Global trade expected to contract by 9.2% this year, having fallen by 2.9% in 2019; Africa’s share of global trade was 2.7% in 2019, below the 4% figure of the 1970s; informal cross-border trade which is a key component of intra-African trade is wide-spread in its composition; the African Trade Report estimates that in Eastern African ICBT is very high and could be worth as much as 80% of value of formal trade in some countries; South Africa was the biggest contributor to Intra-African trade, accounting for 23% of total trade, in 2019.

The biggest jump came from DRC which became the second intra-African trading nation, accounting for 10.4% of total intra-African trade and Nigeria was third with 7%; continent remains overly dependent on export of raw commodities, with oil and gas accounting for over 37% of total exports; Afreximbank’s. African Commodity Index is down 20% year on year, but shows a V-shaped recovery from the lows of April.

Afreximbank released yesterday its annual African Trade Report (ATR). This year’s report examined trade and economic developments in Africa in 2019, a year dominated by trade wars and escalating tariffs that resulted in a sharp deceleration of global trade growth. This has been compounded by Covid-19, and as a result, following a fall of 2.9% last year, global trade is expected to shrink by 9.2% in 2020.

The ATR conducted an extensive study of informal cross-border trade (ICBT), the first attempt at measuring in a detailed manner the size and composition of informal trade. Despite regional variations, the report highlighted the importance of ICBT for generating employment and income. The report estimates that it serves as a source of income for about 43% of Africa’s population and is dominated by women. In Southern Africa (the SADC block), female traders account for about 70% of ICBT. In West Africa, food and agriculture products accounted for 30% of intra-regional trade.

Commenting on the report, Prof. Benedict Oramah, President of Afreximbank, said that: “Even though ICBT accounts for a significant proportion of domestic absorption and has become a major source of income for consumption smoothing, its contribution to GDP is hardly recognized.”

By bringing an evidence-based approach to measuring ICBT, the report highlights the areas that can be targeted to grow intra-African trade and transition ICBT to formality. For example, removing technical and non-tariff barriers to trade, as well as simplifying processes, increasing access to finance and creating payment systems that draw on digitalization to mitigate risks will help traders scale and move up the value chain. ICBT is currently a cash-only business.

Many recommendations come out of the report which will become even more relevant with the advent of the Africa Continental Free Trade Agreement (AfCFTA). Afreximbank, for example, is rolling out its Pan-African Payments and Settlements System (PAPSS) to enable buyers and sellers to trade in local currency, as well as reducing the security risk associated with trading in cash.

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