GTA, playing a crucial role in Intra-Trade in Africa

by | Dec 1, 2022 | GTA News Department | 0 comments

Africa is “the last frontier on earth”. 

In recent years, companies from various countries, have expanded into Africa. Companies are also emerging in the fields of “technology” and “innovation,” just like in developed countries, and expectations are rising for business in Africa in the future. We will divide it into three parts and tell you about the African consumer market and intra-regional trade. The first part introduces the African economy and trade.

GTA made a current study about African consumers after studying the African market and intra-regional trade research.

Africa’s Population Trends and Economy: By 2050, both population and economy will continue to grow the fastest in the world. The population of the entire African continent is expected to reach approximately 2.5 billion in 2050 and approximately 4.4 billion in 2100. Developed countries such as Europe and the United States are trending toward population decline, and the population in the Asian region is also expected to decline by 2050. Africa is expected to have a greater impact on the world economy in the future, and we have high expectations for it as the last huge market.

Exports and imports in Africa: Exports are dependent on resources, making them highly susceptible to the impact of the global economy

The main means of earning foreign currency in Africa is exporting mineral resources such as crude oil and ore that are mined in the country to developed countries. Looking at the export items of all African countries to the world (outside Africa) as of 2016, mineral fuels account for 35.2%, precious stones 12.7%, ores 4.0%, and mineral resources account for more than 50% of the total.

Foreign currency earned from exports is used to import electrical equipment, automobiles, and grains.

The reason for the large amount of imports of final processed products is the delay in the industry, such as the fact that industrial products cannot be produced within the region in order to produce enough to cover the entire population of Africa.

If the focus is on resources that are easily affected by market conditions in exports, the balance of trade will be influenced by market conditions. In the event of a pandemic such as COVID-19 or a global recession, resource prices will fall, causing a large trade deficit for Africa as a whole and destabilizing the economy as a whole.

governments are including industrialization in their economic development plans to break away from dependence on resources.

In addition, as a characteristic of African trade, there are many patterns of exporting resources such as crude oil and rare metals; there are moves to promote intra-African trade.

Current state of intra-African trade: less intra-regional trade than other world regions

Intra-African trade tends to be extremely low compared to other regions. According to 2018 data {UNCTAD}, intra-African trade is not active, with 15.86% of total exports within Africa, 68.71% in other regions of Europe, 59.99% in Asia, and 30.16% in North America.

So why is intra-African trade so low?

One reason for this is the nature of African trade.

In Africa, there are many “resource-producing countries” that export resources such as petroleum and rare metals and import final products. For example, Nigeria, which boasts the largest GDP in Africa, relies on oil for 80% of its total exports. Furthermore, in the Democratic Republic of the Congo, sometimes referred to as a “treasury of natural resources,” petroleum and mineral resources account for as much as 90% of the country’s total exports.

On the other hand, when it comes to imports, there is a characteristic of importing final processed products from countries such as former suzerain countries, China, and Europe.

in Africa, due to the delay in economic development, the process of processing raw materials that require technology into final products is often not done domestically.