The existing deficits limit competitiveness, especially in landlocked states, which highlights the need to invest in logistics and digital connectivity to boost economic growth, advised UN Trade and Development (UNCTAD).
Another limiting factor is the composition of the trade supply: nearly half of the countries in the region, it said, depend on oil, gas or minerals for at least 60 percent of their export earnings, therefore subject to constant price fluctuations.
At the same time, more than 50 percent of imports and exports depend on only five economies, all outside the region; Meanwhile, only 16 of the continent’s 54 countries source more than 0.5 percent of their intermediate goods from Africa, missing out on key opportunities for value-added trade and manufacturing.
Dependence on commodities, high trade costs and weak infrastructure increase vulnerability to external crises, the report said.
Diversifying exports and promoting internal trade will create more stable sources of income, the United Nations agency said when presenting its report “Economic Development in Africa 2024” on Monday.
The African Continental Free Trade Area (AfCFTA), macroeconomic reforms and innovative financial tools can help stabilize economies and reduce dependence on volatile global markets, it said.
According to the analysis, medium and small enterprises (SMEs) generate 80 percent of employment in Africa, but face multiple difficulties precisely because of poor infrastructure, currency volatility and limited access to financing. Full implementation of the AfCFTA could create a $3.4 trillion market, but to tap the potential, investment in infrastructure, streamlining trade policies and processes such as customs, and encouraging industrialization through incentives are needed, he said.
Debt also exacerbates vulnerability: nearly half of African countries, he said, had a debt-to-gross domestic product (GDP) ratio of over 60 percent in 2023, and many spent more on debt interest than on education or health.
Meanwhile, transport costs are among the highest on the planet, largely due to poor road networks and inefficient logistics; for example, lack of connectivity raises the cost of road transport to 29 percent of the price of goods traded within Africa, compared to seven percent for trade outside the continent.
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