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Intra-African trade continues to be a popular topic of conversation as the African Continental Free Trade Area (AfCFTA) takes effect. Orbitt provides our readers with an overview of trade flows of companies seeking trade related funding through the Orbitt platform.
A few months into the signing of the AfCFTA agreement and with much talk of incentivising the intra-African trade of goods and services, the number of companies seeking trade-related funding on the Orbitt platform continues to increase. So far, in 2021, 78 SMEs have approached the platform seeking a total of $1.4bn of trade-related financing.
Some 50% or the companies included a request for working capital to support them with increasing the efficiency of their day-to-day operations, while 25% included a request for asset finance to increase their operative or processing capacity.
Most of the SMEs engage in cross-border transactions of some sort, and Orbitt has analysed these flows of goods and services.
Of the SMEs being studied, 46% have their main operations in West Africa, 27% in East Africa and 15% in Southern Africa.
While 27% of the SMEs indicated that they export their goods and/or services from Africa to Asia, and the same number export to Europe, only 22% indicated any form or intra-African trading of goods and/or services.
East African SMEs recorded more intra-African trades when compared with West Africa – 38% compared with 17%. Perhaps this can be attributed to the interconnectivity and ease of doing business in the East African region, combined with efforts to promote collaboration within the region.
This provides some hope that the efforts being made as part of the AfCFTA will yield similar results and promote intra-African trade.
The Orbitt Perspective
With the continued increase in trade-related funding, more SMEs are raising not only trade finance but also requesting asset finance to increase their technical and operational capacity for value-added services in the region.
More SMEs in East Africa are engaged in the intra-African trade of goods and/or services owing to the structural efforts to promote this in East Africa.
We can expect the same increase in intra-African trade across the continent as these same structural issues are addressed with the AfCFTA now in place.
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