The Future of Trade in Africa – Ayodeji Balogun

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The Future of Trade in Africa – Ayodeji Balogun

AO
Abimbola OtepolaJune 15, 2023

Africa is a continent of immense potential and opportunities. With a population of 1.3 billion people and a combined GDP of $2.6 trillion, it is the world’s second-largest and second-most-populous continent. However, Africa’s trade performance is far from its full potential.

Currently, Intra-Africa trade accounts for 14.4 percent of total African export, but forecasts show the AfCFTA could boost this by about 33 percent, a report by UNCTAD says.

We sat down with our Group Chief Executive Officer, Ayodeji Balogun to get his expert perspective on how to foster cross-border trade, the transformative power of AfCFTA in boosting regional trade, and catch a glimpse of the future of trade in Africa.

Let’s dive in!

How do you envision the African Continental Free Trade Area (AfCFTA) transforming agricultural trade within Africa, and what opportunities and challenges will arise for smallholder farmers and agribusinesses?

Firstly, The AfCFTA agreement creates a strategy for how Africa wants to trade within itself and with the rest of the world. It helps to standardize policy and harmonize tariff and non-tariff-related issues across African countries, facilitating seamless business trade and exchange of goods and services. It focuses on Africa's primary interest areas, particularly agricultural commodities, which are a valuable asset class on the continent.

Africa possesses competitive and comparative advantages in agricultural commodities and the AfCFTA agreement ushers in a new era for trading these commodities over the next 15 to 50 years.

However, Africa faces infrastructure challenges due to its vast landmass with low infrastructure terrain. Transporting goods across long distances, such as from Ethiopia to Nigeria or Senegal to Morocco, poses difficulties across different terrains and climates. Innovative solutions are needed to address this problem.

The construction of belt roads presents opportunities for trade growth in Africa. Leaders should invest in this infrastructure and leverage private capital to enhance its viability. It is crucial to shift our mindset from mere ownership and construction to finding efficient ways of operation and maintenance in a sustainable manner.

Intra-Africa trade in agricultural commodities has great untapped potential. What measures should African countries take to boost trade among themselves?

We first have to own the AfCFTA agreement as a continent. Our leaders have to see it as a vision, see it as a gift that they will give to the next generation of Africans. In my view, the first leaders of Africa in the 50s and the 60s gave us independence. The next gift we would give to the continent is to create an economic bloc that is strong and inclusive, fosters job creation and drives wealth creation across the continent in an inclusive manner.

There is a lot of information available on the agreement and its implications, such as the rules of origin, the tariff and non-tariff barriers to trade, and the best practices to follow. However, what is not well communicated is the shared benefit for all of us as a continent. We cannot have a double standard where we sign up for this agreement but also protect our local industries. We have to take a long-term perspective and see how we can all gain from this economic bloc. We have to commit to it and reap the rewards together.

Technology and innovation have the potential to revolutionize agriculture in Africa. In what ways do you see technological advancements transforming the agricultural trade landscape on the continent?

To build a sustainable food system and agro-industrial growth strategy, Africa must prioritize genetics, and allow investment to flow towards Research and Development. Currently, the West dominates agricultural agenda-setting, limiting Africa to food self-sufficiency at best. To optimize Africa's vast untapped arable land and become a global leader in feeding the world, we must leverage our genetic diversity and drive innovation through science and technology in agriculture.

Improving productivity is essential, as Africa's current agricultural output is only one-third of the global average. Simply intensifying fertilizer use is not enough; we need comprehensive solutions. This involves reforming seeds, transforming agricultural funding, reviewing land tenure systems, and creating an environment conducive to attracting capital for commodity production.

Market systems also play a vital role, and the AfCFTA agreement emphasizes trade. Establishing inclusive, transformative, and efficient Commodities Exchanges across Africa can facilitate the transition from production to trade, processing, and value addition. These exchanges will support the AfCFTA agreement and enhance agricultural commodity trading.

What agricultural commodities do you believe hold the greatest potential for export from regional markets to global markets in the coming years? How can African countries capitalize on these opportunities?

To begin with, we should acknowledge and appreciate the progress and transformation that countries like Ethiopia and Cote d'Ivoire have made in their commodities sectors, enhancing value chains, attracting investment, and increasing production and processing capacities. Cote d'Ivoire has doubled cocoa output and processing in the past decade, while Tanzania has excelled in cashew production and trade.

One of the commodities that has great potential for value and growth in our continent is horticulture given the increasing global demand for environmentally conscious and natural products. Africa can lead this market alongside others like East African avocados and Rwanda’s specialty coffee. The grain sector also has the potential for cross-border trade. Food security in Africa needs to balance surplus and deficit across regions. Commodities Exchanges help with this by providing information and market adjustments.

Smallholder farmers form a significant portion of Africa’s agricultural sector. How can they be empowered to participate more effectively in regional and global agricultural trade?

We need to link smallholder farmers better. They need an identity as economic actors. For example, in Nigeria, many farmers lack identity and finance. They cannot get paid remotely or save money. They cannot improve. We need this soft infrastructure across Africa to give everyone a fair chance at prosperity.

We also need to rethink production and make it more efficient and profitable for farmers. The current system makes them poorer and does not help food security or competitiveness. We need a new system that creates wealth from producers and adds value, processing, and quality to our food.

When you think of the future of trade in Africa, how do you picture it?

When I think of the future of trade, I love to stand on a ship looking at the continent and think through how many lives have been touched, how much sweat has gone into producing the commodities, and how much wealth it has also created.

I like to think of the power of the plate of food and the transformative effect it has from the farmer producing the rice to the maize and soybean getting to the chicken to the milk that goes into the drink, to the leaves of tea and the grain farms and how all of that just comes together and how many lives it impacts.

As consumers, as Africans, we do have power, we are major stakeholders in Africa’s food systems and our choices will reflect in whether our food system will be inclusive or whether our food system will drive us to prosperity, or whether it will be impactful.

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