covid-19: implications for trade and the role of the afcfta
TRANSCRIPT
Transmission channel 1: Commodity prices
• As the severity of COVID-19 emerged through Feb-Mar, commodity prices plummeted for more than 67% of Africa’s exports, and especially oil
• An improvement from May with many commodities recovering by year end, with notable exception of oil remaining down more than 25%
Source: Based on ITC TradeMap Data (2016-18 average) and FAO and Trading Economics, February 2021
Other 27%
Textiles 4%Gold 7%
Foodstuffs 11%
Metals and ores 12%
Petroleum oils 40%
Composition of Africa’s total exports Prices of Africa’s most important commodities
Metals IndexCotton
Brent crude
FAO Food price index
Gold price
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AlgeriaAngolaEritreaSeychellesMoroccoLibyaSenegalMadagascarBotswanaGabonTunisiaEswatiniNigeriaSouth AfricaGuineaLesothoZimbabweDR CongoSouth SudanMalawiMozambiqueEthiopiaTogoNigerBurundiChadMauritiusCongoMaliCARRwandaUgandaKenyaCabo VerdeSudanLiberiaMauritaniaGambiaGhanaZambiaBeninBurkina FasoCôte d'IvoireNamibiaCameroonTanzania, URDjiboutiSomaliaEgyptSierra Leone
Africa average
Screening arrivals Quarantine arrivals from some or all regionsBan arrivals from some regions Ban on all regions or total border closure3 4No restrictions 20 1
NovJan Feb Mar Apr May Jun Jul Aug Sep Oct
3.4 2.8 2.5 2.1 1.80 0.5 2.0 3.8 3.7 3.7
Transmission channel 2: cross-border movement restrictions
Source: Based on Oxford Coronavirus Government Response Tracker (OxCGRT), November 2020
Impact on Africa’s world and regional exports
• Intra-African trade somewhat more resilient: down 13% vs world exports down 20%, but particularly affected by lockdown border measures
• Compare 2008-09 financial crisis: intra-African exports down 10%, Africa’s world exports down 31%
Source: IMF. 2020. DOTS, accessed November
32%
-4%-8%
-38%-41%
-14%-11%
-7%
-50%
-40%
-30%
-20%
-10%
0%
10%
20%
30%
40%
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov
23% 21%
0%
-3%
-44%
-20%
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7%
-50%
-40%
-30%
-20%
-10%
0%
10%
20%
30%
40%
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov
Africa’s exports to the world, 2020 YoY Intra-African exports, 2020 YoY
Case example: Uganda
• Informal cross-border trade collapses for Uganda in line with border restrictions enacted in February-March
Source: Bank of Uganda
Uganda informal cross-border exports, quarterly (US$ millions)
2019-01 2019-02 2019-03 2019-04 2020-01 2020-02 2020-03Informal trade 126.23 126.2 129.9 149.5 130.5 2.7 3.3
0
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160
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-50%
0%
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100%
150%
200%
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Gold accounts for at least 35% of exports
Petroleum oil accounts for at least 35% of exports
Not all African countries have had the same impact…
Source: IMF. 2020. DOTS, accessed November
Individual African countries, change in exports, April to August, YoY
Staple food crops
• Moderate rises of 10-15% for global staple food prices; some export restrictions and supply chain disruptions in early 2020 (wheat from Russia and rice from India particularly)
• Food crisis of 2008 largely averted: carry-over stocks are high, the prospects for the next crop are good and, instead of an expansion of demand through a burgeoning biofuels sector, demand is likely to contract with energy prices being low (source, FAO)
Selected staple crops, international price indices, December 2005 to November 2020
0
20
40
60
80
100
120
140
160
180
200
Dec-
05
May
-06
Oct
-06
Mar
-07
Aug-
07
Jan-
08
Jun-
08
Nov
-08
Apr-
09
Sep-
09
Feb-
10
Jul-1
0
Dec-
10
May
-11
Oct
-11
Mar
-12
Aug-
12
Jan-
13
Jun-
13
Nov
-13
Apr-
14
Sep-
14
Feb-
15
Jul-1
5
Dec-
15
May
-16
Oct
-16
Mar
-17
Aug-
17
Jan-
18
Jun-
18
Nov
-18
Apr-
19
Sep-
19
Feb-
20
Jul-2
0
Rice sorghum Wheat Maize
2008 global food crisis Covid-19 crisis
Source: IndexMundi.com
