2024 Public Sector Perspectives

Andrew Park Public Sector Group, Corporate Banking Josefina Rochette Public Sector Group, Corporate Banking Peter Sullivan Head of Africa Public Sector Group, Corporate Banking Bolstering Intra-Africa Trade Flows Amidst the Current Global Scenario D eep uncertainty clouds the direction and trajectory of global trade given recent economic and political developments: Anti-globalization, economic nationalism, shifting alliances and disruptive technologies are posing unprecedented threats to global trade flows. This is especially true for the African continent. While intra-regional trade forms the backbone of trade in Europe, Asia, and the Americas – with intra-continental trade in these regions standing at 66.9%, 63.8% and 44.4% respectively – intra-African trade represents less than 13% of Africa’s total trade. Moreover, in 33 African countries intra-African trade has declined as a share of the total trade since 2012 1 . This trend has produced a region that is more integrated with the rest of the world than within its own continent. Africa’s heavy reliance on global markets and its absence of a robust intra-regional trade systemmake the continent more vulnerable to external crises and shocks, as illustrated by the repercussions of Covid-19 and the war between Russia and Ukraine. This vulnerability is particularly evident in the case of the Russian invasion of Ukraine, which has worsened the existing decline in food security by driving up prices for essential goods. Although prices are returning to the levels before the invasion, they remain high in comparison to five years ago, with the costs of food on average 42% higher in 2022 than in 2014-2016 2 . This serves as just one example highlighting the significance of intra-Africa trade, and how, if it were remediated, it could address one of the most pressing challenges currently faced by the continent. While there appear to be rising risks to the established trade patterns and partnerships, there are also some encouraging developments that are generating positive momentum for intra- Africa trade flows. For example, the establishment of regional trade agreements, such as the African Continental Free Trade Area (AfCFTA), reinforces regional integration and promotes intra-Africa trade by creating a much larger market for the free flow of goods and services and act as an impetus for infrastructure investments. The tariff liberalization from AfCFTA alone is estimated to generate welfare gains of $16.1 billion and grow intra-African trade by 33% up from 15% during the transition phase alone 3 . However, there remain risks that public policymakers and private sector players need to effectively manage (e.g., infrastructure and digitization, especially in the areas of global value chains), to realize the trade potential of a region rich in natural and human resources. 1 Mo IbrahimReport 2022 2 ODI 3 UNCTAD Citi Perspectives for the Public Sector 25 Africa’s heavy reliance on global markets and its absence of a robust intra-regional trade systemmake the continent more vulnerable to external crises and shocks, as illustrated by the repercussions of Covid-19 and the war between Russia and Ukraine. 24 Bolstering Intra-Africa Trade Flows Amidst the Current Global Scenario