African countries are finding it difficult to trade with each other under the African Continental Free Trade Area (AfCFTA) due to inefficient border procedures, complex documentation requirements and the lack of harmonisation between countries, create major business obstacles, a new report says.

The Driving African Trade through digitalisation report by TradeMark Africa (TMA) says cutting costs and streamlining processes are crucial to realising the continent’s full trade potential.“These barriers diminish the competitiveness of African products and limit the expansion of intra-regional trade and Africa’s integration into global value chains,” it says.

AfCFTA, the world's largest free-trade area which started trading on January 1 2021, created a market of 1.3 billion people and the eighth economic bloc in the world with a $3-trillion gross domestic product.

The agreement sought to remove barriers to trade and put in place common policies to ease movement of goods and services within the continent.

However, according to the United Nations Economic Commission for Africa (UNECA), countries continue to trade with the rest of the world more than among themselves and the envisaged benefits of Africa’s trade agreement are yet to be felt by member countries as evidenced by the declining intra-Africa trade as a share of global trade.

According to TMA, trade costs in Africa have remained high in the last decade compared to other regions, although there has been a noticeable improvement in recent years.

For instance between 2010 and 2021, comprehensive trade costs across Africa decreased by 7.3 percent, with non-tariff costs declining by 2.1 percent.

This is particularly evident in the agriculture sector, where comprehensive trade costs fell by 12.4 percent and non-tariff costs by 6.4 percent.“Africa faces logistical and regulatory challenges that hinder its economic integration and competitiveness, where the potential for economic growth through improved trade is significant,” says TMA.

Intra-African trade as a share of global trade declined to 13.7 percent in 2022 from 14.5 percent in 2021 while intra-African exports as a percentage of total exports fell to 17.89 percent from 18.22 percent.

Intra-African imports as a percentage of total imports declined to 12.09 percent from 12.81 percent over the same period.

South Africa’s Standard Bank (trading in Kenya as Stanbic bank) through its survey conducted between July and September this year found out that Kenyan traders and particularly the small businesses find it difficult to trade with the rest of Africa due to these trade restrictions, including high trading costs and complexities in logistics and policies.

The survey whose finding are contained in a report dubbed Stanbic Bank Africa Trade Barometer (SB ATB): An Overview of the Current Cross-border Trade Landscape of Africa sampled 235 businesses which majority were small businesses.

The TMA report was launched in 2022 with the intent of creating Africa’s leading trade index to address the information vacuum of reliable African trade data and to support and enable the growth of intra-Africa trade.

It focuses on 10 countries including Angola, Ghana, Kenya, Mozambique, Namibia, Nigeria, South Africa, Tanzania, Uganda and Zambia.

“Despite notable progress in regional trade agreements, and ease of trade index remaining constant at 41, perceptions of trading within Africa have become less favourable among Kenyan businesses, with only 17 percent finding it easy, a decline from 31 percent in the previous survey,” the survey says.

According to TMA intra-African trade grew by 7.2 percent year-on-year, reaching $192 billion, accounting for 15 percent of total African trade in 2023, up from 13.6 percent a year ago.

On the other hand Africa’s exports of digitally delivered services reached $36.7 billion in 2023, a fourfold increase from $9.2 billion in 2005.

The annual growth rate of digitally delivered services exports since 2005 was 7.9 percent, outpacing the 4.7 percent average growth of goods exports.

TMA notes that while goods trade declined during the covid-19 pandemic, exports of digitally delivered services continued to grow, showcasing the resilience and expanding role of the digital economy.“Digital services are though highly concentrated, with three countries (Ghana, Morocco and South Africa) accounting for more than half in 20221,” it says.

Africa’s increased adoption of digital technologies is expected to drive an expansion of digital services exports by $74 billion from the current $33 billion and hence to double Africa’s global share of digital exports.

However digital trade in the continent continues to face significant policy hurdles, particularly in the realm of infrastructure and connectivity.

These include inconsistent regulatory frameworks, restrictions on cross-border data flows, inadequate data protection policies, security and restrictions on the use of communication services, such as internet access.

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