This is the “Foreword” by Professor Benedict O. Oramah, President and Chairman of the Board of Directors, of the African Export-Import Bank (Afreximbank) to the “African Trade Report 2022”…
After the myriad negative shocks triggered in 2020 by the COVID-19 pandemic, 2021 — which was supposed to be a transitional year — proved to be exceptional in macroeconomic terms. Global trade recovered strongly, growing by 26.6 percent after contracting by 7.5 percent the year before. World output also rebounded from one of the steepest contractions on record, expanding by 6.1 percent.
The bounce back was even more impressive in Africa, which has consistently shown growth resilience. African trade — which had contracted sharply amid falling commodity prices in the face of sharp global demand and supply shocks — rebounded strongly, rising by 31.4 percent. Africa’s aggregate GDP expanded by 6.9 percent, recovering from the 1.6 percent contraction in 2020 that marked the region’s first recession of the last 25 years. Forecasts point to continued resilience, even in light of various post-pandemic and geopolitical pressures.
The strong rebound and increasing resilience of African economies reflect several factors, including swift and bold fiscal and monetary support, timely counter-cyclical measures from multilateral and development finance institutions — including Afreximbank’s Pandemic Trade Impact Mitigation Facility (PATIMFA) — and the effectiveness of COVID-19 vaccines and therapeutics, which led to the relaxation of containment measures. Globally, easing financing conditions also supported the strong post-pandemic performance, strengthening global demand and improving commodity terms of trade.
The remarkable bounce back has also been propelled by the recovery of consumer-facing industries, particularly in the services sector, which were markedly affected by the pandemic as household consumption shifted more towards goods. One exception was the entertainment industry, specifically the movie and music sectors, which were able to sustain growth even when strict containment measures were being enforced by riding high on the wave of digitalisation.
Cultural interactions among countries and the growth of cultural and creative industries (CCIs), which have been supported by globalisation and the diffusion of modern technologies, accelerated during confinement. CCIs are transforming economies and driving growth through three types of spillover. First, knowledge spillovers in the form of new ideas, skills, and innovation.
Second, industry spillovers from productivity gains achieved through the creation of vertical value chains. And third, network spillovers through agglomeration effects.
With limited barriers to entry, increasing access to modern technologies is magnifying the welfare effects of CCIs. Most recent estimates show that CCIs employ more than 30m people worldwide, mostly young people, and are gender neutral. They are estimated to generate more than US$2.25tn annually and account for around 3 percent of world GDP. Across Africa, a region with a rich cultural heritage, the youth bulge has precipitated a burst of creativity and innovation that is accelerating the growth of CCIs. According to UNESCO, the African film industry has the potential to generate more than US$20bn in revenue and over 20m jobs in the coming years. The growth potential of other creative sectors is just as important, and the African Union has prioritised CCIs as critical drivers of regional development.
However, realising these potential hinges on overcoming several constraints, including the lack of a clear framework for analysing the creative economy to inform policymaking. There is an absence of reliable data to highlight the importance of the production and trade of creative goods and services. Moreover, the application of standards to sustain quality and promote the growth and trade in creative goods and services is limited, and there is a dearth of connected cultural infrastructure to facilitate the integration of African creatives into global circles. Additionally, there is currently a lack of institutional capacity to protect intellectual property rights, which are critical to supporting the development of creative industries, as well as financing gaps. That being said, Afreximbank — through its Creative Africa Nexus (CANEX) — and other regional development finance institutions are playing an increasingly important role in reducing the capital gap faced by African organisations.
This report outlines various policies and programmes to alleviate existing constraints and support the growth of CCIs as one of the engines for structural transformation of regional economies in the era of the African Continental Free Trade Area (AfCFTA). The report shows that the AfCFTA could emerge as a major growth springboard for Africa’s creative industries, especially after the completion of negotiations on investment, intellectual property rights, competition policy and e-commerce scheduled for 2022.
Another important feature of Africa’s CCIs is their intraregional trade orientation. Intra-African trade in creative industries is growing faster than that of other sectors and could boost the aggregate value of intra-African trade to further reduce the region’s exposure to global volatility. Although intraregional trade recovered strongly from the pandemic —increasing by more than 18 percent to account for 14.4 percent of total African trade in 2021—it remains relatively low compared to other parts of the world, even by developing country standards.
The report also reveals large untapped export potential in intra-African trade across all subregions, pointing to significant growth opportunity. South Africa — which remains the largest intra- African trading nation, accounting for around 20 percent of total intra-African trade — has been the leading driver of intraregional trade growth dynamics. Its strong performance consolidated Southern Africa’s position as the top intra-African trading subregion. After recording the fastest growth rate in 2021, Southern Africa’s share of intra-African trade increased to account for more than 44 percent of total intra-African trade.
The recovery of extra-African trade, which grew by 29.5 percent after contracting by 16.2 percent in 2020, was even more impressive, supported by improving commodity terms-of-trade and expanding trade ties with Asia. That region consolidated its position as Africa’s foremost trading partner, accounting for more than 32 percent of extra-African trade. The much lower growth rate of extra-African imports narrowed the region’s trade deficit in 2021. Final negotiations on the rules of origin under the AfCFTA—which prioritise “Made in Africa” and are expected to conclude this year—will further boost intra-African trade and could accelerate the diversification of sources of growth and trade to set the region on a long-run growth trajectory of fiscal and debt sustainability.
Looking ahead, this report argues for a speedy conclusion of negotiations on the rules of origin as well as those on trade in services, intellectual property, investment, and digital trade. More than a passport enabling goods to circulate freely, these reforms to deepen integration could unleash creativity and stimulate innovation to further leverage CCIs and facilitate development through knowledge sharing. Simultaneously, they could catalyse technology transfers to accelerate the diversification of sources of growth and boost African trade in the AfCFTA era.