In a recent report, titled “Future of Trade: Africa,” Standard Chartered has shed light on the outlook for African trade, emphasizing the African Continental Free Trade Area (AfCFTA) as a key driver of improved intra-African trade. The report highlights the potential for substantial growth in the continent’s trade and economic development.
The report predicts that by 2035, Africa’s total exports are projected to reach an impressive $952 billion. However, the AfCFTA, once fully realized and implemented, has the potential to elevate this figure by an additional 29 percent. This translates to an annual growth rate of 3 percent, stretching from the present until 2035.
Increased regional trade and enhanced connectivity are set to open up high-growth corridors across the African continent and beyond. Intra-African trade is expected to reach $140 billion by 2035, equivalent to 15 percent of Africa’s total exports. Africa’s trade corridors with some of the world’s most dynamic regions are forecasted to outpace the global average growth rate of 4.3 percent. Notably, the East Africa-South Asia corridor is expected to emerge as the fastest-growing major corridor, boasting a projected annual growth rate of 7.1 percent through 2035. The Middle East-North Africa and Middle East-East Africa corridors are also expected to be significant, with combined trade volumes reaching nearly $200 billion by 2035.
While the AfCFTA represents a significant step forward in promoting African economic cohesion, it is not the first such initiative. Previous regional agreements have often had overlapping or contradictory objectives, resulting in what experts have referred to as a “spaghetti bowl effect.” The African Union (AU recognizes eight significant Regional Economic Communities (RECs), and many AU member countries are enrolled in two or more of these, leading to high compliance and administration costs that hinder intra-Africa trade competitiveness. AfCFTA aims to address this issue by implementing common rules of origin, granting all 54 AfCFTA member nations preferential trade access to each other’s markets in line with the agreement’s provisions.
However, despite the promising outlook, Africa still faces various obstacles in realizing the full potential of its trade opportunities. Based on a survey conducted with more than 100 African business leaders, 63 percent of respondents identified complex and uncertain trade rules as one of the top challenges in intra-African trade. Additionally, 53 percent noted that underdeveloped transportation infrastructure was a significant barrier, while 51 percent cited ineffective trade facilitators. Moreover, 46 percent of respondents pointed to limited and/or costly access to capital as a challenge.
On a positive note, approximately 90 percent of those surveyed believe that the AfCFTA can help address most of these issues. Progress is already being made, with the AfCFTA implementing various initiatives, including a reporting mechanism and a guided trade initiative to expedite trading among member countries.
Digitalization is also poised to play a crucial role in bolstering intra-Africa trade. The report suggests that adopting digital supply chain financing (SCF) solutions could unlock $34 billion in export value in five key African markets by 2035. While 97 percent of respondents expressed interest in digital SCF solutions, they also cited resource constraints, a technology gap, and interoperability challenges as key barriers to adoption.
José Viñals, the group chairman of Standard Chartered Plc, expressed optimism about the AfCFTA’s potential impact, stating that, “Implemented effectively, the African Continental Free Trade Area can radically reshape future growth and development.” He emphasized that the AfCFTA would enable higher value-added supply chains and more diversified exports, reducing historical commodity dependence and contributing to the achievement of Sustainable Development Goals.
Sunil Kaushal, regional CEO of Standard Chartered Africa Middle East, stressed the urgency of implementing the AfCFTA, especially in the wake of recent supply chain disruptions. He added, “With the right regulations, collaboration, and governance, this opportunity can be made a reality.”
Standard Chartered, which has supported Africa’s growth and infrastructure development for over 150 years, is committed to working with stakeholders to drive trade throughout the continent and ensure sustainable economic development in Africa.