WILLAGRI
For the past thirty years, exchanges between Africa and other continents have steadily increased. On one hand, states support African exports through incentive policies, but on the other hand, strong domestic demand and production challenges (droughts, conflicts, etc.) stimulate imports. The continent has great potential to reverse its trade deficit, with cultivable land and a low-cost workforce among its assets. However, challenges persist, stemming from Africa’s historical role as a supplier of raw materials: limited access to reform finances, weak infrastructure, and a lack of value chains. Despite significant growth in African exports, exceeding $700 billion in 2022 compared to $250 million in 1990, the continent plays a minor role in global trade. The World Trade Organization (WTO) estimates its share at 3% of global trade, a figure unchanged for thirty years!
Statistics on African trade, nonetheless, reveal an increase in the number of countries engaging with Africa, surpassing 180. The EU, Asia, and North America remain the continent’s top three trading partners. Over the past thirty years, financial institutions have shifted their perspective on Africa, once seen as unattractive and risky. The focus has transitioned from a few “bankable” countries to viewing the entire African continent as a potential trading partner.
A significant challenge remains: the value addition of commodities. The trade balance involves importing expensive processed food products while exporting low-value agricultural raw materials:
– Cocoa
– Coffee
– Wood
– Cotton
– Fruits and vegetables
According to the African Development Bank (AfDB), in recent years, five African countries have successfully attracted multinational companies and established production and processing sites, particularly in the agro-food sector. Across all sectors, these countries account for 60 to 70% of continental value-added activities:
– South Africa
– Egypt
– Nigeria
– Morocco
– Algeria
The African Continental Free Trade Area (AfCFTA) brings some attractiveness to the continent. It has initiated major projects to establish an ecosystem conducive to transportation and project financing, aligning with its Agenda 2063. This agenda includes various programs to promote African sovereignty and better representation on the international stage.
Promoting High-Value Exports
To support this ambition and fund an inclusive transition, Africans must produce, process, and package before exporting, especially in the agricultural sector. This drive to industrialize the agri-food sector has gained the support of foreign financial partners, willing to support initiatives even in unstable regions such as South Sudan. African ports are capitalizing on this to develop their logistics capacity, aiming to lead intra and intercontinental trade.
The valorization of local production will contribute to reducing imports that have hampered African economies, particularly since recent crises (Covid, conflicts, droughts). States recognize the importance of gaining food and energy sovereignty.
Simultaneously, new organizations are tasked with encouraging African economies to prioritize high-value-added products that are more competitive for export. The African Export Development Fund (AEDF) is one such entity. As a subsidiary of Afreximbank, it targets and supports high-potential valorization projects at various levels of the value chain:
– Financial services
– Technology
– Manufacturing, transport, and logistics
– Development vehicles like industrial parks
The African strategy is underway but faces obstacles, some beyond its control, such as the recent European decision to impose a “carbon” tax on imported goods. This aims to maintain fairness with European producers subject to the Emissions Trading System (ETS). According to AfDB, this hurdle could cost African exporters $25 billion, disappointing them as a major customer and considering their low contribution to global greenhouse gas emissions (4%).
The American Approach
Recently, Morocco received a US delegation from the National Association of State Departments of Agriculture (NASDA), an organization promoting partnerships for agriculture. The delegation exchanged ideas with the Agricultural section of the US embassy and the American Chamber of Commerce (AmCham), aiming to share trends and expectations of the US market. Ted McKinney, former US government official and CEO of NASDA, expressed the desire to understand the mechanisms of the Moroccan agri-food system and assess the interest in a trade partnership. Morocco is a stable partner with an ambitious agricultural project, and the US has already signed a free trade agreement with them. The collaboration focuses on technology and innovation in climate resilience, two concerns shared by both partners.
Key Agri-food Sectors
Olive Market
For the period 2023-2029, the trend in the olive market in Africa is upward, with an annual growth rate of 5.5%. Considered a pillar of African agriculture, the olive sector is subject to industrialization, although primary production remains in the hands of small-scale farmers. In terms of production, Morocco leads with 1.5 million olives produced in 2021. Production has faced challenges in recent months, with operating costs and drought affecting yields. The price of a liter of extra virgin olive oil is over 5 euros! Olive oil enjoys a positive reputation among consumers, particularly for its nutritional and dermatological benefits. Stakeholders focus on organic production and valorization as cosmetic products to stand out and create added value. Morocco is the leading African exporter, with its Morocco Gold label receiving support from the FAO and the EBRD, enhancing the reputation of its olive products.
Rice Market
The African rice market is valued at approximately $13 billion, with an estimated annual growth rate of 3.41% for the next five years. The supply remains insufficient compared to domestic demand. The production capacity is limited by the profile of rice farmers, predominantly small-scale farmers in Nigeria, Ivory Coast, Madagascar, Mali, or Tanzania. Industrial rice farmers produce only 10% of African rice. Rice cultivation is supported by strong domestic demand and changing urban lifestyles. The work of women favors the choice of this basic commodity, easy to store and cook. To meet demand, a map of areas most suitable for rice cultivation has been established by the International Institute for Applied Systems Analysis (IIASA) using its GAEZ tool. This mapping will facilitate the implementation of industrialization projects for production.
Cotton Market
Valued at approximately $6 billion, the cotton market is expected to exceed $7 billion by 2029. The expected annual growth rate is around 5%, continuing until 2029. In the hands of small-scale farmers, cotton production is often a secondary or alternative activity to corn or soybean fields. Cotton cultivation thrives in the hot and humid climate of sub-Saharan Africa and its saline soil. Manual picking preserves the characteristics of cotton, in line with international standards set by the Better Cotton Initiative (BCI). This organization supports a preventive approach to risks within the cotton sector. Cotton is mainly exported to Asia (Bangladesh, Vietnam, China, Malaysia) but is of interest to the entire global textile sector. The African Growth and Opportunity Act (AGOA) provides visibility and facilitates its referencing in foreign marketing channels. The attractiveness of natural cotton fiber supports African exports. Burkina Faso, a leader, exported nearly $460 million worth of cotton in 2021.
Cocoa Market
With an annual growth rate of nearly 7%, the cocoa market, currently valued at $17 million, is expected to reach $23 million in five years. The cocoa cultivation, deeply rooted, feeds various industries, including food, cosmetics, or pharmaceuticals. Ivory Coast, the world’s leading producer, annually produces 2.2 million tons of cocoa beans, representing 2/5th of global production. The sale of cocoa beans constitutes the country’s main export revenue. The value chain is located outside Africa, with these beans being sent to Europe, where the main chocolate producers are located: Germany, Belgium, Italy, and Poland, leading the way. The diversification of cocoa uses (confectionery, flavor, coating, filling, etc.) supports the health of this market.
Sources: Mordor Intelligence, La Vie Eco, EUR Activ, La Tribune