Africa Agriculture Trade Monitor
Agricultural trade can play a critical role in countries’ economic development and overall food security. While Africa’s share in both global and regional trade has increased in recent years, it remains below optimal levels – and below its great potential.
To provide a more comprehensive view of trends in Africa’s intra-regional trade, IFPRI and the Technical Centre for Agricultural and Rural Cooperation (CTA) have launched the first annual Africa Agriculture Trade Monitor . The report was launched at the Africa Green Revolution Forum, held in Kigali, Rwanda in early September.
According to the report, Africa’s overall agricultural trade has grown since the 1990s. The region’s agricultural exports tripled in volume between 1998 and 2013, while agricultural imports grew by five times due to population and income growth and subsequent increased demand. This imbalanced growth has led to a growing trade deficit, particularly with North and South America. The major imported commodities contributing to this deficit include sugar, maize, and wheat from North and South America and rice, palm oil, and wheat from Asia.
Africa’s intra-regional trade also increased between 1998 and 2013, with the volume of goods traded within the region growing by 12 percent during this period. Despite this rapid growth, however, the share of intra-regional trade in Africa’s overall trade remains low at 21 percent. The report cites several factors for this low share, including insufficient trade-related infrastructure, limited private sector participation in regional integration initiatives, and poor or inadequate institutional quality.
Processed foods accounted for around 40 percent of intra-African trade between 1998 and 2013, with fish products and cereals accounting for 8 and 7 percent, respectively. The share of coffee in intra-African trade fell from 10 percent during 1998-2006 to 7 percent during 2007-2013.
Why is increasing intra-regional trade so important? Low levels of intra-regional trade are of particular concern, as such trade could help African countries better respond to both global price shocks and local production shocks by providing access to less volatile regional food supplies. For example, the report found that in almost all West African countries, national food production was more volatile than regional food production from 1980-2010. The region also experienced high levels of overlapping trade flows, in which products being imported from outside the region were also being produced by other countries within the region and exported to external markets. This highlights the opportunities to expand intra-regional trade by redirecting these trade flows.
Both supply-side and demand-side factors have played a role in Africa’s level of agricultural exports; however, the report finds that the role of domestic supply-side factors has been stronger. On the domestic supply side, agricultural productivity, government spending on agricultural extension services and market access support, and trade-related infrastructure and policies all affect agricultural exports.
The report found land productivity to positively impact export performance, while labor productivity negatively impacts exports. The authors explain that countries with higher agricultural labor productivity are often undergoing structural transformation, with concurrent shifts toward non-agricultural export products.
Africa also has lower quality ports and less efficient customs clearing institutions than other regions of the world, according to the report. Addressing these issues will be crucial in increasing trade, both global and intra-regional.
On the demand side, trade policies in importing countries play a significant role in Africa’s export performance. Increases in tariff rates in importing countries reduce exports, as do non-tariff barriers, like strengthened sanitary and phytosanitary regulations. Domestic support policies for agricultural producers in OECD countries were also found to decrease Africa’s trade shares. The report emphasizes that African policymakers should continue to take part in global negotiations, such as those conducted by the WTO, to lower such trade barriers.
Several recent developments have aimed to increase intra-regional trade in Africa, including the Regional Economic Communities (RECs) of the Africa Union, the Continental Free Trade Area (CFTA), and the Tripartite Free Trade Agreement (FTA). These institutions aim to create a single continental market for goods and services, as well as free movement of labor and capital and coordination of standards and product regulations.
However, many countries still face significant challenges when it comes to participating in regional and global trade. In addition to poor domestic infrastructure and institutions and strict international quality standards, challenges also stem from climate change, which is expected to decrease Africa’s overall agricultural yields and threaten the region’s food security. The report encourages policymakers to allocate more public funding to agricultural research and development in order to sustainably increase agricultural production and help farmers reduce their risk while using natural resources more wisely. Efforts should also be made to better integrate smallholder farmers into value chains by providing access to agricultural inputs and services and improving linkages between farmers and processors. Finally, African governments should utilize global capacity-building efforts to improve trade facilitation and help domestic producers meet global food quality and safety requirements, and should continue liberalization of trade policies to reduce barriers to intra-African trade.