11th February, 2021Virtual

UNU-WIDER

COVID-19: implications for trade and the role of the AfCFTA

Impact of Covid-19 on African trade

Transmission channel 1: Commodity prices

• As the severity of COVID-19 emerged through Feb-Mar, commodity prices plummeted for more than 67% of Africa’s exports, and especially oil

• An improvement from May with many commodities recovering by year end, with notable exception of oil remaining down more than 25%

Source: Based on ITC TradeMap Data (2016-18 average) and FAO and Trading Economics, February 2021

Other 27%

Textiles 4%Gold 7%

Foodstuffs 11%

Metals and ores 12%

Petroleum oils 40%

Composition of Africa’s total exports Prices of Africa’s most important commodities

Metals IndexCotton

Brent crude

FAO Food price index

Gold price

30

40

50

60

70

80

90

100

110

120

130

AlgeriaAngolaEritreaSeychellesMoroccoLibyaSenegalMadagascarBotswanaGabonTunisiaEswatiniNigeriaSouth AfricaGuineaLesothoZimbabweDR CongoSouth SudanMalawiMozambiqueEthiopiaTogoNigerBurundiChadMauritiusCongoMaliCARRwandaUgandaKenyaCabo VerdeSudanLiberiaMauritaniaGambiaGhanaZambiaBeninBurkina FasoCôte d'IvoireNamibiaCameroonTanzania, URDjiboutiSomaliaEgyptSierra Leone

Africa average

Screening arrivals Quarantine arrivals from some or all regionsBan arrivals from some regions Ban on all regions or total border closure3 4No restrictions 20 1

NovJan Feb Mar Apr May Jun Jul Aug Sep Oct

3.4 2.8 2.5 2.1 1.80 0.5 2.0 3.8 3.7 3.7

Transmission channel 2: cross-border movement restrictions

Source: Based on Oxford Coronavirus Government Response Tracker (OxCGRT), November 2020

Impact on Africa’s world and regional exports

• Intra-African trade somewhat more resilient: down 13% vs world exports down 20%, but particularly affected by lockdown border measures

• Compare 2008-09 financial crisis: intra-African exports down 10%, Africa’s world exports down 31%

Source: IMF. 2020. DOTS, accessed November

32%

-4%-8%

-38%-41%

-14%-11%

-7%

-50%

-40%

-30%

-20%

-10%

0%

10%

20%

30%

40%

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov

23% 21%

0%

-3%

-44%

-20%

-10%

7%

-50%

-40%

-30%

-20%

-10%

0%

10%

20%

30%

40%

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov

Africa’s exports to the world, 2020 YoY Intra-African exports, 2020 YoY

Case example: Uganda

• Informal cross-border trade collapses for Uganda in line with border restrictions enacted in February-March

Source: Bank of Uganda

Uganda informal cross-border exports, quarterly (US$ millions)

2019-01 2019-02 2019-03 2019-04 2020-01 2020-02 2020-03Informal trade 126.23 126.2 129.9 149.5 130.5 2.7 3.3

0

20

40

60

80

100

120

140

160

-100%

-50%

0%

50%

100%

150%

200%

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Gold accounts for at least 35% of exports

Petroleum oil accounts for at least 35% of exports

Not all African countries have had the same impact…

Source: IMF. 2020. DOTS, accessed November

Individual African countries, change in exports, April to August, YoY

Staple food crops

• Moderate rises of 10-15% for global staple food prices; some export restrictions and supply chain disruptions in early 2020 (wheat from Russia and rice from India particularly)

• Food crisis of 2008 largely averted: carry-over stocks are high, the prospects for the next crop are good and, instead of an expansion of demand through a burgeoning biofuels sector, demand is likely to contract with energy prices being low (source, FAO)

Selected staple crops, international price indices, December 2005 to November 2020

