It is now approaching two years since the start of trading under the African Continental Free Trade Area (AfCFTA) got underway, and African businesses are gaining more insight about it’s potential benefits and challenges.
As the world’s largest free trade area initiative, the AfCFTA is a much-needed regime given that companies of all sizes across the continent are desperate to identify new markets and boost exports.
To assess impact of the continental trade regime, an industry lobby group sought views from 800 executives doing business on the continent.
One of the more surprising results of the survey was that 70% of respondents said that despite all the obstacles and the fact that intra-African trade accounts for just 16% of total African trade, they already export goods or services to other African countries.
It is even more unexpected given that most of the participants lead small and medium sized enterprises (SMEs) rather than large corporations.
However, the researchers found that the vast majority export services rather than goods within Africa, underlining the fact that physical and regulatory obstacles continue to deter trade in goods.
Asked about which countries they preferred as export destinations, the researchers also uncovered surprising results.
Rwanda emerged among the top ten countries cited by the respondents.
The list of the countries that most African companies export to is mostly fairly predictable. The large markets such as, Nigeria, Kenya, South Africa and Ghana, lead the way as might be expected.
This replicates the results of our 2021 survey, although the proportion of companies exporting to Nigeria has increased from 19% to 25% over the past year.
Some variation is to be expected but a further increase next year may be demonstrative of a real trend.
The inclusion of Rwanda and Benin among the top ten, with 13.5% and 10.6% of those surveyed already exporting to them respectively, is a big surprise, say the researchers in their report.
The report was prepared by the Pan-African Private Sector Trade & Investment Committee(PAFTRAC), in partnership with the African Export-Import Bank(Afreximbank), African Business, Botho Emerging Markets Group, Africa Business Council and the Arab-Africa Trade Bridges Program.
Here is a breakdown of the findings:
- 93% feel confident in the AfCFTA boosting Intra-African Trade, an increase from last year’s survey
- 67% describe as positive or very positive the impact of the AfCFTA upon their companies
- 81% say AfCFTA will open up new markets to export goods and services
- 25% elected Nigeria as their top destination for exporting goods/services within Africa
- 29% elected South Africa as their top destination to import goods/services within Africa
Some of the continent’s most populous countries, such as Ethiopia and Democratic Republic of Congo are nowhere to be seen on this list, highlighting the potential they hold for intra-African trade.
Similarly, countries that have built their wealth on single commodities are often overlooked by the vast majority of African exporters. For instance, fewer than 1% of those companies surveyed currently export to oil rich Equatorial Guinea. It will therefore be interesting to see whether such companies begin to target these markets as the AfCFTA begins to take effect over the next few years.