• High frequency data indicating digital uptake accelerated by Covid-19
• Not without challenges: • Low (but rapidly
rising) internet penetration rate –28%
• Electricity – 31 African countries among the bottom 50 in the Getting electricity subcategory of the WB Doing business index 2019
• Validity for AfCFTA e-commerce protocol
Selected digital growth statistics, 2020 H1, YoY
Indications of accelerated digitalization in Africa
12%
33%
91%
52%
17%
42%
Customers
Nigerian data consumption
Total payment value
Jumia Pay transactions
Orders
Active customers
M-P
esa
MTN
Jum
ia
Sources: Jumia Financial Statements, MTN Financial Statements, M-Pesa Financial Report 2020
Building forward better: role of the AfCFTA
Diversify Africa’s trade away from commodity dependenceoil now accounts for as much as 40% of Africa’s exports
Drive industrialization estimated gains to industry of $36bn - $43bn with the
AfCFTA
Ease and simplify intra-African tradeCustoms Transactions include 20-30 different parties, 40documents, 200 data elements
Transition for the digital economycovid-19 estimated to have accelerated digitalization by
about 7 years globally
Boosting African industrial trade
• Intra-African exports would increase the most for industrial products; with gains ranging between around 25 per cent (or US$ 36.1 billion) and almost 30 per cent (or US$ 43.3 billion) under low ambition scenario and high ambition scenario
• Largest increases in exports of vehicles and transport equipment, energy, metals, machinery, chemical products, sugar, other food products, wood and paper, and textiles
Change in intra-African exports by main sectors, as compared to the baseline without AfCFTA in place - 2040 - US$ bn (various scenarios)
9.5 12.5 16.84.5
8.89.0
36.1
41.143.3
0.0
10.0
20.0
30.0
40.0
50.0
60.0
70.0
Low ambition scenario Intermediate ambition scenario High ambition scenario
US$
bill
ion
Agriculture and food Energy and mining Industry
0123456789
10
Vehiclesand
transportequipment
Energy Metals Machinery Chemicalproducts
Sugar Other foodproducts
Wood andpaper
Milk anddairy
products
Textile
Low ambition scenario Intermediate ambition scenario High ambition scenario
Export gains by sector
• Largest increases in exports of vehicles and transport equipment, energy, metals, machinery, chemical products, sugar, other food products, wood and paper, milk and dairy, and textiles.
Top 10 gains in intra-African exports by sectors, as compared to the baseline without AfCFTA in place - 2040 - US$ bn (various scenarios)
19.1%
20.3%
20.0%
5.3%
17.5%
14.1%
75.6%
62.2%
66.0%
0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
African LDCs
African non-LDCs
Africa total
Agriculture and food Energy and mining Industry
Export gains by level of development
• African LDCs are estimated to have the greatest forecast boost to industrial exports
Proportion of total gains in Africa’s (non-LDCs vs. LDCs) exports to Africa, by main sectors, under intermediate ambition scenario (as compared to baseline) – in 2040
We asked firms how the AfCFTA could help cross-border e-commerce
• Indications that harmonized rules and regulations would help• Emergence of ‘trust’ as a key issue: consumer protection regulations could help• Other big ‘behind the scenes’ issues include: data governance, IPR, liberalization of goods
and services sectors important for e-commerce • African Trade Exchange (ATEX): ECA/Afreximbank initiative to facilitate AfCFTA trade
through a B2B e-commerce platform integrating AfCFTA provisions
Source: ECA. Forthcoming. E-commerce in Preferential Trade Agreements: Implications for African firms and the AfCFTA
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6
12
15
16
17
0 2 4 6 8 10 12 14 16 18
No data localisation requirements
No local presence requirements in other EAC countries
Harmonised data standards and privacy laws
Harmonised laws on electronic trade, digital signaturesand e-transactions
Conumer protection regulations for building digital trust
Harmonised laws for taxation
Number of respondents