at less than 3%, driven largely by merchandise trade, an indicator that African countries continue to trade with the rest of the world more than among themselves.

This is according to a new report by the Economic Commission for Africa (ECA) on Assessment of progress on regional integration in the continent.

The report shows Africa’s regional integration agenda is progressing, albeit slowly.

It notes that, despite progress in monetary and financial integration, member states have not met the macroeconomic convergence criteria.

Infrastructure development through the Program for Infrastructure Development in Africa also achieved mixed results.

While roads and ICT advanced, the report notes, rail transport and energy infrastructure progressed little owing to financing challenges.

The report indicates that there has been some progress in the fulfillment of the first 10-year implementation plan (2014–2023) of Agenda 2063.

These areas include the adoption of the Agreement Establishing the African Continental Free Trade Area (AfCFTA) and the creation of the Single African Air Transport Market.

The report, meanwhile, sees less encouraging progress in some areas crucial for AfCFTA such as the ratification of the Protocol to the Treaty Establishing the African Economic Community relating to Free Movement of Persons, and Right of Residence and Right of Establishment.

“The rising number of unconstitutional changes of Government highlights the ongoing challenges afflicting African countries, including weak governance, persistent poverty and limited employment opportunities,” said Stephen Karingi, Director of ECA’s Regional Integration and Trade Division.

The second 10-year implementation plan of African Union’s Agenda 2063 will need to address those challenges directly, per the director.

“States should continue to take the necessary measures to ensure that the regulatory environment is conducive to the mobilization of sustainable financing of infrastructure by the private sector,” he added.

Regional integration, he said, remains critical in African efforts to achieve productive and sustainable development.

“The effective implementation of the Agreement will determine the extent to which the continent can derive the benefits of free markets and trade integration for the overall benefit of the people on the African continent,” noted Karingi.

Some of the key areas highlighted in the report on regional integration include:

Trade Integration

Despite trade under the Agreement Establishing the AfCFTA having officially started on 1 January 2021, the envisaged changes in intra-African trade are yet to appear.

Intra-African trade as a share of global trade declined from 14.5% in 2021 to 13.7% in 2022.

Over the same period, intra-African exports declined as a percentage of total exports from 18.22% to 17.89%, and intra-African imports declined from 12.81% to 12.09%.

Monetary and financial integration

Of the primary criteria, the inflation criterion was met the least in 2022. Inflation remained elevated in many African countries in 2023: the African average was 18.5%, and in 19 countries inflation was above 10%.

General government gross debt in 2023 averaged 65.2% of GDP for Africa, compared with the 2022 average of 64.6 %.

Single African Air Transport Market

Currently, 36 members of the African Union, accounting for 89% of the intra-African air transport market, have joined the Market.

The Market is expected to increase the frequency of flights along existing air routes by 27% and allow for gains through economies of scale of about $500 million from passenger fares, free competition, the opening of new commercial routes and the development of the private sector in civil aviation.

Information and communications technology

Africa has not performed well in bridging the gender digital divide: in 2023, 32% of the female population used the Internet compared with 42% of the male population, against a global average of 65% of females and 70% of males.

Energy

The proportion of the world’s population without access to electricity residing in Africa rose from 74% before the COVID-19 pandemic to 77% in 2020.

The report says 39 African countries can provide cheap and reliable energy to their populations by using renewable sources, including green hydrogen production.

Infrastructure financing

Africa still faces a massive annual infrastructure financing gap estimated between $130 and $170 billion. Other innovative financing instruments include blended finance, green, social and sustainability-linked bonds, and debt-for-nature swaps.

The report recommends that the second 10-year implementation plan of Agenda 2063 should address those challenges directly. Aspiration One of the Plan, currently being finalized, will be having every member of the African Union achieve at least middle-income status by 2034.