0

20

40

60

80

100

120

140

160

180

200

Dec-

05

May

-06

Oct

-06

Mar

-07

Aug-

07

Jan-

08

Jun-

08

Nov

-08

Apr-

09

Sep-

09

Feb-

10

Jul-1

0

Dec-

10

May

-11

Oct

-11

Mar

-12

Aug-

12

Jan-

13

Jun-

13

Nov

-13

Apr-

14

Sep-

14

Feb-

15

Jul-1

5

Dec-

15

May

-16

Oct

-16

Mar

-17

Aug-

17

Jan-

18

Jun-

18

Nov

-18

Apr-

19

Sep-

19

Feb-

20

Jul-2

0

Rice sorghum Wheat Maize

2008 global food crisis Covid-19 crisis

Source: IndexMundi.com

• High frequency data indicating digital uptake accelerated by Covid-19

• Not without challenges: • Low (but rapidly

rising) internet penetration rate –28%

• Electricity – 31 African countries among the bottom 50 in the Getting electricity subcategory of the WB Doing business index 2019

• Validity for AfCFTA e-commerce protocol

Selected digital growth statistics, 2020 H1, YoY

Indications of accelerated digitalization in Africa

12%

33%

91%

52%

17%

42%

Customers

Nigerian data consumption

Total payment value

Jumia Pay transactions

Orders

Active customers

M-P

esa

MTN

Jum

ia

Sources: Jumia Financial Statements, MTN Financial Statements, M-Pesa Financial Report 2020

Role of the AfCFTA in recovery

Building forward better: role of the AfCFTA

Diversify Africa’s trade away from commodity dependenceoil now accounts for as much as 40% of Africa’s exports

Drive industrialization estimated gains to industry of $36bn - $43bn with the

AfCFTA

Ease and simplify intra-African tradeCustoms Transactions include 20-30 different parties, 40documents, 200 data elements

Transition for the digital economycovid-19 estimated to have accelerated digitalization by

about 7 years globally

Boosting African industrial trade

• Intra-African exports would increase the most for industrial products; with gains ranging between around 25 per cent (or US$ 36.1 billion) and almost 30 per cent (or US$ 43.3 billion) under low ambition scenario and high ambition scenario

• Largest increases in exports of vehicles and transport equipment, energy, metals, machinery, chemical products, sugar, other food products, wood and paper, and textiles

Change in intra-African exports by main sectors, as compared to the baseline without AfCFTA in place - 2040 - US$ bn (various scenarios)

9.5 12.5 16.84.5

8.89.0

36.1

41.143.3

0.0

10.0

20.0

30.0

40.0

50.0

60.0

70.0

Low ambition scenario Intermediate ambition scenario High ambition scenario

US$

bill

ion

Agriculture and food Energy and mining Industry

0123456789

10

Vehiclesand

transportequipment

Energy Metals Machinery Chemicalproducts

Sugar Other foodproducts

Wood andpaper

Milk anddairy

products

Textile

Low ambition scenario Intermediate ambition scenario High ambition scenario

Export gains by sector

• Largest increases in exports of vehicles and transport equipment, energy, metals, machinery, chemical products, sugar, other food products, wood and paper, milk and dairy, and textiles.

Top 10 gains in intra-African exports by sectors, as compared to the baseline without AfCFTA in place - 2040 - US$ bn (various scenarios)

19.1%

20.3%

20.0%

5.3%

17.5%

14.1%

75.6%

62.2%

66.0%

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

African LDCs

African non-LDCs

Africa total

Agriculture and food Energy and mining Industry

Export gains by level of development

• African LDCs are estimated to have the greatest forecast boost to industrial exports

Proportion of total gains in Africa’s (non-LDCs vs. LDCs) exports to Africa, by main sectors, under intermediate ambition scenario (as compared to baseline) – in 2040

We asked firms how the AfCFTA could help cross-border e-commerce

• Indications that harmonized rules and regulations would help• Emergence of ‘trust’ as a key issue: consumer protection regulations could help• Other big ‘behind the scenes’ issues include: data governance, IPR, liberalization of goods

and services sectors important for e-commerce • African Trade Exchange (ATEX): ECA/Afreximbank initiative to facilitate AfCFTA trade

through a B2B e-commerce platform integrating AfCFTA provisions

Source: ECA. Forthcoming. E-commerce in Preferential Trade Agreements: Implications for African firms and the AfCFTA

4

6

12

15

16

17

0 2 4 6 8 10 12 14 16 18

No data localisation requirements

No local presence requirements in other EAC countries

Harmonised data standards and privacy laws

Harmonised laws on electronic trade, digital signaturesand e-transactions

Conumer protection regulations for building digital trust

Harmonised laws for taxation

Number of respondents