As the clamour for an economic transformation in Africa intensifies, the focus of attention has shifted towards the continent’s two pivotal sectors: agriculture and manufacturing, which are poised to drive the growth of its export market, writes Abdul-Hafeez O. Odusanya, managing director of AFEX Fair Trade Uganda.


In recent years, many African countries have seized new opportunities and grown their exports to the world. Take Ghana, for example, famed for its rich cocoa production. The country has been impressing chocolate makers worldwide with its delicious cocoa beans, delighting the taste buds of millions across the world. According to Statista, Ghana and Ivory Coast are by far the two largest producers of cocoa, accounting for more than 50% of the world’s supply. Likewise, Kenya has been flourishing in the flower export business, with its exotic blossoms reaching floral shops in Europe and beyond. These success stories showcase the continent’s growing efforts to diversify its exports and leverage its abundant natural resources.

However, there are still notable gaps in Africa’s current export landscape. The continent remains heavily reliant on exporting primary commodities like raw materials, leaving it vulnerable to fluctuations in global demand and prices.

According to the United Nations Conference on Trade and Development (UNCTAD), in 2016-18, Africa imported about 85% of its food from outside the continent, amounting to US$35bn, and is expected to reach US$110bn by 2025.

This over-dependence on specific commodities makes Africa’s export market susceptible to external shocks and hinders its ability to fully capitalise on its economic potential. Moreover, inadequate infrastructure, bureaucratic barriers and logistical challenges continue to impede the seamless flow of goods, impeding Africa’s competitiveness in the global market.


Unlocking trade potential through AfCFTA and public-private sector engagement

In 2020, Africa’s merchandise exports experienced an 8.5% drop, while imports fell by 13.2%, as reported by the World Trade Organization. Despite the multi-faceted challenges, there are glimmers of hope across Africa’s trade spectrum. The African Continental Free Trade Area (AfCFTA) landmark agreement is opening doors for the region to revitalise its trade potential. UNCTAD projects that the AfCFTA could boost intra-African trade by 15-25% by 2040, resulting in welfare gains of US$16.1bn for the continent. Essential to this growth will be public-private sector engagement (PSE) which is a key strategy to support the implementation and success of the AfCFTA. Until organisations stop working in silos and start collaborating effectively, any efforts to drive transformation will be severely hampered.

In context, the African private sector produces over 80% of the total output, invests two-thirds of the total capital, and lends three-fourths of the total credit. It also employs about 90% of the working-age population. Most of the private sector consists of small and medium-sized enterprises (SMEs), which are the main drivers of economic growth in Africa. SMEs make up over 90% of all businesses in Africa and create 63% of jobs in low-income countries. They also contribute to over 50% of gross domestic product (GDP), according to a report by the UN Economic Commission for Africa.

In many developing countries, the private sector plays a crucial role in providing goods and services for export markets, thereby generating foreign exchange and helping SMEs to increase their production capacity, achieve economies of scale and improve their competitiveness. By promoting more collaboration between the private and public sectors of the economy, we can unleash the potential of Africa’s export market.


Fostering collaborative efforts for sustainable export market growth

While debates continue over the best path to industrial growth on the continent, a key – often overlooked – point is that of collaboration, particularly across public and private sectors whose activities often intersect. Where governments are implementing policy change, it is often with the direct support and involvement of private institutions. Civil society also contributes by raising awareness and influencing the private sector to take a more active stance on developmental issues. A resilient African export market will require this collaboration to promote policy coherence and effective implementation of trade-related measures.

Governments can work closely with private sector stakeholders to design and implement policies that address their specific needs. The market alone cannot allocate resources optimally, and the state alone cannot fix the market failures. However, when the state and business work together effectively, they can overcome these challenges and reduce policy uncertainty. This cooperation can also help them to allocate scarce resources more efficiently, implement better trade policies and regulations, remove major trade barriers and create wealth more effectively.

To achieve this goal, data would serve as a major driver. Market information systems will indicate the status of the market, showing volumes of food commodities available, prevailing market prices for crop production, cross-border trade, input supply and so on. These key indicators can drive regional trade and increase investors’ confidence.

On the other hand, there needs to be a shift in how we think about food systems, particularly the role that farmers and other parts of the agri value chain play. This is another area where PSE can make a difference in boosting productivity and innovation. We need to move up in the value chain from dealing with raw materials to processing, in order to sell a higher-value product. This is achieved by supporting standardisation and working with farmers to upgrade the quality of food produced.

According to the Organization for Economic Co-operation and Development, PSE transfers can help farmers improve their competitiveness, diversify their income sources, adopt new technologies and enhance their environmental performance. However, PSE transfers should be well-targeted, transparent and consistent with broader policy objectives. In Africa, PSE transfers are relatively low compared to other regions, accounting for only 3% of gross farm receipts in 2019. This suggests that there is room for increasing public support for agriculture in a way that fosters sustainable and inclusive development.

Some examples of successful PSE interventions in Africa include the Comprehensive Africa Agriculture Development Programme, which aims to increase agricultural growth and reduce poverty and hunger, and the Alliance for a Green Revolution in Africa, which supports smallholder farmers to access quality seeds, fertilisers, markets and finance.

Long-term, the continent needs a dualistic system to encourage small-scale producers as well as foster industrialisation of production. Specialty exports such as cashew and cocoa help employment but achieving food security for Africa requires raising the output of staple foods towards industrial levels.

Currently, the most significant roadblock to trade is its lack of infrastructure. Poor road networks and dated storage facilities hinder trade efficiency and prevent the continent from fully tapping into its trade potential. Transportation is expensive, too. In some nations, these expenses make up 35% of the value of exports and 45% of the value of imports. Moreover, Africa’s high tariffs discourage investments in supply chains, resulting in rises in the costs borne by end consumers.

To address these challenges, Africa needs to invest more in its infrastructure and reduce trade barriers. According to a recent report by UNCTAD, improving infrastructure and connectivity could increase intra-African trade by 33% and reduce trade costs by 16%. Furthermore, implementing the AfCFTA could boost intra-African trade by 52% by 2022 and create a market of 1.2 billion people with a combined GDP of US$2.5tn. Therefore, enhancing infrastructure and trade integration could unleash Africa’s economic potential and foster inclusive growth.

Governments can join forces with private companies to invest in upgrading transportation networks, establish new rail routes and develop industrial parks to modernise ports and customs processes. By doing so they can effectively reduce trade obstacles and enable the smooth movement of goods and services across the continent.

This investment would not only bring advantages to businesses but also have a beneficial effect on local communities, by generating employment opportunities and fostering economic growth.


In summary…

Change is necessary for Africa’s supply chain to not only survive but remain resilient in the long term. Growth does not happen by chance; it requires sustained effort over time, sound structural reforms and well-targeted public and private investments, within a stable and planned macroeconomic framework.

PSE can help Africa become a global supply chain player by turning vulnerabilities into strengths. However, to fully harness these opportunities, PSE must work towards reducing tariff barriers, enhancing productive capacities and promoting regional integration. With these strategies in place, Africa can chart a course to future exporting success.