The 35 countries of Sub-Saharan Africa (SSA)* are rich in oil and natural resources, which gives them potential to contribute to the global trading system: first, many of the region’s nations have the potential to be suppliers of oil and gas to the global economy and second, as the drive for economic development continues, the region pulls in imports supporting infrastructure development and trade itself.

The challenge, however, is that SSA’s economies are unstable and exhibit all the issues associated with under-development. There is, indeed always has been, potential across the region, but Africa’s nations are developed to different extents, transport linkages between them remain weak, and poverty remains entrenched. For example, seven out of 10 of the world’s most unequal nations are African. The average score of SSA countries on the World Bank’s ‘ease of doing business’ rankings is 143 out of 190. Trading across borders ranks on average across the countries at 136 and the average cost and time of implementing border compliance on exports is US$547 and 108 hours, compared to a global average of US$389 and 64 hours.

Africa itself recognises the importance of regional integration and trade in the African Economic Community and its Regional Economic Communities (RECs). But of these, the Economic Community of West African States (ECOWAS) in particular has taken a stronger role in managing regional security and peace than it has in promoting cross-border integration. This undermines Africa’s attempts to build trade from within the region.

In spite of all this, over the past 10 years there has been a marked shift in the way the rest of the world views African trade. There is increasing awareness that it is trade and not aid that will fuel economic development across the region and that this has potential to create political stability as well. The US-Africa Business Forum in September 2016 focused on furthering trade and investment links between the US and Africa and was supported by some US$33bn in US government and business finance. African trade is some 5% of all European trade, with a particular strength in commodities, and is supported by Economic Partnership Agreements which attempt to give African nations free trade access to the European market.

This briefing looks at the region’s trade in terms of what it trades and with whom it trades. It focuses on SSA, with the Middle East and North Africa covered in a separate report, as its trade base is somewhat different. Data is a real challenge for the region but, using the Equant Analytics proprietorial methods for mirroring and harmonising trade data, information is provided here that has hitherto not been available. It covers trade, trade finance, sectoral trade, hidden or obscured data and the implications of political instability and lack of transparency for a region that needs to comply with global systems if it is to integrate fully with them.


Trade, oil and SSA

SSA constitutes some 4% of world trade (Figure 1). South Africa and Nigeria are by far the largest trading nations in the region: South Africa’s imports are more than double those of Nigeria and its exports are nearly twice those of Nigeria at an estimated US$100.2bn and US$125.3bn respectively in 2016. Oil and gas dominates the region’s trade: nine of the top 10 export sectors in the region are commodities rather than higher-value manufactured products.




This creates a dependency on oil prices and commodity prices, which undermines the stability of the region’s economies. When commodity prices fall dramatically, as in 2015, the region’s exports suffer (Figure 2). The trend post-2015 does not suggest that the region’s historical trade surplus in commodities will be restored over the next five years.




The region has two challenges when it comes to trading with the rest of the world. First, its trade, and therefore its revenues, are closely correlated with the oil price. It is a net “loser” from reductions in oil prices because, as an exporter, the value of its exports drops and this means that it has lower export revenues. While it also imports a lot of refined oil, this is insufficient to offset the loss in export earnings. Second, its infrastructure across countries is generally not well developed and therefore it is harder for countries outside of the region to import oil from all except the largest producers. This also limits trade between countries in the region.

The correlation between the oil price and the region’s exports is 83% (Figure 3). Although this does illustrate how important the sector is to the region, the correlation is lower than it is, say, for the Mena region, where the corresponding figure is 96%. The difference indicates that trade, although moving strongly with oil and broader commodity prices, is also influenced by other factors.




Those economies that are less resource-dependent, particularly South Africa, fare better than those countries that are entirely dependent on commodities for their exports. This makes it difficult to generalise about the region.

Oil and gas alone represents some 44% of the region’s export trade, and nine out of 10 of the region’s top sectors are commodities. The remaining eight commodities from the top 10 constitute nearly 38% of the region’s export trade.

This means that SSA will be disproportionately affected through its exports by any change in commodity prices compared to the world (Figure 4). For example, the drop in export value in 2009 was some 32% for SSA, while for world trade as a whole it was 23%. In 2010, SSA recovered back to where it had been in 2008, while world growth was comparatively low at 21%. This pattern continued in 2011, helped by a 45% and 36% increase in trade with China in the two respective years.




