Despite seeing rapid export growth in the past decade, sub-Saharan African countries account for just 3% of global trade in goods and services, holding back Africa’s development, according to a new World Bank report published Thursday.
“To reduce poverty on a large scale and transform their economies, African countries must scale up and diversify their participation in international markets and global value chains,” said the report, “Africa In the New Trade Environment: Market Access in Troubled Times.”
Two big trade efforts — the European Union’s Everything but Arms and the United States’ African Growth and Opportunity Act, or AGOA — remain underutilized, according to the report. Oil exports make up the majority of AGOA trade.
Changing tides: Sub-Saharan African nations are shifting away from Western trade partners. For example, the share of exports of goods to Europe dropped from 31% in 2005 to 25% in 2010. “East Asia is rapidly replacing North America and Europe as Sub-Saharan Africa’s key trading partner in both intermediate and capital goods trade,” the report said.
The report encouraged greater diversification of trading partners, including better regional integration, as barriers to trade between African nations are rife. This would also help reduce the heavy reliance on exporting raw material.
Governments should also tie foreign aid to building export capacity, such as through infrastructure and digitalization, to better exploit AGOA and other trade efforts, the report said.
Low numbers, high dependence: Despite only making up a fraction of global trade relative to population, African nations are highly dependent on exports for their gross domestic product. North America’s exports make up just 30% of the economy, but this figure rises to 53% in sub-Saharan Africa. That means the region is highly vulnerable to external shocks.
When COVID-19 hit, “the region felt its severest economic shocks mainly through the channel of trade” due to sharp shifts in demand abroad, the report said.