Africa’s trade potential for resilience in the face of unprecedented shocks
Global trade has recently experienced unprecedented shocks as the world grapples with the consequences of Covid-19, protracted geopolitical conflicts, and rising energy costs.
According to the International Monetary Fund (IMF), African nations were some of the hardest hit by the food crisis caused by protectionist policies implemented by exporters after the Ukraine-Russia conflict began. As a net food importer, the continent saw specific commodity prices rise by as much as 70% in some nations, with the IMF reporting that global food commodity prices rose by 23.1% in 2021.
Furthermore, according to the World Bank, global oil prices surged as several large oil companies stopped operations in Russia causing a demand increase for oil and gas coming from the Middle East and OPEC.
What’s the Africa global trade situation?
Despite economic shocks, the continent is still a source of several key global trade commodities that can support trade resilience. Africa, according to the United Nations, is home to 30% of the world’s mineral reserves, 12% of its oil, and 8% of natural gas. As home to 65% of the world’s arable land and 10% of renewable fresh water, Africa has also been a significant agricultural producer exporting fresh produce to the Middle East, Europe, and beyond.
Oil and Gas
Significant portions of West Africa, including Nigeria, Togo, Cameroon, Equatorial Guinea, and Gabon, North Africa, including Libya, Egypt, Chad, and even Angola in Southern Africa, and East Africa, including South Sudan, contribute significantly to the continent's oil production and exports. Despite being among the lowest since 2000, Africa is expected to produce an average of 7.3 million barrels per day in 2021, according to Statista.
Oil and gas exports have proven to be shock resistant as a year-round commodity in recent years. Despite falling demand in 2020 because of travel restrictions, oil exports have increased significantly since then as the world has returned to normal cross-border movement.
The potential for growth in African oil exporters with seaports remains strong throughout the year and beyond, as they can continue to supply their commodity to other continents such as Europe, which has been experiencing oil and gas shortages due to standoffs caused by a combination of sanctions and protectionist measures.
Precious Metals and Minerals
With increasing pressure to include metals in the sanctions against Russia, African precious metals producers are poised for rapid growth as markets seek new sources to fill supply gaps. Gold, diamond, cobalt, bauxite, iron ore, and copper are abundant on the continent, with West African nations such as Ghana and Mauritania, Southern African nations such as Namibia, Mozambique, and South Africa, and Central African mining powerhouses such as the Democratic Republic of the Congo producing some of the most sought-after precious metals and minerals.
Global markets are shifting, and Africa is increasingly being considered as a source of minerals that will power the future. For example, increased demand for lithium, cobalt, and nickel is increasing demand for lithium, cobalt, and nickel, both of which are abundant on the continent.
According to the United Nations, Africa holds 40% of the world's gold and up to 90% of the world's platinum and chromium reserves. According to Reportlinker.com, the former is commonly used in the manufacture of catalytic converters for vehicles with internal combustion engines, a market that is expected to be worth 370,693,000 by 2030. Chromium is essential in the production of stainless steel, a common household commodity found in almost every home worldwide.
Agricultural commodities
Agriculture is one of Africa’s main economic sectors. According to a report by McKinsey, the sector makes up 23% of the continent’s GDP, employs nearly 60% of the work force in sub-Saharan Africa, and accounts for between USD 35 billion and USD 40 billion in exports from the continent annually.
The continent exports a variety of cash crops. East Africa, with Ethiopia and Kenya leading in coffee production, and the latter also playing a significant role in the fresh cut flower and tea markets, has a significant role to play in the export market. Coffee, cocoa, oil palm, and rubber are among the popular commodities leaving West Africa for global markets, while citrus, table grapes, and some deciduous fruits are the main agricultural exports from Southern Africa.
Supply chain resilience in Africa: the need for reliable logistics
While Africa has an abundance of natural resources that can propel the continent to economic prosperity, the potential for her commodities to catalyse economic resilience is heavily reliant on agile supply chains that can quickly respond to global demand and supply shocks. To get African goods into global markets, producers will always need dependable freight forwarding and integrated logistics partners who are as resilient and resistant to shocks as they are.
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