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    Thursday, July 4, 2024

    ITC-Afreximbank Research: Potential for $1.8 Billion in Annual Africa-Caribbean Trade by 2028

    Olufemi  Adeyemi 

    potential for trade between Africa and the Caribbean could reach $1.8 billion by 2028, presenting significant opportunities for economic growth and collaboration between the two regions. 

    Prof. Benedict Oramah, President and Chairman of Board of Directors of Afreximbank stresses a point as International Trade Centre (ITC) Executive Director, Pamela Coke-Hamilton (right) listens. The two leaders spoke in Nassau, the Bahamas as part of the release of preliminary findings of the ITC-Afreximbank ‘Strengthening AfriCaribbean Trade and Investment’ project.

    The objective of the project is to boost trade and investment in Africa and the Caribbean, and to enhance cooperation between the private sectors of the two regions .

    According to a new study conducted by the International Trade Centre (ITC) and the African Export-Import Bank (Afreximbank), trade between Africa and the Caribbean has the potential to reach $1.8 billion annually by 2028. This growth can be achieved by prioritizing value addition, trade facilitation, and improved logistics.

    The present bilateral trade in goods between Africa and the Caribbean, valued at $729 million, excludes tobacco, arms/ammunition, and fossil fuels.

    During the 31st Afreximbank Annual Meetings and the third AfriCaribbean Trade and Investment Forum (ACTIF) in Nassau, the Bahamas, the ITC-Afreximbank ‘Strengthening AfriCaribbean Trade and Investment’ project released its initial findings. The study indicates that the travel and transportation industries have the greatest potential to contribute to this growth, accounting for two-thirds of the potential ‘services trade’ between the two regions.

    Our most recent research indicates that the most significant sectors in the goods segment are minerals and metals, wood, paper, rubber, and plastics, as well as processed food and animal feed.

    The primary goal of this initiative is to foster increased trade and investment opportunities between Africa and the Caribbean, while simultaneously strengthening collaborative efforts within the private sectors of both regions.

    Following this launch, Afreximbank and ITC will embark on an in-depth analysis of sectors in the two regions to identify and map out five promising value chains. This analysis will focus on identifying barriers to growth and the requirements necessary for successful expansion. The findings of this comprehensive study will be presented in a detailed report, scheduled for publication at the Fourth ACTIF in 2025.

    Prof. Benedict Oramah, President and Chairman of the Board of Directors of Afreximbank, reacting to the findings, said: "The report confirms the vast Africa-Caribbean trade and investment opportunities that remain untapped. It provides a strong validation of Afreximbank’s Caribbean Strategy. With a project pipeline of $2.5 billion and an investment pipeline worth $1.5 billion, the Bank has demonstrated its commitment to realizing opportunities across the two regions. The productive collaboration between Afreximbank and ITC is a testament to this, as it aims to bridge the knowledge gap and build capacity among small and medium-sized enterprises, which are critical for the growth of Africa-Caribbean trade and investment."

    ITC Executive Director Pamela Coke-Hamilton (http://apo-opa.co/4cHI8mVsaid: “Small businesses can be among the first to drive and benefit from increased trade between these two regions, as they form the backbone of both African and Caribbean economies. There are huge growth opportunities if the right sectors are prioritized for development and investment.”

    Turning potential into exports

    As per the ITC data, the export volume between Africa and the Caribbean remains below 3%, despite their shared history and cultural connections. Even prior to the global impact of COVID-19, conflicts, and climate change, export levels were already low. Over the past decade, the percentage of bilateral exports has never exceeded 6%.

    The trade between the two regions is highly concentrated in a few key products. For instance, over half of Africa's exports to the Caribbean consist of mineral primary products, with crude oil being the leading export, valued at $232 million and accounting for 27% of the total exports.

    Regarding Caribbean exports to Africa, a fertilizer manufactured in Trinidad and Tobago, known as anhydrous ammonia, accounts for approximately half of all exports to Africa, valued at $423 million, representing 49% of the total exports.

    Tackling trade challenges

    To enhance trade between the two regions, two primary challenges must be addressed: high tariffs, particularly on processed goods, and inefficient logistics. Bilateral tariffs often exceed those imposed on exporters from other trading partners. Furthermore, tariffs escalate with the level of processing, discouraging the transformation of products into value-added goods for export. Reducing tariffs would mutually benefit both regions by offering consumers a broader variety of products at a lower cost and enabling specialization in competitive sectors.

    With regard to trade logistics, performance in Africa and the Caribbean is considerably lower compared to other regions, as indicated by the World Bank Logistics Performance Index (LPI). Enhancing the efficiency of goods and information flow can expand market access and promote trade.

    One potential solution to reduce trade costs between the two regions lies in trade agreements. As part of this new initiative, the International Trade Centre (ITC) will conduct an analysis to assess how various tariff liberalization and non-tariff measures harmonization scenarios can potentially increase trade at both the country and product levels.

    Strengthening partnerships

    The project will contribute to the implementation of the memorandum of understanding between ITC and Afreximbank. It will also build upon the cooperation on the “How to Export with the AfCFTA” Training Programme, South Sudan National Export and Investment Strategy, Pan-African Fashion Alliance, and the Pan-African Private Sector Trade and Investment Committee Survey.

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