EAA INAUGURAL ANNUAL LECTURE
LEVERAGING TRADE AND DIGITAL FINANCE TO SUPPORT THE IMPLEMENTATION OF THE AfCFTA
The EAA held its Inaugural Annual Lecture on 6th June in London on the fringes of the Commonwealth Trade Ministers meeting. We were honoured to have the presence of The Rt Hon Patricia Scotland, KC, Secretary-General, Commonwealth Secretariat; HE Manoah Esipisu, Kenya’s High Commissioner to the Court of St James; and Lord Valentine Cecil, Chairman of the Association to open the session.
The lecture was delivered by Dr James Mwangi, CBS who is the Group Managing Director and CEO of Equity Group Holdings Plc. The response was given by Hon Adan Mohamed, Economic Advisor to the President of the Republic of Kenya.
A panel discussion followed that was moderated by Juliana Olayinka, Business Broadcast Journalist and CEO of JComms Consultancy. The panellists were:
Daniel Owusu Acheampong, Deputy Head of UK Trade Policy, Africa
Nikhil Hira, Executive Director, Eastern Africa Association, Regional Office
Professor Sangeeta Khorana, Professor of International Trade Policy, Bournemouth University and Advisor Trade and Gender to the Commonwealth
Nadia Hasham, Trade Policy Expert, UNECA
HIGHLIGHTS OF THE LECTURE
Dr Mwangi pointed out that AfCFTA was the largest free trade area with a population of 1.3 billion people and GDP of USD 3.4 Trillion. However, Intra-Africa trade is only 15%. Key statistics:
|Africa’s % of Global GDP||2.8%|
|Africa’s % of Global Trade||3.0%|
|Africa’s % of Global Passenger Traffic||2.4%|
|Africa’s % of Global Manufacturing||2.8%|
|Africa’s % of Global Energy Consumption||3.4%|
|Africa’s % of Global Food Supply||8 %|
|Africa’s % of Global Population||17%|
|Africa’s % of Global Land Mass||20%|
|Africa’s % of Global Arable Land||65%|
|Africa’s % of Global Renewable Fresh Water||10%|
|Africa’s % of Global Natural Resources (Minerals)||30%|
Tailwinds for the Continent
There are a number of tailwinds that countries in Africa face.
Tailwind 1: The pandemic has put the spotlight on concentrated global manufacturing supply chains that require diversification. 40% of global chemical product exports come from 5 countries; 63% of finished electronic goods exports come from 5 countries; 48% of global machinery & transport equipment exports come from 5 countries; 59% of global electronic parts and component exports come from 5 countries.
Tailwind 2: Ukraine-Russia war has put the spotlight on highly concentrated agricultural production that requires diversification. 92% of palm oil production takes place in 5 countries; 68% of sunflower oil production takes place in 5 countries; 72% of olive oil production takes place in 5 countries; 89% of soybeans production takes place in 5 countries; 67% of canola production takes place in 5 countries; 54% of wheat production takes place in 5 countries; 70% of maize production takes place in 5 countries; 72% of rice production takes place in 5 countries.
Tailwind 3: Focus on sustainability will require Africa as an equitable partner.
Tailwind 4: A transformed Africa is a more balanced world.
Secular growth and economic opportunities
All these present opportunities for Africa and are making the Continent one of the highest growth regions in the world. A coordinated and integrated Africa has the potential to make the continent one of the fastest growing regions in the world. East Africa which is increasingly more integrated remains one of the highest growth regions in the world.
This growth and the various economic opportunities will be driven by enhanced Continental integration leading to expanded ecosystems. Africa’s natural resources will play a big role in catalysing broader and deeper Continental value chains. The demographic dividend that the Continent has will further fuel the growth. We can expect productivity gains from improving labour literacy levels and access to improved infrastructure.
Equity’s Africa Recovery and Resilience Plan
Equity Group’s Africa Recovery and Resilience Plan is a multi-pronged and holistic solution to achieve the social and economic transformation of Africa. The plan comprises 6 strategic pillars that will be operationalised through a collaborative, deliberate, and ecosystem-centric approach. The plan was conceived with execution in mind and with no economic and financial assumptions, only targets!
The detailed plan as presented by Dr Mwangi is in the presentation that is shared with this newsletter.
The above was extracted from Dr Mwangi’s presentation.
THE RESPONSE BY HON ADAN MOHAMMED
Hon Adan Mohammed’s response to the lecture is reproduced below:
Highlighting: The immense potential of leveraging digital and trade finance to accelerate the African Continental Free Trade Agreement (AfCFTA)
The AfCFTA, which came into effect on 1st January 2021, representing a significant milestone in the Continent’s quest for economic integration and development.
