GLOBAL DYNAMICS AND INTERNAL STRIFE ARE CLOUDING AFRICA’s TRADE OUTLOOK

Africa’s trade partners have evolved over the past decade and trading volumes have soared up until 2014, but anaemic global growth saw trade volumes retract since. Of course, the subdued global environment translates to lower demand for African exports, and particularly vulnerable have been the commodity producing countries on the continent.

Notably, total trade between Africa and the World fell to USD795 billion in 2016 from USD880 billion in 2015 and USD1.2 trillion in 2012.

A large number of African countries have been suffering from Sub-par GDP growth as primary sector activity dwindled, largely in minerals and mining. Major oil exporters like Nigeria and Angola were in recession in 2016. Notable oil exports in these two countries, make  up more than ninety percent of total exports. The foreign exchange earnings of which then filter into other economic activity.

The China story remains crucial for Africa. Sino- African trade relations have grown meaningfully over the past decade or so and china has emerged as Africa’s single largest trading partner. However, according to data from the International Trade Centre, bilateral trade between the two fell sharply between to some USD113 billion in 2016 from a peak of USD146 billion in 2012. Although the 2016 data represents a 9.6% year-on year contraction of trade with Africa, trade between China and Africa only stood at USD30 billion a decade ago. Continued slow growth in China, the second largest economy in the world poses obvious risks to Africa. According to the International Monetary Fund, global growth is expected to only recover marginally over the next three years averaging some 3.7% from 3.1% in 2016. In China, GDP growth is expected to grind slower still to average some 6.0% over the next three years from 6.7% in 2016 and a high of 14.2% back in 2007.

Nevertheless, Africa’s long-serving traditional trade partners remain important, namely the EU and the US. The US is directly behind China with trade of circa USD50 billion in 2016 , while trade with France follows closely at USD 49.0 billion. Even still trade with Europe as a whole continues to remain substantial and stood at USD297.3 billion in 2016, making up 37.4% of Africa’s total trade profile. So, Britain’s exit from Europe (Brexit) and US trade policies do remain crucial to the trade outlook for Africa. In the US, under President Trump , there have not been any  meaningful trade policy decisions on Africa yet. Even after the African Growth and Opportunity Act (AGOA) conference held in Togo this August, a coherent Africa policy is lacking. The AGOA agreement which enhances market access to the US for some countries in Sub-Saharan Africa expires in 2025 and there has been no major talk on extension of the Act. With regards to Britain’s looming exit from the EU, some may argue that an orderly Brexit would cushion the impact on Africa in many domains, particularly if the UK negotiates better trade deals with the continent. However, this could mean intra-regional trade may take a knock as more Africans may prefer imports from the UK and outside Africa in general as productive capacities outside the commodity arena on the continent remain limited.

Notably, it’s not only global factors that has played out negatively for Africa’s trade performance in recent years. In 2016, Africa’s trade has also been hard hit by bad weather conditions, particularly in East Africa, a region less reliant on commodity exports but highly dependent on agricultural and horticultural exports.  A slow recovery in North Africa has seen economies like Tunisia and Libya still recovering from the aftermath of the Arab Spring .

While there are many global uncertainties including Brexit and US trade policies toward Africa that could either negate or proliferate the continent’s trade performance going forward, global growth projections, better weather prospects and a more meaningful recovery in the performance of North African economies suggest a more favourable outlook in 2018.

Confidence Interval

 

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