Figure 5 reinforces the point that the region is dependent on commodities. The only sector that is not a commodity within the top 10 exports is the automotive sector, which is particularly important for South Africa. It constitutes nearly 2.5% of the region’s exports and was worth US$8.3bn in 2015 and US$8.8bn in 2016. Elsewhere in the region, export growth by sector is flat or negative over the past two years because of weak commodity prices.




The picture into 2017 for the fastest-growing sectors looks positive if oil is excluded (Figure 6). Although growth is modest in the top five fastest-growing export sectors, live plants (which includes the important flower and vegetable trade in countries like Rwanda, Ethiopia and Kenya) is set to grow by over 7% and the oil seed and fruit sector by over 9%. While these sectors are smaller, it does suggest that the trade routes between the region’s big agricultural producers and Europe in particular are strengthening.




Imports proxy well for the type of consumer demand in an economy and Figure 7 shows that imports are far more widely distributed than exports. The major import sector is still oil and gas, but second and third are machinery and equipment respectively. These two sectors include computers, IT systems and mobile telephones. Many of these sectors represent inputs into the development of communications and information technology infrastructures. The fact that imports are growing indicates that demand in the region for products associated with development is strong.




There is a projected drop in the growth of imports across all fast-growing sectors (Figure 8). In the case of oil and gas, this is because of a sharp pick-up in 2016 after the decline in trade overall in 2015.

There are two interesting features related to the fastest-growing sectors:

  • The first is that imports of footwear are increasing. While it would be disingenuous to associate this with any decline in poverty, it does perhaps hint at an improvement in living standards.
  • The second is that the other three fastest-growing areas are associated either with infrastructure or with processing around oil and gas (chemicals and plastics, for example). This may suggest that infrastructure around the region’s key export sectors are improving.




The challenges ahead

The IMF argued that SSA’s growth would be the slowest in 20 years in its October 2016 report. It noted that policy responses to a slowdown in commodity prices and sluggish economic performance in Asia generally and China in particular have been weak. As a result, the IMF’s forecast for 2016 was just 1.5% GDP growth, rising to 3% in 2017. Sovereign debt remains high and the region remains prone to natural disaster.

The combination of drought, low commodity prices and weak economic performance arguably created a “perfect storm”, particularly for oil-exporting countries. These economies account for a disproportionately large proportion of the region’s trade and, as Figure 9 shows, experienced very slow growth in 2016. The oil importers, although equally dependent on soft commodity prices for their exports, fared relatively well in GDP terms in 2016.

This has to be seen against the backdrop of a sharp slowdown in oil prices, and therefore the value of trade in 2015. The increases in both GDP and trade were particularly marked in 2016 for some countries, particularly Sierra Leone. This reflects the swift pace at which the economies have regained growth, but does not necessarily reflect sustainable growth.




There are big risks attached to these projections. The first is geopolitical risk, in the true sense of the word. Geopolitics is the study of a country or region’s international policy and political power from the perspective of geography, including natural resources, borders and spatial components of trade. Nigeria, for example, is a grouping of six internal regions and some are less risky from the perspective of foreign direct investment than others. The region’s nations do not always speak with one voice and this is clearly a difficulty when it comes to building trade both across the region as well as externally. The African Economic Community itself comprises of eight groupings with differing impact on trade and, indeed, security and politics. While integration in the region remains partial, the scope for trade integration is limited and, as a result perhaps, only 12% of Africa’s trade is with itself.

The other, immediate, risk to SSA is policy changes in the US. China and India are the first and second-largest trading partners of the region, but the US is close in third place and is politically important both in the US to many African Americans
and to African countries as well. Until now, the US has driven the “trade not aid” momentum and Barack Obama’s legacy was the US-Africa Business Forum. While many suggest that the US still needs a policy towards Africa that works in the interests of both, the early weeks of the Donald Trump administration do not suggest that either trade or economic development outside of the US is likely to be a priority. This represents a substantial risk to growth forecasts, partly because of the size of the US aid budget and partly because trade is so important to Africa’s long-term sustainable development.

It is likely that Africa will continue to look to China for investment and trade, but a substantial proportion of that investment is in construction, infrastructure projects and land purchase so that the region remains dependent rather than growing independently. There are opportunities for Europe, which is the largest trading bloc above Asia Pacific and North America. But in spite of a 30% increase in trade between 2015 and 2016 (again a result of a pick-up after the drop in trade in 2015), we are expecting exports to Europe to fall back by over 4%, suggesting that the process will be hard.

