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African businesses thriving with advancements in trade finance opportunities.

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TLDR:

  • The African Continental Free Trade Area (AfCFTA) is set to drive intra-Africa trade and accelerate sustainable economic development.
  • West Africa is projected to experience robust intra-regional trade, driven by agricultural products such as shea butter and cocoa beans.
  • East Africa will benefit from large-scale cross-border infrastructure developments, such as the Lapsset Corridor Project.
  • Africa’s integration with global value chains will help create value-add from its rich natural endowments and reduce dependency on imports.
  • Digitalization in trade finance will benefit SMEs by reducing time and monetary costs associated with obtaining supply chain financing.
  • Technology will play a pivotal role in Africa’s trade future, allowing for more efficient customs and border procedures and increasing e-commerce opportunities.

The African Continental Free Trade Area (AfCFTA) is a critical imperative for delivering cross-continental cooperation, development, and progress. Once fully implemented, AfCFTA will enable and drive intra-Africa trade and accelerate sustainable economic development. AfCFTA is the world’s largest free-trade area, connecting 1.3 billion people with a combined GDP of $3 trillion. By 2035, total African exports are expected to reach close to $1 trillion, and a well-implemented AfCFTA can boost this figure even higher. Intra-Africa trade is set to grow 3.9% per annum and reach $140 billion by 2035. West Africa is projected to experience robust intra-regional trade with a projected growth of 13.3% annually over the next decade, driven by agricultural products such as shea butter and cocoa beans. East Africa will also benefit from large-scale cross-border infrastructure developments, such as the Lapsset Corridor Project connecting Ethiopia, Kenya, and South Sudan.

Creating greater value-add from Africa’s rich natural endowments is a key challenge. AfCFTA aims to build up value chains across the continent, allowing Africa’s markets to internalize value-creating activities, create wealth and quality employment opportunities, and reduce import dependency for essentials such as pharmaceutical and agricultural products. Foreign direct investment inflows are vital to achieving this objective and facilitating knowledge spill-over and tacit learnings. Digitalization in trade finance is a key development that will benefit SMEs – the backbone of Africa’s economy. Digital supply chain finance solutions could help democratize access to trade finance by reducing time and monetary costs associated with obtaining supply chain financing. Technology will play a pivotal role in Africa’s trade future, allowing for more efficient customs and border procedures, increasing transparency, and boosting cross-border vendor-buyer connectivity. Digital technologies can also help alleviate infrastructural barriers and provide access to a larger customer base through e-commerce platforms. Africa’s e-commerce market is expected to post double-digit growth and surpass half a billion users by 2025.

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