Promoting African trade

Ahmed Abdel-Hafez, Tuesday 14 Nov 2023

As the third Intra-African Trade Fair in Cairo comes to a close this week, Ahmed Abdel-Hafez sounds out experts on the challenges facing African trade

Promoting African trade
Promoting African trade

 

Cairo hosted more than 1,500 companies from 75 countries this week at the third Intra-African Trade Fair (IATF), which brings together continental African and global players to showcase their goods and services and explore business and investment opportunities.

The fair, which began on 9 November and ends on 15 November, was organised by the African Export-Import Bank (Afreximbank) in collaboration with the African Union Commission (AUC) and the African Continental Free Trade Area (AfCFTA) Secretariat.

It featured exhibitors from a wide variety of sectors, including agriculture and agro-processing, textiles, the automotive industry, construction and infrastructure, consumer goods, the creative industries, education, energy, engineering, finance, healthcare and pharmaceuticals, information and communications technologies, tourism, transportation, start-up firms, and small enterprises.

In an address at the presidential summit of the trade fair the president said that Africa’s huge natural resources and its agricultural, educational, and mineral potential should be leveraged to drive intra-African trade. “The capabilities exist and the possibilities exist, but there may be some obstacles and problems that hinder this work,” the president added.

The fair aims to promote and facilitate intra-African trade, investment, and joint projects and to stimulate commercial integration across the continent. Towards the end of facilitating intra-regional trade, the Afreximbank has pledged to facilitate $45 billion worth of trade deals and investments, a press release stated.

Benedict Oramah, president and chairman of the board of Afreximbank, said that, working with the African Union Commission and the African Continental Free Trade Area (AfCFTA) Secretariat, Afreximbank had supported the delivery of critical AfCFTA-enabling instruments, including the Pan-African Payment and Settlement System (PAPSS) which was making intra-African payments quicker, cheaper and more efficient.

“Afreximbank supports PAPSS with a settlement and clearing fund of $3 billion,” he said, adding that the African Collaborative Transit Guarantee Scheme had also commenced operations in the COMESA Region with Afreximbank as the regional guarantor, facilitating the movement of goods across Africa’s 110 multiple borders.

According to Jean-Louis Ekra, deputy chair of the Intra-African Trade Fair (IATF2023) Advisory Council, the reliance of African economies on natural resources and commodities makes them vulnerable to adverse trade shocks, liquidity constraints, and macroeconomic management challenges.

Speaking on the sidelines of the fair, Ekra said that intra-African trade is estimated at only 16 per cent of the total at present, whereas intra-regional trade is 58 per cent of the total in Asia and 67 per cent in Europe.

The AfCFTA, which came into effect in January 2021, aims to increase this figure by creating a single African market of 1.3 billion people with a combined GDP of $3.4 trillion.

According to Ekra, the presently low level of intra-African trade can be explained by constraints such as limited infrastructure including payments and settlement systems, lack of access to relevant market information, limited knowledge about business and sustained investment opportunities, and limited platforms to connect buyers and sellers.

Africa is deficient in infrastructure, transport, and logistical systems, all of which are indispensable to plans to expand intra-African trade, Khaled Al-Saqti, dean of the Faculty of Transport and Logistics at the Egyptian Naval Academy, told Al-Ahram Weekly.

Although the continent boasts relatively cheap prices, low-cost labour, and abundant raw materials, the foundations for building an African industrial and commercial base that can compete and participate dynamically in international trade, logistics are extremely difficult. Connecting projects and enterprises across the far-flung continent will require huge and sustained funding, Al-Saqti stressed.

The economic blocs that have emerged in Africa, such as the East African and Central African blocs, are important steps towards the goal of integration. However, poor logistical linkages between them still hampers the growth of commercial interplay.

Many of the raw materials most sought after in the world today are located south of the Equator, for example, an area that is not well-connected with neighbouring blocs. The closest maritime transport system is in the southeast of the continent, and it requires a lot of development.

Al-Saqti cited a tangible example of the logistical challenges facing intra-continental trade. It takes six days for Nigerian coffee shipments to arrive in Egypt via Italy, or four days from Nigeria to Italy, then two days from Italy to Egypt. But it would take 21 days for the same shipment to arrive if it were sent from Nigeria to Egypt directly.

Walid Gamaleddin, chair of the Export Council for Building Materials in Cairo, agrees that though logistics make trade difficult in Africa, they do not make it impossible.

The African countries are showing the political will needed to overcome such obstacles through special programmes, he said, such as Egypt’s Export Support Programme, which offers the incentive of a 50 per cent rebate on freight costs for Egyptian exports to Africa.

Gamaleddin is optimistic about the prospects for the further expansion of trade in Africa. A deal to export half a million tons of Egyptian cement to the East African bloc is in the works, he said, adding that this demonstrates the good reputation of Egyptian cement across the continent. Egypt is already the largest exporter of construction insulation materials to East Africa.

Among the logistical difficulties Gamaleddin listed is the lack of direct shipping between Egypt and West Africa. He said that Egyptian exports need to be unloaded in a European Port or in Morocco first and then reloaded onto another vessel to their destination, increasing shipment costs significantly.

The Egyptian Ministry of Trade and Industry is currently studying the possibility of buying or renting two giant container ships that will operate on a direct shipping basis from Egypt to West Africa.

Sherif Al-Sayad, a member of the Export Council for Engineering Industries, sees major prospects for the growth of Egyptian exports to the African market. Egyptian goods “account for only one per cent of Africa’s imports. This means that there is a large demand for goods across the continent,” he said, adding that Egypt is well-equipped to increase its share of trade.

It has the industrial base in the engineering industries needed to meet the needs of the African market, especially in the manufacture of utensils, cables, automotive supplies, and household appliances. “The Egyptian manufacturing base can provide products of reasonable quality at a competitive price. These industries are also labour intensive, so their growth is immediately and directly felt in the labour market,” Al-Sayad said.

Al-Sayad praised the Egyptian government’s Export Support Programme. “It is one of the most important tools for promoting intra-African trade because of the additional advantages it offers exporters, such as the extra support it offers through the 50 per cent rebate on freight costs. If the programme continues, it will open up more opportunities,” he said.

Three measures are needed to support intra-African trade, Al-Sayad said. The first is to expand facilities granting certifications authenticating that products meet safety, electricity consumption, or quality standards. These can be expensive to obtain from abroad, which adds to a product’s cost burden.

The second is to develop direct shipping to African ports, thereby lowering shipping costs for Egyptian products to African markets. Al-Sayad noted that it costs as much to ship a container from Egypt to West Africa as it does to ship one from China to the same destination despite the much shorter distance from Egypt.

The third measure is to expand the Common Market for Eastern and Southern Africa (COMESA) Agreement to the rest of Africa. The current African Free Trade Agreement also only applies to East African countries. Broadening the same standards across the continent will permit the movement of Egyptian goods to additional countries without further customs burdens.

Just as Egypt is doing its best to promote its trade to Africa, the rest of the continent also must do its part, said professor of transport economics Mohamed Ali.

“The African countries must move beyond exporting raw materials and industrialise because their overdependence on raw material exports forfeits their competitive edge and obstructs integration in trade,” Ali said.

He added that ships bound for Africa laden with Egyptian goods should also return home with African goods needed in the Egyptian market. This would help to build integration between the African countries and develop strong and practical shipping lines.


* A version of this article appears in print in the 16 November, 2023 edition of Al-Ahram Weekly

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