How these risks play out will depend on several factors:

  • How the Asia Infrastructure and Investment Bank (AIIB) develops its remit into Africa. During the course of 2016, the intention to expand into Latin America and Africa was made clear and, given that there has not been an explicit statement of policy towards Africa by the US, this is an opportunity for China to step into the breach.
  • The extent to which the US closes down trade relationships with countries outside of America.
  • The performance of SSA’s oil and non-oil-producing nations. Ethiopia has the potential to grow rapidly alongside Angola and Equatorial Guinea. The latter countries are oil producers and Angola is the fastest-growing supplier of oil into China in its own right. Ethiopia, however, has the potential for large-scale agribusiness and also has a far more diversified structure of trade than other Sub-Saharan countries (with the notable exception of South Africa).
  • The impact of elections in Rwanda, Kenya, Liberia, the Democratic Republic of Congo and Angola on economic performance.
  • The need for greater transparency both in data collection and actual regional trade if the region is to overcome challenges around know-your-customer (KYC) and anti-money laundering (AML) concerns in trade finance.


The largest trading nations

The region’s trade fortunes are divergent to say the least. South Africa, Nigeria and Angola dominate as the region’s largest exporters (Figure 10). Some countries, even as large as the Gambia and Rwanda, barely register on the scale compared to the top three, but are important because of their role in some of the region’s Regional Economic Communities. The Gambia has been influenced, for example, by the security stance of the Economic Community of West African States (ECOWAS), while Rwanda has played an influential role in pushing trade between East African Community (EAC) members and ensuring that 20% of the EAC total trade is between members.




Similarly, South Africa and Nigeria dominate imports, but interestingly Ethiopia, Angola and Kenya are third, fourth and fifth: these are bigger and faster-growing economies (Figure 11). Although Angola is still very dependent on oil, Ethiopia’s trade is more diversified. Figures 10 and 11 between them show how much greater imports are than exports by country. This reflects both the strength of demand and the degree of inward investment into the region.




Figure 12, 13 and 14 focus on five of the largest exporters and importers. What is interesting is that commodities dominate even more developed economies like South Africa and the importance of China cannot be understated if more detail behind the data is examined:

  • Angola is a major oil and gas exporter (Figure 12). However, since 2012 its exports in this sector have been declining in the wake of the drop in commodity prices and the slow-down in China, by far its largest export destination, receiving some five times the value of Angola’s exports than India, the next largest destination. To support its exports, Angola imports predominantly electrical and mechanical machinery. Imports are set to grow by around 6% between 2016 and 2017, suggesting that even though oil and gas exports may still continue to fall (we project by around 1%), the infrastructure around it is still being built.
  • Ethiopia’s oil and gas sector (Figure 13) is growing rapidly and while as recently as 2014 coffee and tea were the largest export sectors, the annual growth rate in oil and gas exports of around 12% has made sure that this is now the dominant and fastest-growing sector. Its major export partners are Kuwait and Somalia so it is more dependent on regional destinations than many of its SSA counterparts. Its imports of electrical and mechanical machinery are predominantly from China and set to grow by around 9%. Imports from China are roughly three times higher than imports from the US, its second-largest import partner.
  • Kenya’s largest export sector is coffee and second-largest is live plants (Figure 13). Both are set to grow by around 4% over the next year and go mainly to the US and Uganda. It imports fuels and machinery, which reflects the importance of infrastructure for the country. Machinery imports are set to grow at around 12% this year and, like other countries in the region, come predominantly from China.
  • Nigeria (Figure 12) has been battered by the drop in oil prices, and oil and gas exports (mostly to India and Spain) are set to fall by around 2% this year. Cocoa, its second-largest export, is unlikely to grow at all. Mirroring this, its imports of oil and gas are increasing by 7% but its imports of cars, machinery and other products associated with economic development are not set to grow. China is its major import partner with levels of imports four times that of the US, which is Nigeria’s second-largest import partner.
    South Africa (Figure 14) is known for its exports of precious metals but these are not set to grow over the next year, reflecting potentially sluggish growth in global prices. Its exports of cars, the third-largest sector, are projected to grow by around 4% and this reflects the role of South Africa as a hub for vehicle production. It exports predominantly to China – at four times the rate that it exports to the US. Imports from China are set to remain relatively flat during the course of the year and interestingly, the outlook for imports of machinery does not look optimistic, with a projected drop of nearly 2%.

