African trade boom fueled by technology & trade pacts: DP World
28% expect sub-Saharan Africa to be their largest export market this year, up from 19% of respondents the previous year
Africa’s business leaders anticipate growth in 2024, investing in technology to increase efficiency and boost resilience amid economic, geopolitical and climate instability, revealed in the latest Trade in Transition study, commissioned by DP World and led by Economist Impact.
While the study forecasts a booming African trade landscape in 2024 with senior executives predicting a surge in intra-African trade, fueled by new trade pacts and tech investments, African firms remain cautious as inflationary pressures, economic uncertainty and political instability threaten to impact growth.
Over 26% of the executives surveyed identified heightened inflation and economic uncertainty as the primary limitations on expanding imports, a 7% increase on the previous year. Additionally, nearly 20% pointed to political instability in crucial source markets as their primary constraint, up 4% year-on-year.
Unveiled at the World Economic Forum in Davos, the study captures the perspectives of African trade experts and senior executives during a period of unprecedented transformation, as heightened global geopolitical risk, climate change and significant advancements in technologies create both challenges and opportunities.
African business poised for intra-African trade growth
In light of the African Continental Free Trade Area (AfCFTA), executives across the continent expect intra-regional trade to grow in 2024. Some 28% of the surveyed business leaders expect sub-Saharan Africa to be their largest export market this year, up from 19% of respondents the previous year. Only Europe (38%) and North America (34%) rank higher in the list of regions expected to provide the greatest contribution in terms of export sales.
Almost three-quarters agreed that government actions, like enhancing regional trade agreements, have positively impacted their supply chain strategies, the study added. This highlights governments' significant role in creating a favourable environment for business growth and trade expansion.
Technology set to increase resilience and efficiency
In the face of persistent challenges posed by systemic issues and political instability, businesses across Africa are strategically embracing technology as a transformative investment.
The study further noted that while the AfCFTA should help to reduce a significant amount of tariff barriers, long transport times and high costs due to significant border control and long waiting times, complex customs and bureaucracy remain a concern. High transport costs were cited as the second biggest challenge facing businesses when increasing both their import and export sales.
In response, businesses in Africa are increasingly investing in technology to adapt. 38% of executives identified using digital tools for improved inventory management as the primary strategy to reduce overall trade and supply chain costs in Africa. Further, 45% of executives plan to implement advanced automation and robotics to gain real-time insights and forecast disruptions in their supply chains in 2024.
This aligns with global findings, which reveal that executives across all sectors and regions found technologies that improve supply chain efficiency and resilience to be, by far, the main source of optimism for the future of global trade.
Mohammed Akoojee, CEO & managing director, sub-Saharan Africa, DP World said: “Regional trade agreements, exemplified by AfCFTA, stand out as powerful tools to address the intricate challenges within the region’s trade and supply chain infrastructure. The nine-percentage-point increase in the proportion of Africa-based executives projecting that sub-Saharan Africa will be their biggest export market is a case in point. The synergy of public and private sector partnerships to enhance investment, strengthened trade agreements and technological advancements also positions the continent for growth and resilience.”
John Ferguson, global lead, new globalisation, Economist Impact, added: “Through such regional cooperation, economies can leverage scale, enhance competitiveness, and attract significant investment across the continent. The report also reflects a profound optimism regarding technologies’ potential to address systemic and economic challenges, showcasing adaptability and confidence in its role in enhancing supply chain efficiency and resilience.”