By Southern Times Correspondent
Trade between Africa and India has risen over the past 10 years and is highly likely to double its total of US$60 billion in 2017 to US$120 billion in 2021, according to a report released by the African Export-Import Bank (Afreximbank) and the Export-Import Bank of India (Exim India).
The report revealed that trade between Africa and India increased more than eight-fold from US$7.2 billion in 2001 to US$59.9 billion in 2017, making India Africa’s fourth-largest national trading partner, accounting for more than 6.4 percent of total African trade in 2017, up from 2.7 percent in 2001.
Trade with Africa now accounts for just over 8 percent of India’s total trade, but this is only marginally higher than the 7.6 percent in 2001.
“The impressive growth in trade between Africa and India stems from a mix of factors, including the growing stock of foreign direct investment undertaken by African and Indian corporate entities; and deepening economic and political ties illustrated by a number of strategic initiatives, most notably ‘Focus Africa’ launched by the government of India in 2002 to boost trade and investment between Africa and India, and the India-Africa Forum Summit launched in 2008.
“Other key drivers include the government of India’s Duty-Free Tariffs Preference Scheme for Least Developed Countries and the strengthening cooperation between Afreximbank and Exim India,” stated the report.
The report further predicated that Africa-India trade could double by 2021, especially if appropriate steps are taken by sovereign and corporate entities with a view to optimising the full benefits of growth and the potential offered by the two trading partners. These involve bold efforts and undertaking initiatives to address infrastructural constraints that hamper the capacity of both partners to respond to growing trade and investment opportunities; stimulate interactions between Africa and India’s private sector, policymakers and think tanks; increase the availability of information on markets and market opportunities; address market access constraints, including tariffs and other non-tariff barriers; and facilitate trade and investment through appropriate policies and regulatory frameworks.
The report also revealed that the major challenge for trade in Africa is access to finance since most growing traders are small-medium enterprises.
“Against the backdrop of increasing uncertainty in the global economy, reliance on innovative and non-traditional financing solutions developed by export credit agencies, including the Export-Import Bank of India (Exim India) and the African Export-Import Bank (Afreximbank), not only helps in mitigating risks in international trade but also contributes to promoting regional trade and investment.
“According to the Asian Development Bank, the global trade finance gap is estimated at about US$1.5 trillion annually, with most of the finance needs coming from emerging and developing economies. The African Development Bank (AfDB), through its periodic survey, puts the annual trade finance gap in Africa at US$120 billion.
“Lack of access to trade finance is one of the major reasons for the low participation of micro, small and medium-sized enterprises in international trade. The challenge is even more pronounced in developing countries, especially in Africa, where small and medium-sized firms account for only 28 percent of banks’ trade finance portfolios,” said the report.