All of this reinforces the role that commodity prices play for the region’s key exporters, and while Ethiopia and Kenya to some extent have broken out of that cycle, they are far smaller exporters than Angola, Nigeria or South Africa.







The impact of conflict and political risk for the SSA region

China, India and the US are the region’s largest trading partners (Figure 15). Germany exports slightly more into the region than the US does (largely accounted for by automotives) but in terms of total trade, these four nations dominate.




What has been particularly interesting is how sharply trade between India and China and SSA grew immediately after the financial crisis, while trade with the US has actually fallen back somewhat for both exports and imports.

Figures 15 and 16 show export and import trends between SSA and these three biggest trading partners and highlight how important the drop in commodity prices in 2014 and 2015 has been for the region. Exports are predominantly in commodities and raw materials so the collapse in prices devastated the value of trade. Imports from China consist of machinery and electrical equipment, especially telecommunications, while from India they are in the automotive, telecommunications and pharmaceutical sectors.

These are higher-end consumer products so when GDP starts to slow, so too does demand for these products.

2017 will prove to be an interesting year for the trade relationships with these partners. China and India show signs of returning to a growth path and SSA exports and imports are set to increase slightly this year. Projections for the US, however, are less positive and will depend to a large extent on the path that President Trump chooses to take in relation to trade generally and Africa in particular.





The Gambia

Key risks (47.8/100):

  • Some enduring political uncertainty after political crisis in January
  • Widespread poverty and social inequality
  • Big challenges ahead for President Adama Barrow




In size, the Gambia is the smallest mainland country in Africa and has a population of 1.8 million. It suffers from widespread poverty and ranked 175th out of 188 in the United Nations Development Programme in 2015. In late December 2016, a brief political crisis highlighted the interconnected and transnational nature of sub-regional security issues and the commitment of ECOWAS to maintaining stability.

The crisis began when Yahya Jammeh, the authoritarian president of the Gambia, suffered a shock defeat in the presidential election to his political rival, Adama Barrow. After initially accepting the result, he then refused to relinquish power. This move prompted ECOWAS to issue an ultimatum: step down or face military intervention. Jammeh went into exile as ECOWAS troops moved across the border from Senegal and reached the presidential palace in Banjul without any military resistance.

A crisis in the Gambia could have had a spillover effect both politically and economically. ECOWAS’s decisive intervention to remove an authoritarian leader is therefore being seen by many as a demonstration of their capability to ensure peace and stability in West African nations and the region as whole. However, it is important to note that this was an unusual case: ECOWAS did not forcibly remove a dictator, but rather ensured the peaceful transition of power after the victor of a democratic election was prevented from taking office. ECOWAS has a strict legal charter in place to prevent overreach.

Nevertheless, the swift and decisive resolution to the crisis, as well as the unity demonstrated by the ECOWAS nations, is an encouraging sign for regional security. It made a strong statement on leaders clinging to power, not just to those in power in the sub-region, but to African leaders as a whole. The success of the intervention even prompted UN general secretary Antonio Guterres to state his belief that greater unity between nations in the sub-region and the African Union (AU) will help streamline co-operation with the UN.

In terms of the Gambia’s future, for many the transition from a 22-year dictatorship to a conventional five-year presidential system may be strange, but not unwelcome and a wave of optimism follows Barrow into office. However, Jammeh leaves a fractured political infrastructure behind him as well as widespread poverty and economic inequality.

Furthermore, Jammeh allegedly stole nearly US$12mn of state funds as he left, leaving Barrow and his administration in reported “financial distress”. Barrow and the Gambia certainly have a difficult road ahead; nevertheless, the future certainly looks brighter in 2017.



Key risks (53.5/100):

  • Presidential election in August 2017
  • Stable, but little or no political opposition
  • Freedom of press severely limited
  • Increasing tension with DRC and Burundi over refugees




In a 2015 referendum, the people of Rwanda voted overwhelmingly in favour of allowing the current President Paul Kagame to stand for election for a third consecutive term of seven years and two five-year terms thereafter. The amendment made to the constitution as a result of this referendum means that it is not inconceivable that Kagame will remain in power until 2034.

