Africa topples Asia, Europe, US as Africa’s preferred trade market

Easier cross-border trade thanks to a new continental trade agreement, a rise in quality of made-in-Africa goods, lower market prices, and accessibility compared to those in Asia, US and European markets, is driving Africa to trade more with Africa than with the rest of the world, according to the latest Africa Trade Barometer.

SPECIAL REPORT | BIRD AGENCY | African businesses increasingly prefer to trade across the continent’s borders over out-of-the-continent markets like Asia, the US, and Europe, due to a rising quality of made-in-Africa goods, lower market prices, and accessibility.

The latest Standard Bank Africa Trade Barometer, which tracks 10 African countries among the 54 signatory nations of the African Continental Free Trade Area Agreement (AfCFTA) shows 37% of the businesses prefer partners based in African markets compared to Asia(24%), Europe(16%) and North America(3%).

Businesses from Namibia (75%), Tanzania (48%) and Angola (43%) showed the highest affinity for cross-border trade compared to firms from some of the continent’s biggest economies- Nigeria (34%) and Kenya (34%) with a huge preference for Asian markets like China.

“Businesses surveyed report that trading within Africa is easier than trading with the rest of the world. This observation underlines their preferences in trading partners, revealing a significant lean towards engaging in commerce with African markets,” said authors of the  Barometer.

Quality of goods (72%) was the most significant consideration for businesses looking to trade with partners in Africa, followed by market prices (51%) and market accessibility (38%).

Rising intra-African trade sentiment among surveyed businesses is centred on good trading relationships and affordable transportation that have significantly increased from 5% and 2%, respectively, in May 2023 to 15% for both in August 2024.

“This result contrasts the perceptions of surveyed business on world trade, with trading relationships taking strain due to the high transport cost,” said the survey.

Ongoing implementation of the AfCFTA has been the most significant contributor to easing trade barriers across country borders, propelled by the Guided Trade Initiative (GTI) that started with eight countries in 2022, trading in select goods to catalyse trade through preferential tariff arrangements.

Up to 30 more African countries are expected to be covered by the GTI by the close of 2024, as well as an increase in the scope of products to be traded, including biopesticides, packaged moringa, tea, coffee, and meat products.

Other initiatives under the AfCFTA are also emerging, opening up the regional borders to small businesses.

In the first week of November, Kenyan Micro, Small and Medium Enterprises (MSMEs) shipped their first exports of assorted products to South Sudan, Zambia and DRC under the AfCFTA Framework in an initiative dubbed TradeConnect.

Over the next 12 months, the TradeConnect initiative aims to mobilise and transport 1000 containers of diverse goods worth US $ 1.2 million across the continent.

The Kenyan government hopes the TradeConnect initiative will improve Kenya’s exports by 10 per cent annually and cut the logistics nightmare for exporters by 30 per cent.

A growing intra-African trade infrastructure development connecting African regions, for instance, the Standard Gauge Railway (SGR), which connects the port city of Mombasa to the capital, Nairobi, and planned extension to Uganda, is also seen easing the cost of goods and faster lead times across borders.

Once fully operational, the SGR will cover approximately 3,800 kilometres (2,400 miles) and link Kenya to Uganda, South Sudan, the Democratic Republic of the Congo, Rwanda, Burundi, and Ethiopia.

The sentiments positively impacted intra-African trade as a percentage of total African trade, with the Barometer showing it rose slightly from 13.6% in 2022 to 14.9% in 2023.

Albeit at a slightly larger scale, the majority of surveyed African businesses cited good quality products (84%), fast response times (82%), and the low cost of importing (79%) as the most important elements in doing business with China.

The nature of African business’s involvement in trade with China is centred on importing final goods and services (56%), importing raw materials (39%), and buying final goods and services from Chinese wholesalers operating in Africa (16%).

A mere 3% of surveyed businesses favour trading with US-based companies, which is most common in Kenya, where 8% of surveyed enterprises desire to deal with American firms.

The low favorability rating across the ten markets, the Barometer said, is driven by businesses reporting high shipping costs (50%), high tariffs and taxes (37%), currency fluctuations (28%), and longer lead times (27%).

“This aligns with macro-level trade data, albeit to a lesser extent, with imports and exports between the two regions(US-Kenya) declining by 7.3% and 6.2%, respectively, between 2022 and 2023,” the survey reports.

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Conrad Onyango, bird story agency