Vehicles and food expected to be the main drivers of trade in Africa by 2022

This article was contributed to TechCabal by Conrad Onyango / bird

AfCFTA zone supporters are betting that full tariff liberalization in the vehicle manufacturing and food processing sectors will unlock billions of dollars in regional trade as the continent prepares to reap the benefits of the largest market unique in the world.

Vehicle manufacturing and food processing have been touted as the next big drivers of intra-African trade as the largest single global market – the AfCFTA is set to enter its second phase of implementation in less than a year. a month.

A new report, Economic Development in Africa 2021, “Reaping the Potential Benefits of the African Continental Free Trade Area for Inclusive Growth” from the United Nations Conference on Trade and Development (UNCTAD) shows that vehicles have the highest untapped export potential of $ 1.4 billion. , followed by the processing of sugar ($ 1.3 billion) and fish and shellfish ($ 1.1 billion).

The expected demographic and economic growth, as well as the liberalization of tariffs under the AfCFTA, are expected to unlock these sectors, with a potential windfall of billions of dollars for African economies.

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“The sector that is expected to realize the greatest export potential as a result of tariff liberalization is the automotive industry. Overall, tariff liberalization promises an additional export potential of 18% by 2025 ”, according to the report.

Lately, there has been a new demand for new vehicles on the continent, driven by a rising middle class with a taste for new vehicles – at the expense of used vehicles imported from overseas markets like Dubai and Japan.

The African Association of Automobile Manufacturers sees the development of regional value chains increase new vehicle sales from 1 million to 5 million units per year in Africa.

The research firm Modor Intelligence shows that by 2023, the countries of West and North Africa will be the main engines of growth in the automotive sector, with Morocco and Ghana being presented as the next players, s ‘adding to sales from South Africa, which is currently responsible for 85 percent of all vehicle sales in Africa. South Africa and Morocco both have extremely ambitious vehicle export strategies.

Automotive factory in Ghana

When it comes to food, the African fish market will be driven by a huge preference for tilapia, with Aqua-Spark’s new Aqua Insights report showing the continent will consume up to three times (29 million tonnes per year) the quantity it currently consumes, until 2050. – against 10 million tonnes currently.

“The sectors that benefit the most from tariff liberalization are those which also promise to have increasing export potential based on the evolution of supply and demand over the next five years,” said the Minister. report.

The copper, electrical products and machinery as well as the grain and iron and steel sectors present huge untapped opportunities to unlock Africa’s intra-African trade potential.

By 2025, according to the UNCTAD report, intra-African trade will increase by $ 9.2 billion thanks to partial tariff liberalization under the AfCFTA.

“The African Continental Free Trade Area has the potential to harmonize national and regional objectives through a coherent and integrated policy framework, including in the context of phase II of the implementation of the area agreement. African Continental Free Trade Policy, on investment and competition policies, ”the report said.

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In November, AfCFTA Secretary General Wamkele Mene said that 41 states that have signed and ratified the agreement pledged to eliminate import duties on 97% of goods traded on the continent and remove barriers non-tariffs over a progressive period, within the framework of trade liberalization. .

UNCTAD estimates Africa’s total untapped export potential from intra-African trade at $ 21.9 billion – if all countries fully liberalize within five years.

GDP and population growth are expected to boost supply and demand for goods and commodities to unlock most of the untapped trade and investment potential ($ 13.3 billion), while the removal of friction current market in African trade could bring in up to $ 8.9 billion.

Smaller African countries have the greatest potential to unlock billions of dollars in trade, but are eclipsed by their larger peers in absolute terms due to their much larger economies.

According to the report, Carbo Verde, Equatorial Guinea and The Gambia have the greatest expected untapped potential.

These countries, along with Somalia and South Sudan, are all expected to increase their export potential to Africa by more than 100%.

South Africa ($ 7.9 billion) leads Egypt, Morocco and Côte d’Ivoire in absolute terms.

The UNCTAD 2021 Maritime Transport Review released in November shows that the AfCFTA is increasing intra-African trade by around 33% and reducing Africa’s trade deficit by 51%.

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