Similar moves by African presidents have led to widespread violence in countries such as Burkina Faso and Burundi. However, this has not been the case in Rwanda. Indeed, Kagame’s leadership has provided Rwanda with relative stability over the years. In 1994, it was Kagame’s campaign with the Rwandan Patriotic Front (RPF) which ultimately brought the genocide of hundreds of thousands of ethnic Tutsis to an end and helped to unify the country. Since his initial presidency in 2000, the economy has improved and poverty and unemployment have declined.

However, for many, the relative stability in Rwanda comes at a price; some see Kagame as something of a despot. He has not allowed any significant political challenges to his rule or that of the RPF. Indeed, many human rights organisations argue that he imprisons dissenters or rivals. Furthermore, the powers of the press are severely limited under the guise that propaganda could fuel further ethnic tensions. As a result, censorship is rife and in its 2016 report, the Press Freedom Index ranked Rwanda 161st in the world.

Without any serious political opposition and zero tolerance of public dissent, the stability we see in Rwanda is not necessarily representative of the true situation. Having said this, it is unlikely Rwanda will see any serious domestic instability on the scale of some of its neighbours. For example, in Burundi, President Pierre Nkurunziza’s decision to run for a third term fuelled violent protests and a mass exodus of around 230,000 people into neighbouring countries. There were fears that the increased tensions with Rwanda and the Democratic Republic of the Congo (DRC) could destabilise the whole East African sub-region; however, this has not been the case so far. Rwanda is nevertheless in a precarious geopolitical position in the Great Lakes region. It is surrounded by unstable states and for this reason the political situations in Burundi and the DRC should be monitored closely.


Dual-use goods and regional risk

The analysis of the Gambia and Rwanda illustrates the complexity of trade within Africa. Regional boundaries are disputed within countries (such as Nigeria) and political processes are not stable in many African nations. This is a product of history and is not the focus of this report. However, it does mean that there is a perception of risk in the region which holds it back, both in terms of how much businesses can extend into Africa, and of course, the extent to which the region’s businesses, which are often very small, can export out of the region.

Dual-use goods trade is a good illustration of how risks in the region might be perceived. Dual-use goods are those that can be used for both civilian and for military purposes and can indicate two things: the persistence of conflict and fraudulent trade.

This is illustrated in Figure 20 which shows how trade in these sectors has escalated, particularly between 2011 and 2012. This spike is consistent with regional conflicts (particularly, the Arab Spring, the Libyan civil war, the Ivorian civil war and the Central African Republic civil war). What it suggests is that dual-use goods supporting conflict in North Africa may have been diverted through SSA nations too.




The decline in value of trade in 2015 reflects a broader drop in global trade caused by the general slowdown and lower commodity prices which, in Africa, created a decrease in trade by 36%. The drop in dual-use goods was markedly lower on average at 24% for exports and 20% for imports. Between 2014 and 2015, special materials imports, which may constitute weapons-making materials, fell by a relatively low amount, 3.2%. Aerospace and propulsion goods dropped by just 0.3% in the same time frame.

Over the whole period since the second Gulf War, trade in dual-use goods has increased substantially: for aerospace at an annualised rate of 20% and for nuclear at 13%, as examples.

These figures are deliberately aggregated and taken for the region as a whole. Dual-use goods are not necessarily hiding crime or covert trade and, as their name suggests, could be entirely for civilian purposes. However, what it does show is two things: first, the extent to which the region’s trade is significantly defined by sectors which present a risk for trade finance practitioners and second, the extent to which this is associated with increasing geopolitical risks and conflict within the region.

Although we know that dual-use goods trade fell back in 2014 and 2015, the poor reporting in these countries means that we do not have available data for 2016.


The region’s hidden trade: why this matters to trade finance

The biggest risk for trade finance practitioners is not knowing exactly what is being traded in a country and with whom. By way of example, South Africa’s second-largest export sector, worth US$20bn, is “Commodities not elsewhere specified”: in other words, it is goods that are not identified by customs officials. This does not mean that the goods are in any sense illegal, nor does it mean there is deliberate fraud. It just means that no one knows what is in the box.

“Hidden trade” is a widespread problem for SSA. Although many nations do not have the undisclosed sectoral data in their top 10 sectors, many substantially under-report their data.

To assess how important this is as a phenomenon, Equant Analytics uses its proprietorial data cleaning and mirroring methodology to find the gaps in the data. The Equant approach looks at “raw” data registered with international bodies like the World Trade Organisation and the United Nations Comtrade. It integrates the publicly available data onto one platform and then looks at each trade flow for each country. In other words, it looks at Kenya’s trade with Germany and Germany’s trade with Kenya and takes an average point of that value weighted in favour of the better reporting country.

