By: Antoine Bouet
The third annual Africa Agriculture Trade Monitor (AATM) was released last week. The report finds both good news and bad news for Africa’s trading system, as well as some important promises.
First the good news.
The value of African agricultural exports grew steadily between 2003 and 2018, and African exports are expanding in several emerging and fast-growing countries. Agricultural exports in Africa showed an upward trend between 2003 and 2018, as did the diversification of Africa’s export destinations. Exports increased to Brazil, Russia, India, China, and several other Asian countries, including Saudi Arabia, Viet Nam, United Arab Emirates, Turkey, Malaysia, and Pakistan. This diversification has resulted in a progressive decrease in Europe’s share as a top destination for African exports, from 45 percent in 2005–2007 to 36 percent in 2016–2018. Increased diversification of African exports is a positive trend as it reduces risk for African producers. It also helps producers move away from markets that are not very dynamic (e.g., the European Union) and into markets that sustain high economic growth (Asia and other emerging economies).
The report also finds that African agricultural exports vary approximatively in line with world agricultural exports, but a few African products outperform global trends. These include unprocessed products like sesamum seeds and tomatoes, as well as semi-processed or processed products like soups and broths or sucrose. While Africa’s exports used to be predominantly composed of unprocessed products, this finding shows that African countries can also be successful in exporting semi-processed or processed goods.
Between 2008 and 2018, intra-African agricultural exports rose faster than world agricultural exports, particularly for many semi-processed producers (e.g., rice flour wheat or meslin flour) and processed agricultural goods (soups and broths and preparations therefore, sucrose, and prepared food). Intracontinental trade flows are responding well to emerging trends in domestic food demand. According to the report, export shares of emerging cash products and processed food products are expanding, while the shares of more traditional export products are contracting. Among food products, increased export shares for maize and wheat have been observed over time, especially for processed foods such as soups, broths, and food preparations. This reflects growth in Africans’ processed food consumption, a result of demographic shifts, growing urban food demand, and changing lifestyles and habits in rural areas. Other products traded intra-regionally include rice, cattle, apples, vegetables, sweeteners and fats, beverages, and traditional non-food products such as tea, coffee, palm oil, cotton, and tobacco.
The AATM also found several negative trends.
There has been an increasing deficit in African trade in staple food products. In 2018, Africa imported a significant amount (in net terms - i.e. accounting for exports) of wheat, maize, rice, amounting to almost US$25 billion per year. In the same year, the region’s annual net imports in the sugar sector were US$4.1 billion and in the vegetable oil sector were US$8.8 billion. For these three value chains (cereals, sugar, and vegetable oil), the deficit in imports reached close to US$ 40 billion in 2018, compared to it US$ 10 billion in 2003. This reflects much stronger economic growth and population growth in Africa than in the rest of the world.
The report also finds that Africa’s trade policies are not improving. In addition to continued border formalities, Non-Tariff Measures (NTMs) remain a real impediment for African agricultural trade. The NTMs faced by African countries range from sanitary and phytosanitary measures to conformity assessment and domestic support in the US, the EU, Brazil, and China.
While there has been no systematic collection of trade data analyzing the impact of Covid-19 on agricultural trade in Africa, there is reason to believe that the pandemic and related policies adopted by African governments may have affected the region’s agricultural trade in 2020.
The 2020 AATM also underlines a few promising trends for the future, in particular the potential impact of the African Continental Free Trade Area (AfCFTA) on agricultural trade. There is room for expanding intra-African trade by further opening countries to extra regional trade flows (trade between RECs). While intracontinental agricultural exports have grown steadily over the past two decades, this growth has been largely dominated by SADC (Southern African Development Community) and COMESA (Common Market for Eastern and Southern Africa) member countries, and trade occurs predominantly within regional economic communities. On average, SADC and COMESA retained 84 percent and 66 percent of their intra-Africa exports within their respective regions in 2016–2018.
Tariffs are notably higher for extra-REC imports, with some protections against other African countries far exceeding world tariffs. For example, IGAD (Inter-Governmental Authority on Development) and EAC (East African Community) countries charge 44.3 percent and 41.9 percent, respectively, on imports from AMU (Arab Maghreb Union); similarly, EAC and ECCAS (Economic Community of Central African States) countries charge 20.9 percent and 22.8 percent, respectively, on imports from ECOWAS (Economic Community of West African States). The report indicates that the elimination of import duties on intra-continental trade could boost intra-African agriculture trade, and if authorities successfully improve NTMs and customs formalities, the potential impact of the AfCFTA could be even larger.
The report also finds that intra-African trade, particularly in agriculture, is much larger than official statistics alone suggest. For instance, estimates show that informal cross-border trade in staple foods accounts for about 30 percent of total trade in West Africa. While there are some initiatives that attempt to estimate the gap between reported trade and total trade, there is currently no continent-wide system for monitoring and quantifying informal cross-border trade in Africa.
The report also contains a regional chapter focused on SADC. Trade integration in this part of Africa has a long history. SACU (Southern African Customs Union) is the oldest customs union still in existence today. However, the initial political behind the union will has not sparked a real economic evolution. SADC has not been transformed into a customs union, NTMs affecting intra-regional trade remain numerous, and customs, electricity, transport, and telecommunications infrastructure in the region have not significantly improved. The report’s authors concluded by pointing to the need for genuine political will to emerge to advance trade integration in the region.
The third annual report of the Africa Agriculture Trade Monitor (AATM) has been presented during the AGRF Virtual Summit on September 11, 2020. It is the result of a collaborative initiative between the International Food Policy Research Institute (IFPRI) and AKADEMIYA2063. It builds on the work of the Regional Strategic Analysis and Knowledge Support System (ReSAKSS) and the African Growth and Development Policy Modelling Consortium (AGRODEP) on trade, both facilitated by IFPRI and AKADEMIYA2063 as part of their work in support of the Comprehensive Africa Agriculture Development Programme.
The objectives of the report are to present recent trends of African agricultural trade and provide analysis and policy recommendations. It is based on a unique database on trade and is written collaboratively by 11 authors, 9 of whom are African.
Antoine Bouet is a Senior Research Fellow at IFPRI.