The African continent stands on the threshold of a new era: African countries together have embarked on a path of deepening trade integration through the “African Continental Free Trade Area” agreement, and the agreement is helping to reshape the trade landscape on the continent, especially as it aims to break down barriers and create a unified trade landscape across Africa.
The African Continental Free Trade Agreement was launched among 49 member states of the African Union, aiming to create a single market followed by free movement and a single currency. It was launched in March 2018 and entered into force a year later, with work under the agreement to begin at the end of this year.
The agreement contributed to trade flows between the countries of the East African Community, as export growth among these countries over the past two decades recorded exceptional rates, as described by a series of studies by the International Monetary Fund, rising more than eightfold and far exceeding the growth rate of the region’s exports to the rest of the world.
In January 2021, the African Free Trade Area entered into force, aiming to significantly accelerate the growth of intra-African trade and use trade more effectively as an engine of growth and sustainable development by doubling intra-African trade, and to strengthen Africa’s common voice and policy space in global trade negotiations.
In recent years, Egypt has moved towards concluding many international trade agreements with many economic blocs in Africa, with the aim of opening new markets for Egyptian exports as well as the possibility of diversifying such exports.
This would lead to increased export proceeds and an improved balance of payments position, as well as increased trade exchange through Egypt obtaining the goods it needs from these countries at prices lower than their global counterparts. Despite all this, anyone following Egyptian-African foreign trade notices the low volume of trade exchange between Egypt and Africa, whether Egyptian exports to the continent or Egyptian imports from it, in general, and in agriculture in particular.
Trade exchange between Egypt and African countries saw slight growth of 1.2% in the period from January to August 2023, recording about USD 5.819 billion, compared with USD 5.75 billion in the same period of 2022.
The African market accounted for 7% of Egypt’s total foreign trade in the period “January to August 2023”, and the trade balance was in Egypt’s favour by USD 3.348 billion, compared with USD 2.433 billion in the same period of the previous year, growth of 37.6%.
The foreign trade bulletin issued by the Central Agency for Public Mobilisation and Statistics showed that the value of trade exchange between Egypt and the African market grew by 8.1% to USD 780.309 million last August, compared with USD 721.475 million in the same month of 2022.
The African Continental Free Trade Area will cover a market of more than 1.2 billion people with a gross domestic product of USD 2.5 trillion, across all 55 African Union member states. At full strength, it will be the largest free trade area in the world since the formation of the World Trade Organization (WTO).
This is according to the African Union, which stressed that the trade agreement could boost regional income by 7%, or USD 450 billion, and provide new opportunities, including in agriculture, manufacturing and e-commerce, alongside industries such as transport and manufacturing, accelerate wage growth for women and lift 30 million people out of extreme poverty by 2035.
Intra-African Trade Strengthens Partnership
Egypt is keen to cooperate with a number of African countries in the economic field, with the aim of increasing Egyptian investments, opening African markets to Egyptian products, completing the agreement establishing the Continental Free Trade Area, and helping to develop infrastructure in a number of African countries. Egyptian investments in Africa reached USD 10.2 billion in 2021, and EgyptAir signed a memorandum of understanding to establish a Ghanaian national airline with joint investments.
In this context, the head of the Egyptian African Businessmen’s Association, Dr Yousry El-Sharkawy, stressed in his conversation with Zawia3 that economic solutions are recently heading towards the African continent, which holds within it a remedy for the world economy and its food security, and therefore there must be trade rules to drive and organise this trend, with agreements being one of these tools. He pointed out that the free trade agreement has paved the way to a common African trade market and a common currency as well, noting that African countries were far removed from intra-African trade rates compared with the volume of their trade with the countries of the world, and expressing hope that the African free trade agreement will account for 55% of the continent’s countries’ trade with one another over the next six years.
He praised Egypt’s role in seeking to strengthen this file through its presidency of the African Union in 2019, crowning that presidency by joining the free trade agreement in 2020. After all procedures were completed, the agreement began to enter into force and the tools for actual implementation were completed, including promotion, customs and tax agreements, transport between member states, and financial and bank transfers. This came in cooperation with the African Union and the intra-African trade area, together with export partners, development partners and the African Development Bank.
El-Sharkawy added that Sudan has the largest share of Egyptian-African trade, at a ratio of 80 to 20% in the depth of the African continent, and said Egypt aspires to take trade into the heart of Africa and sub-Saharan Africa, to the Horn of Africa region, and to reach West Africa in the coming stages, over the next six years, with a value of up to USD 13 billion.
As Egypt prepares to operate three shipping lines for African trade, El-Sharkawy explained that Egypt’s main African stations on these lines are the port of Mombasa, Kenya, Morocco, Tetouan and Tunisia, stressing that the association, as part of the financial and business community, cooperates with all bodies to achieve this, whether in the transport sectors or in banking and central banks: “We present policy papers so that solutions can be found that are consistent with the real challenges we have experienced on the ground as a business community”.