Globally, this technique uncovers US$2.1tn of additional trade or 11% of global trade. By way of comparison, within SSA, many of the countries are so poor at reporting data, it is little surprise that the “hidden trade” is US$186bn. In other words, the average divergence between what countries in the region say they are trading and what they are actually trading, is nearly 84% of the region’s trade. Much of this is oil and precious metals trade and, since there is no official data for many years for Angola, Kenya and many others, could potentially be explained just by these omissions (Figure 21).




There are some notable large absentees from the chart – Angola, Tanzania and Kenya, for example. However, what the chart shows is that there is substantial divergence between what countries say they are doing and what they are actually doing. Generally speaking, this divergence is greatest for exports, suggesting that, where there are tariffs or taxes imposed on imports, it is in the authorities’ interests to collect reasonable data. South Africa, for example, has a 67% divergence for exports and an 18% divergence for imports.

The fact that the trade data diverges in this way matters for the region. It suggests a degree of hidden trade which, though by definition, concealed within the data, may indicate greater risk for trade finance providers. The importance of “goods not elsewhere classified” for major regional players suggests that some trade is not being adequately reported.

Individual countries within the region are seeking to improve both trade finance and trade integration. They can greatly improve their prospects of achieving these goals by tightening trade reporting.

Methodological note: The EADR is the percentage difference in any one year between what a country records as its trade with the United Nations and what Equant Analytics finds that it actually trades by mirroring its trade data with each of its individual partners. The mirroring technique is one developed and used by both the World Trade Organisation and the OECD, however, the weighting process, based on an analysis of the reliability of the data in the country or sector pair from the start of the time series, is proprietory to Equant Analytics.


Concluding remarks: Trade finance

Bank-intermediated trade finance in the region, based on trade that originates or passes through the region is an estimated US$249bn. Much of this is for commodities, infrastructure or special project finance and does not flow to the smaller exporters in the region. The level of trade finance into Africa has been declining for a number of years according to the ICC’s 2016 report, not least because the commodity focus of trade in the region means that standard letters of credit – which have been in decline over the last few years – are the appropriate vehicle for trade finance.

These are sectors of trade finance that are especially vulnerable to the strictures of risk and compliance regimes and there are several risks that may inhibit the amount of international trade finance coming in. These are clear from the discussion above:

  • Dependency and diversification risk: Roughly 80% of the region’s trade is in commodities and raw materials. Some of these, such as agricultural products, are very low-value and very prone to volatility both in prices and in climatic conditions. This makes the smaller trading nations vulnerable, but even the larger trading nations of SSA export predominantly commodities and rely on China, India and the US to import higher-end goods for consumers. Without sustained investment in infrastructure, for example as in Ethiopia, it is unlikely that the region will escape this dilemma and this means that the region’s growth is likely to become more associated with economic fortunes elsewhere, particularly in India and China.
  • Geopolitical risks: The biggest risks that the region faces are from the sustained instability and uncertainties in the Middle East and North Africa and the effects of any pending “trade war” between China and the US, which may divert trade from SSA while the two global trade powers focus on domestic interests. Interestingly, SSA does not trade much with North Africa, but the spillover effects of tensions in the region, including any real or perceived link to terrorism, will continue to plague small businesses.
  • “Trade not aid” risk: The region consists of many small and poor countries. There are big divergences in both the amount of trade and the importance of trade to each economy but if the region as a whole is to escape its dependency on aid through trade, then trade finance projects, perhaps with economic development criteria targeted specifically at smaller companies, will be vital. It will also be essential that the region’s economic communities work together, not just for security reasons, but increasingly to support trade. The role of export credit agencies will be key in this, not least because their emphasis in the region is on supporting smaller export businesses.
  • Data risk: Poor data reporting has resulted in “hidden” trade in the region of over US$180bn. Dual-use goods trade has not increased substantially but this may simply be because we have no data for 2016 and the drop from 2014 to 2015 was smaller than that for trade overall, suggesting that these products are a core part of trade in the region. Similarly, unless governments demonstrate that they are becoming stricter on recording trade data, the lack of data in the region will persist as a concern for investors.

SSA has resources and a young population. It is dynamic and the drive for change is powerful. It recovered well from the drop in trade in 2015 and while the IMF downgraded its forecasts for economic growth in the region, the Equant Analytics momentum forecasts for trade in 2017 suggest that there is scope for optimism.




