AFCFTA Key in Cushioning African LDCS from External Shocks

The Economic Commission for Africa (ECA) is supporting regional trade integration through the African Trade Exchange Platform (ATEX), a platform enabling bulk procurement of commodities. Speaking at a session on integrating regional trade during the regional consultation on LDC5 for Least Developed Countries (LDCS) in Africa and Haiti, ECA Director for Regional Integration and Trade Division, Mr. Stephen Karingi, highlighted the importance of trade within the LDCS of which 33 are in Africa.

Over the past 5 years, about 80% of exports from African LDCS were destined to extraAfrican countries while about 79% of African LDCS imports were sourced from outside of the continent. “Mirroring Africa more broadly, the LDC’S largely import manufactured products and export goods low along critical value chains like fuel products, ores and metals, and food items,” Mr. Karingi said, expressing concern that current trade patterns have exposed African LDCS to commodity price volatilities and global shocks.

The ECA and Afreximbank in collaboration with the African Union and the African Continental Free Trade Area (AFCFTA) Secretariat, have developed a digital B2B and B2G ATEX.

The platform provides a safe and secure digital marketplace for pooling Africa’s trade demand, as well as a one point of transparent and competitive access to critical supplies.

Mr. Karingi explained that ATEX digitally enables the trade of the main agricultural commodities and inputs imported by the continent from Russia and Ukraine. These include cereals, fertilizer and associated inputs, oils, oilseed, other products and inputs that support agricultural value chains.

The ATEX trade platform has been established on the back of the establishment of the AFCFTA, which, if fully implemented, is set to accelerate industrialization in Africa and increase the value of intra-african trade by 400 percent and the share of intraAfrican trade to 26 percent by 2045. This is compared to the share of intraAfrican trade which was at 15 percent in 2020.

“The impact of the AFCFTA on intraAfrican trade is likely to be much higher as the above estimates don’t consider informal cross-border trade which is prevalent in most African LDCS,” said Mr. Karingi, adding that while the AFCFTA is expected to impact countries differently based on their existing comparative advantages, all African countries will benefit.

Trade gains are expected mostly in the industry, agrifood and services sectors. For example, Ethiopia’s intra-african agrifood sector is expected to grow by 84% and the industry sector in Benin by 63%.

The ECA is helping African countries, many of which are LDCS, in developing their national AFCFTA implementation strategies.

Furthermore, the ECA has conducted research with Organisation for Economic Co-operation and Development (OECD) and gathered data on Digital Services Trade Restrictions across African countries. Of 28 countries with data, ECA has collected data on 17 LDCS which shows different trade restrictions across African countries.

For example, little restrictions in Gambia and high restrictions in Tanzania with infrastructure being the most common restriction found.

Despite the trade and industrialization prospects for LDCS offered by the AFCFTA, there were many barriers to industrialization for LDCS. For instance, productive actors are largely resource- and talent-poor Micro Small and Medium Enterprises which were disproportionately led by women and youth including those in the informal sector.

Noting that women face constraints to participation in trade, including access to assets, finance, markets, information, networks, skills, standards, tech, security at borders, Mr. Karingi said inclusive complementary policies were necessary for national and regional AFCFTA implementation.

In line with this, the African Union Assembly decided to include the Protocol on Women and Youth in Trade in the scope of the AFCFTA Agreement. and ECA ensures that gender policy is mainstreamed in the national AFCFTA implementation strategies.

“African LDCS are extremely vulnerable to global shocks due to their current trading patterns and the AFCFTA will be instrumental in cushioning African LDCS from external shocks and bolstering the industrialization of these countries,” said Mr. Karingi.