African economies will grow by 4.1 percent in 2018, according to the 2018 Africa Trade Report.
The report "Stimulating Intra-African Trade: Implications of the African Continental Free Trade Agreement, was launched by the African Export-Import Bank (Afreximbank), and copied to the Ghana News Agency.
The report was announced by South African President Cyril Ramaphosa, Ambassador Albert M Muchanga, Commissioner for Trade and Industry of the African Union Commission, and Dr Benedict Oramah, President of Afreximbank, at the Annual General Meetings and the celebration of the 25th anniversary of Afreximbank in Abuja.
According to the report, the implementation of the African Continental Free Trade Area (AfCFTA) will create opportunities for access to the intra-African market and will significantly increase trade flows, given that the removal of barriers and cost reduction under AfCFTA should reduce production costs and generate economies of scale, boosting domestic production and investment in different sectors of the economy, which will increase value creation in export production and growth in many sectors.
The report states that AfCFTA must go further than a 100 per cent tariff reduction on all products, since non-tariff barriers are also major constraints on the intra-African market.
These non-tariff barriers include standards, customs procedures, technical barriers, licenses, prohibitions, distribution restrictions, supply restrictions, competition measures and rules of origin.
Removing these barriers, which add costs to imports for domestic production and investment would boost domestic production and improve the integration of export products into the value chain.
Dr Benedict Oramah, President of Afreximbank, said: “Intra-African trade accounts for only 15 percent of Africa’s total trade, while in Europe the figure is 67 percent. We need to develop industrialization, increase intra-African trade, and no longer depend on raw materials, creating more value added and diversifying exports. The African Continental Free Trade Area Agreement and Afreximbank’s Fifth Strategic Plan underscore the need for this structural transformation of African economies. ”
“Afreximbank is committed to ending African countries’ dependence on raw materials, and our programs, including the African Commodity Initiative, are helping to create more value by supporting processing capacity and manufacturing in various commodity sectors, “he said.
Dr Hippolyte Fofack, Chief Economist at Afreximbank, said: “The AfCFTA needs to focus on policies promoting export diversification for each member state. In addition, it is important to encourage the manufacture of goods using more technology. Given the current average technology and skills in intra-African trade, AfCFTA appears to be well positioned to increase the volume of manufactured products using technology. ”
The report said more than 80 percent of Africa’s trade comes from the rest of the world, while the continent’s share of world trade remains below three percent, in part because of the small size of many African economies which limits their weight in the world.
The report also stresses that 16 of the 55 African countries do not have access to the sea and depend on their neighbors for extra-African trade, using their ports.
But trade between landlocked countries and their neighbors is weak. Most products that cross borders come from other continents or are destined for them.
On one hand, trade in the European Union mainly concerns manufactured goods and intra-industry trade is the dominant form of trade in the common market.
On the other hand, most African countries are members of at least one economic bloc. And yet, like trade in landlocked African countries, the bulk of trade flows seem to be destined for partners outside the continent.