Equant Analytics provides datasets of global trade flows covering the time period 1996 to 2020, with annual and monthly data from January 1996 to the current month. The data cover import and export flows for 200 countries by partner, sector and partner-sector trade routes. The goods dataset uses OECD mirroring techniques to ensure that bilateral trade flows are identical. For example, exports of oil from Saudi Arabia to Germany will have the same value as imports of oil into Germany from Saudi Arabia.

Data refinement methodology

Equant Analytics uses the UN Comtrade statistics as the main source of comprehensive and detailed information on international trade. The UN Comtrade’s database provides information as it is reported by country authorities and does not apply any data integrity verification or missed data filling. Consequently, the raw UN Comtrade dataset presents the following relevant issues:

  • Absent or sparsely reported data for many countries and territories, especially in Africa, Asia and Latin America
  • Large asymmetries in bilateral trade values reported by a pair of countries
  • Partly disclosed information due to statistical confidentiality (relevant especially to the arms trade and sanctions regimes)
  • Classification reporting and conversion issues (UN Comtrade does the conversion between different classifications, based on the most detailed layer of the classification, while some information can only be reported on an aggregated level)
  • Delayed reporting and past information amendments by some countries

In order to build consistent international trade data and increase its coverage on the bilateral level to the extent possible, Equant Analytics shares the trade mirroring approach used, in particular, by the OECD.

This approach uses the information reported by partner countries to resemble and verify the reporter’s data as well as to fix the asymmetries. Mirror statistics are mostly helpful for small and medium-sized trading countries, where there is no reported data available or the data is very sparse. However, in many cases they help to reveal some systematic trade underestimation for some well-established reporters, or information which was not disclosed.

Equant Analytics implemented the trade mirroring algorithm for the UN Comtrade Harmonised System (HS) classification, revision 1996, as follows:

  • Trade mirroring applied for each trade flows between all the reporting countries and territories.
  • Simple trade mirroring is done for cases when the trade is reported only from one of the sides.
  • When a trade is reported by both sides and there is an asymmetry, the common trade value is calculated as a weighted average of the two reported values. The weights are defined in accordance with the country reporting reliability index, developed by Equant Analytics.
  • If the asymmetry is extremely high, the lower value is assumed to be underreported, and the resulting trade value is set to the higher declared figure.
  • The resulting trade values on 2 and 4-digit levels, calculated for the HS 1996 classification are compared with those for HS classification used when reporting (normally country statistic offices report in the most recent classification for the year, and this information is converted to previous versions of HS classifications with certain losses, related to detailed data disclosure). If the difference between the trade value in HS 1996 and HS ‘as reported’ is higher than 40%, the former is assumed to be wrong and the HS ‘as reported’ value is taken as the best estimate.
  • When the whole dataset is processed for a single year, country total imports and exports are calculated for the refined trade values for each commodity group, and the total cumulative import and export values are obtained for each country and the world.

The resulting ‘refined’ dataset appears to be the most complete of the available source data, and features the following attributes:

  • Provides best available estimates of aggregated trade statistics, where they were not reported or significantly distorted
  • Gives an indication of hidden trade flows and the true state of trade relationships, when the ‘refined’ values diverge significantly from the ‘raw’ figures. The amount of hidden trade can be estimated as the difference between the two on a commodity or aggregate levels.
  • Is import/export consistent: each country import value is equal to the counterparty’s export value for every commodity group/classification code, and the global import total converges with
    the export total.

Trade forecast methodology

Equant Analytics employs a momentum-based forecasting algorithm in order to produce trade value forecasts. The method below is generic as applied to a longer time period. The forecasting method features the following concepts:

  • Analyses dynamics of differentiated time series with 10-year historical horizon, applies outliers filtering and absent data filling.
  • A double momentum forecast: the first taking a 10-year moving window and the second a three-year moving window.

Any data or information provided in this publications is for illustrative purposes only and does not represent investment advice or recommendation. All efforts are made to ensure that data and information are accurate and reliable at the time of delivery. Any divergence of the data from other publicly available sources or from material available on Equant Analytics data platforms is due to rounding or use of alternative methodologies. These are made explicit in the text.


*Sub-Saharan Africa is a geographical definition used by the United Nations to cover all countries that lie fully or partially south of the Sahara desert. No political statement is intended by this definition.


Rebecca Harding, CEO, Equant Analytics