The AfCFTA aims to create the world’s largest free trade area by uniting all 55 African Union (AU) Member States under a single market. It envisions boosting intra-Africa trade, enhancing competitiveness, and promoting sustainable economic growth across the Continent to fully realise the transformative potential of this Agreement, it is crucial to embrace digitalization and leverage innovative trade finance solutions.
To fully realise the potential benefits of digitalisation and trade finance, collaboration among stakeholders is crucial. Government should prioritise digital infrastructure development, create enabling regulatory frameworks, and invest in capacity building for businesses and financial institutions.
Financial institutions need to embrace digital transformation, develop innovative trade finance solutions, and strengthen their support for SMEs. Businesses should leverage digital platforms and trade finance options to expand their operation and seize opportunities within the AfCFTA market.
- Digital technology can play a pivotal role in overcoming the longstanding challenges faced by African countries in cross-border trade. By adopting digital platforms and solutions, the AfCFTA can facilitate seamless and efficient trade processes, reduce transaction costs and eliminate bureaucratic hurdles. For instance, digital trade platforms can provide a centralised marketplace for buyers and sellers, allowing them to connect, negotiate deals, and complete transactions electronically. This would greatly enhance market access for Small and Medium-size Enterprises (SMEs) and promote inclusive economic growth.
- To successfully leverage digital and trade finance for the AfCFTA, key stakeholders including Governments, regulatory bodies, financial institutions, and businesses need to collaborate. Policymakers should create an enabling environment that promotes digital infrastructure development, a legal framework for e-commerce, and a regulatory framework that fosters innovation and security in digital transactions. Financial institutions should invest in technology and expertise to offer innovative trade finance solutions tailored to the needs of businesses engaged in intra-Africa trade.
- Moreover, Public Private Partnerships can play a vital role in driving the adoption of digital and trade finance solutions. Collaborative efforts between governments, international organisation, financial institutions, and technology providers can lead to the development of digital trade platforms, the establishment of capacity-building programs, and the sharing of best practices across the Continent.
- Digitalisation and trade finance can play a pivotal role in unlocking the full potential of the AfCFTA and driving its successful implementation. Here are some key reasons why leveraging these tools is of utmost importance.
Trade Facilitation: The integration of digital technologies and trade finance solutions can significantly streamline and expedite trade processes. By embracing digital platforms and tools, the AfCFTA can reduce administrative bottlenecks, eliminate paper-based documentation and enhance efficiency. This will result in quicker customs clearance, smoother logistics and improved trade facilitation, enabling business to take advantage of the expanded market access provided by the AfCFTA.
Inclusive Economic Growth: Digitalisation and trade finance have the potential to foster inclusive economic growth by empowering Small and Medium-sized Enterprises (SMEs) and entrepreneurs. With digital platforms and e-commerce solutions, SMEs can overcome geographical barriers and connect with regional and international markets. Moreover, innovative trade finance mechanisms can provide SMEs with access to affordable financing, help them expand their operations, invest in new technologies and participate actively in cross-border trade.
Risk mitigation and increased financing: Trade finance solutions, particularly those leveraging digital technologies such as block chain, can enhance transparency, reduce fraud risks and mitigate the challenges associated with cross-border transactions. This increased transparency and risk mitigation can create an environment that encourages financial institutions to offer more favourable financing options to businesses engaged in intra-Africa trade. Improved access to trade finance can catalyse investment, stimulate economic activity and boost intra-Africa trade volumes.
Job creation and skills development: The adoption of digital technologies and trade finance solutions can contribute to job creation and skills development in the African Continent. As businesses embrace e-commerce platforms and digital trade, new job opportunities will emerge in logistics, digital marketing, data analytics, and other related fields. Additionally, the development of digital infrastructure and the need for expertise in trade finance will require a skilled workforce, leading to capacity building and the creation of employment opportunities.
Enhance regional integration: The AfCFTA aims to foster regional integration and cooperation among African nations by leveraging digital and trade finance the barriers to cross-border trade can be minimised, promoting stronger economic ties between countries. The ease of conducting business digitally and the availability of trade finance solutions will encourage businesses to explore new markets within the AfCFTA region, leading to deeper regional integration and economic synergies.
In conclusion, leveraging digital and trade finance is of paramount importance for accelerating the African Continental Free Trade Agreement. These tools can enhance trade facilitation, promote inclusive economic growth, mitigate risk, increase access to financing, create jobs, and foster regional integration by harnessing the power of digitalisation and trade finance, Africa can unlock its full economic potential and build a prosperous future for its people.
This is a commentary and comments are welcome by email to email@example.com