The World Bank’s chief economist for Africa, Albert Zeufack, said the African Continental Free Trade Area has the potential to increase employment opportunities and incomes, helping to expand opportunities for all Africans. The continental trade agreement is expected to lift about 68 million people out of moderate poverty and make African countries more competitive.
The British bank “Standard Chartered” expected Africa’s total exports to reach a total value of one trillion dollars by 2035. In a report on the state of the economy and trade in Africa, the bank made achieving this export value conditional on African countries succeeding in implementing the continental free trade agreements and stimulating intra-trade exchanges among the continent’s countries.
The report explained that intra-African trade will reach USD 140 billion by 2035 if the continent’s countries implement the Continental Free Trade Area agreement well, an increase of 15% over the continent’s current total intra-trade, by 2035.
The Standard Chartered report was based on the activity African trade corridors are currently witnessing, which exceeds activity rates on other trade corridors on the world map, whose average is 4.3%, which bodes well for 2035. The report cited the trade corridor linking East Africa and South Asia, whose average growth rate is 7.1%, a rate expected to continue until 2035, while trade corridors between Middle Eastern countries and North African countries will grow to USD 200 billion by 2035.
For his part, Dr Amr El-Samadouni, secretary-general of the international transport and logistics division at the Cairo Chamber of Commerce, said the African free trade agreement contributes to boosting trade exchange between Egypt and African countries.
El-Samadouni added in press statements that Egypt seeks to increase its intra-trade with the African continent by 20% within 5 years as work under the African free trade agreement begins, to reach USD 7.4 billion, pointing to Egypt’s ability to achieve more than that.
El-Samadouni criticised the fact that, despite the vastness of the African continent’s resources and its many countries, it is characterised by a low level of intra-trade among its countries, at a rate of less than 18%, compared with intra-trade rates among Asian and European countries of about 50% and 70% respectively.
Transport and Money Transfers Are the Main Challenges to African Trade
Egypt hosted the third edition of the Intra-African Trade Fair last November, which helped strengthen trade relations and economic integration among African countries. It resulted in the signing of many protocols and agreements worth close to USD 3 billion and subsequent trade exchange opportunities estimated at about USD 10 billion, reflecting the depth of trade cooperation between Egypt and the continent’s countries.
In a related context, the head of the African Businessmen’s Association, Dr Yousry El-Sharkawy, pointed out that three editions of the Intra-African Trade Fair have been launched to support the implementation of this agreement among the participating countries, adding that many intensive meetings were held within the African Union at the governmental level and at the level of diplomatic and trade representation, as well as the mid-year review in Zambia and Kenya last year, in addition to the Intra-African Trade Fair, communication with the African customs and tax system, and work to provide non-bank financial services to support intra-trade among the continent’s countries.
The most prominent challenges facing the community of African businesspeople in Egypt are transport and money transfers, as well as understanding the nature of the products chosen for the African continent, and promotion deep inside the continent and the philosophy of promotion, according to the head of the African Businessmen’s Association, who explained the role of the free trade agreement in confronting these challenges and working to resolve them to achieve higher results.
Egyptian Efforts to Enter the Heart of Africa
Egypt has 15 commercial representation offices inside the African continent, represented by the assets owned by El Nasr Export and Import Company, according to statements by Eng. Ahmed Samir, Minister of Trade and Industry, and the ministry seeks to establish integrated Egyptian trade centres in Africa relying on these assets, starting with three key African countries: Kenya, Tanzania and Côte d’Ivoire.
The minister explained that, regarding Kenya, it is planned to establish “the Egyptian Logistics Centre for storage and handling services for Egyptian exports”. As for Tanzania, the ministry’s plan is to establish an Egyptian trade centre in both Tanzania and Côte d’Ivoire.
In this context, economist Dr Rashad Abdo, head of the Egyptian Forum for Political and Strategic Studies, explained to Zawia3 that Egypt’s joining of the African free trade agreement will contribute significantly to increasing the volume of African trade exchange in the coming years, given the state’s efforts to implement the agreement’s provisions and increase the volume of African exports. He pointed out that the African Continental Free Trade Area agreement holds great potential for diversifying Africa’s export basket and encouraging trade in services: by strengthening trade infrastructure and improving access to finance, services exports can be given a boost of about 50%, opening the way for African countries to benefit from growing global demand for high-skill, high-value-added services.
The economist expected that Egypt’s entry into this agreement will help remove the obstacles Egypt faces in many African countries, consolidate international relations within the continent and provide more foreign currency to solve the dollar crisis. He explained that the Continental Free Trade Area gives African countries an opportunity to enter regional and global value chains, a crucial step towards economic diversification and industrial transformation, as Africa’s exports to the rest of the world are still heavily skewed towards primary commodity exports, as he put it.
According to the International Monetary Fund, this agreement represents a historic opportunity for African countries to realise their full economic potential by breaking down trade barriers and improving the broader business environment for trade. Tariffs within Africa are high compared with other continents, averaging 6%, while non-tariff measures amount to the equivalent of an 18% tariff. Challenges still beset the trade environment, including transport and communications infrastructure, access to finance, and customs and border procedures.
