African economies to grow by 4.1% in 2018 – report | Fin24

African economies to grow by 4.1% in 2018 – report

Jul 17 2018 19:13

African economies will grow by 4.1% in 2018, according to the African Export-Import Bank's Africa Trade Report 2018, launched by President Cyril Ramaphosa in Nigeria.

The report, titled Boosting Intra-African Trade: Implications of the African Continental Free Trade Area Agreement, says growth will be driven by continuing recovery in developed economies and by improving global demand, with positive repercussions on commodity prices and Africa’s merchandise trade. "The main factors expected to accelerate economic growth on the continent are continued growth acceleration in a number of large economies, most notably Egypt and Kenya, the strengthening of major oil-producing economies – especially Nigeria, Angola and Libya – and the (modest) growth in South Africa," it said.

Other growth-enhancing factors include continued implementation of reforms aimed at increasing consumer confidence and improving the business climate; along with growing public spending, especially on infrastructure. 

Free trade fundamental

Ensuring a successful and speedy implementation of the African Continental Free Trade Area (AfCFTA) after ratification will enable the continent to fully achieve the trade and economic integration fundamental in helping the region contain adverse shocks and long-term deterioration in its terms of trade, the report argues.

Implementation of the AfCFTA agreement will create opportunities for intra-African market access and will significantly increase trade flows, it adds.

The report further argues that tariff removal and cost reduction under the AfCFTA will reduce production costs and induce economies of scale, spurring higher domestic production and investment into different sectors of the economy.

This will boost value addition in production and enhance export growth across sectors, it says.

Lagging behind Europe

SA signed the agreement but is yet to ratify it.

Earlier in the week, Ramaphosa urged his Nigerian counterpart, Muhammadu Buhari, to sign as well.

The report advises that the AfCFTA arrangement needs to go beyond a 100 per cent tariff reduction in all goods, as non-tariff barriers are also major constraints on intra-African trade.

"Such non-tariff barriers include standards, custom procedures, technical barriers, licenses, prohibitions, distribution restrictions, procurement restrictions, competition measures and rules of origin," the report says.

These barriers, it argues, add costs to intermediate import for domestic production and investment. Removing them would spur on domestic production, also increasing the integration of export products into the value chain. Meanwhile, Dr. Benedict Oramah, President of Afreximbank, says Intra-African trade makes up just 15% of the continent's total trade, compared to Europe's 67%.

According to Oramah, the continent needs a "sustained strategic shift" to industrialisation, increased intra-African trade, and "de-commoditisation through increased value addition and export diversification."

Imports vs exports

According to the report, Africa relies on the rest of the world for over 80% of its trade, while its share of global trade is less than three percent.

This is in part due to the small size of many African economies, which limits their individual global bargaining power.

Furthermore, 16 of the 55 African countries are landlocked, relying on their coastal neighbours for extra-African trade and development, using ports and shipping lines.

AfCFTA and Afreximbank's Fifth Strategic Plan both emphasise the need for a structural of African economies.

More than 100 speakers, including heads of state, ministers, central bank governors, director generals of international trade organisations, business leaders, African and global trade development experts and academics will be speaking during the four days of Afreximbank's Annual Meetings and 25th Anniversary Celebrations, held in Abuja, Nigeria.

* Sign up to Fin24's top news in your inbox: SUBSCRIBE TO FIN24 NEWSLETTER

Follow Fin24 on Twitter and Facebook. encourages commentary submitted via MyNews24. Contributions of 200 words or more will be considered for publication. We reserve editorial discretion to decide what will be published. Read our comments policy for guidelines on contributions.

cyril ramaphosa  |  economy  |  trade  |  africa


Company Snapshot

Money Clinic

Money Clinic
Do you have a question about your finances? We'll get an expert opinion.
Click here...

Voting Booth

Would you switch to a bank that rewarded you for 'good' financial behaviour?

Previous results · Suggest a vote