African trade continues to tilt eastward, with China having surpassed Europe as the biggest trading partner of many sub-Saharan countries during the past decade.It is a trend that will continue, says Dr Goolam Ballim, chief economist at Standard Bank.Speaking at a recent conference in Cape Town, Ballim highlighted the importance of Asia to Africa trade, saying Asia was a key partner to most African countries.“Most of the trade activity Africa has with Asia is with China in particular, which is a net importer of minerals, fuels and oil from sub-Saharan Africa. The bulk of the exports going out of Africa are ores and metals. Some other items move, but nothing like the ores and metals that are exported.”Ballim told conference delegates that China had established itself very well as a trading partner in Africa (including South Africa) since 1995. “Very swift action has been taken over the past three decades. More than half of the continent’s trade is now with Asia, while Europe’s share of trade has shrunk significantly, considering half of Africa’s trade in 1995 was with Europe.”According to Ballim, Asia’s usurping of market share from the West will not continue for much longer. “What we are expecting to see going forward is the Chinese and the rest of Asia consolidating their market share and anchoring it well.”However, he added, Africa needed to boost exports of more than just metals and ores going forward.“It is essential that Africa develops its industrial capacity so that it can address the trade imbalance that exists, especially with Asia,” said Ballim. “Underscoring the absence of an industrial base is the high dependence on foreign engineering that leads to massive machinery imports into Africa.”Whilst resources have been critical to Africa’s growth, it is necessary to diversify economies and increase export volumes.The African Development Bank has been very vocal about the need for industrialisation, especially to increase export capacity. It maintains that this is a prerequisite to A f r ica’s sustainable and inclusive growth. By adding value through processing, packaging and marketing its raw materials, Africa can improve its export volumes significantly.Ballim agrees, saying it is an opportunity that can bring about positive change. However, he adds, not only does Africa need to export more to the rest of the world, it also needs to trade more within the region.“The continent has the lowest intra-regional export value in the world if compared with other regions like Asia or Europe,” he says.He suggests that the African Continental Free Trade Area (AfCFTA) could address some of the challenges that have prohibited intra-regional trade to date. “There are some real challenges to overcome to improve trade. The continent has enormous capacity constraints and the penchant for protectionism continues to rear its head, impacting on intra-regional trade.”Another constraint is insufficient power. “It is probably the biggest hurdle when it comes to moving the continent from a light industrial base to a heavier industrial base,” says Ballim. “In East Africa, we are seeing a commitment to infrastructure and power developments with clear, strategic growth plans in place to boost export volumes and to increase trade.
