2014 African Trade Report Single

AFRICAN TRADE REPORT
2014
REGIONAL VALUE CHAINS:

A PRE-REQUISITE FOR INTEGRATION INTO GLOBAL VALUE CHAINS
AFRICAN EXPORT-IMPORT BANK
BANQUE AFRICAINE DIMPORT-EXPORT
(AFREXIMBANK)

(AFREXIMBANK)
AFRICAN TRADE REPORT 2014
REGIONAL VALUE CHAINS:

A PRE-REQUISITE FOR INTEGRATION INTO GLOBAL VALUE CHAINS
FOREWORD
As I write, the globalization of value chains is in full swing. Different stages of the production
process are increasingly dispersed across different countries and continents. The goods and
services we buy are increasingly made up of inputs from different countries around the world.
As technology pushes the frontiers of trade and intensifies economic interdependency across
countries, global value chains have truly become a globalized phenomenongeographically and
across all sectors and tradables.
Some of the developing countries have used their integration into internationally joined-up
production as a means to close the industrial and manufacturing gap between themselves and
the advanced countries. This is especially true for some East Asian economies. In China, imported
intermediate inputs now make up more than 30 percent of exportsa figure not too far behind
the 44 percent in the exports of the European Union.
A countrys effective integration into the global economy, and its ability to mitigate adverse termsof-trade shocks, depends more and more upon its position within global value chains. In this
contextand increasingly as I travel across the continent of Africa to meet government officials
and leaders from the business communityI hear the same concern: how to effectively integrate
and then move up the global value chains? The 2014 edition of the African Export-Import Banks
annual flagship report the African Trade Report 2014 (ATR 2014)appropriately titled Regional
Value Chains: A Pre-requisite for Integration into Global Value Chainsprovides some important
insights.
The Report takes as a case study the leather and leather products industry in Africa. The continent
is the worlds largest source of leather, which it has largely exported with little value addition, while
steadily increasing its global imports of finished leather products. Drawing on a comprehensive
analysis of value chains in this industry, the main message of the Report is that the development of
regional value chains in Africa has the potential to enhance the continents export competitiveness
and provide the needed catalysts for more gainful integration into global value chains. By creating
regional value chains, countries in Africa can mitigate their exposure to adverse terms-of-trade
shocks and sustainably improve their balance of payments positions.
However, if African regional value chains are to develop and grow, they will require the expansion
of existing firms and the establishment of new onesand capital investments, whether domestic
or foreign. In this context, the role of national and regional institutions, and that of multilateral
development finance institutions, emerges as critical for the development of regional value
chains in support of growth and improved trade performance in Africathe region which is more
exposed to recurrent adverse terms of trade shocks.
Indeed, African trade has always been vulnerable to global volatility and exogenous shocks. But
the period covered by this Report has been one of particular hardship, caused by global economic
and financial volatility, the spillover effects of the lingering fiscal and sovereign debt crises in the
Eurozone, and the outbreak of the Ebola Virus Disease in West Africa.
4 AFRICAN TRADE REPORT 2014
The Ebola crisis had high human and socioeconomic costsillustrated in the collapse of aggregate
output and rising food pricesand resulted in the contraction of trade in the affected countries
which were essentially cut from the rest of the world. But its aggregate effect on African trade was
negligible, partly because the affected countries account for very small shares of overall African
trade.
More pronounced were the effects on African trade of uncertainty and volatility associated with
the global economic environment: plummeting oil prices, the end of the commodity super-cycle,
and the slowing of growth in developing economies. The declining commodity prices, coupled with
growth deceleration and weak demand from China, which has become one of Africas major trading
partners, caused a contraction of Africas merchandise trade for the second consecutive year. The
direct consequences have been felt in declining levels of foreign reserves and intensification of
macroeconomic management challenges, especially in the major oil-exporting countries in the
region.
Looking ahead to the near term, the growth deceleration in developing economies is likely to
continue, but its depressing effects on African trade are likely to be partly offset by a resurgence of
demand from the group of advanced economies, spearheaded by demand from the United States.
The implementation of trade-enhancing policies advocated by the World Trade Organisation,
including improvements in market access and the adoption of policies to limit trade distortions
and promote competitiveness, have the potential to improve the outlook for African growth and
trade performance in the near term. For African countries, the uncertainty of the global economic
environment makes the adoption of these policies all the more necessary.
To make progress in the long term, as argued in this years African Trade Report, African countries
need to diversify their sources of growth and continue their ongoing efforts to accelerate the
structural transformation of their economies. They will need to enhance their international
competitiveness and boost their manufacturing export capacity through developing regional value
chains with other countries on the continent. Integrating into regional value chains will prepare
them to link more gainfully into the global economy, by increasing the bargaining power of African
corporations and allowing them to align themselves with the lead firms. The Report provides
insight into how to address these and other trade- and growth-related challenges facing the
African continent.
Dr. Benedict O. Oramah

President and Chairman of the Board of Directors
The African Export-Import Bank
Cairo, Egypt
July 2015
ABBREVIATIONS AND ACRONYMS

ADB
AfDB
APEC
ASEAN
BEC
CEE
CIS
CEN-SAD
CET
CFTA
COMESA
EAC
ECB
ECCAS
ECOWAS
EIF
EPA
FAO
FTAAP
GDP
GTZ
GVC
LLP
NEPAD
PIDA
OEC
OIC
OPEC
QE
QQE
REC
RTA
RVC
SACU
SADC
TFTA
TPP
TSH
WAEMU
UMA
UNCTAD
WTO
Asian Development Bank

African Development Bank
Asia-Pacific Economic Cooperation
Association of Southeast Asian Nations
Broad Economic Classification
Central and Eastern Europe
Commonwealth of Independent States
Community of Sahel-Saharan States
Common External Tariff
Continental Free Trade Area
Common Market for Eastern and Southern Africa
East African Community
European Central Bank
Economic Community of Central African States
Economic Community of West African States
Enhanced Integrated Framework (WTO)
Economic Partnership Agreement (European Union/West Africa)
Food and Agriculture Organization
Free Trade Area of Asia-Pacific
Gross Domestic Product
Deutsche Gesellschaft fr Internationale Zusammenarbeit
Global Value Chain
Leather and Leather Products
New Economic Partnership for Africas Development
Programme for Infrastructure Development in Africa
Oil-Exporting Countries
Oil-Importing Countries
Organisation of Petroleum-Exporting Countries
Quantitative Easing
Quantitative and Qualitative Easing
Regional Economic Community
Regional Trade Agreement
Regional Value Chain
Southern African Customs Union
Southern African Development Community
Tripartite Free Trade Area
Trans-Pacific Partnership
Trans-Sahara Highway
West African Economic and Monetary Union
Arab-Maghreb Union
United Nations Conference on Trade and Development
World Trade Organization
TABLE
OFOF
CONTENTS
TABLE
CONTENT
10
1 INTRODUCTION AND EXECUTIVE SUMMARY
The World Economy And African Trade In 2014

Intra-African Trade
The Outlook For Trade
Case Study: Developing Regional Value Chains In Leather And Leather Products
Structure Of The Report
16
2IDENTIFYING AND PROMOTING REGIONAL VALUE CHAINS IN

LEATHER AND LEATHER PRODUCTS IN AFRICA
2.1 Introduction
2.2 Regional Value Chains In The Era Of Global Value Chains
2.3 Distribution Of Value-Added In The Leather And Leather Products
(LLP) Industry

2.4 Emerging Trends In Leather And Leather Products Trade In Africa

2.4.1 Trends In Inputs And Outputs Of Africas Leather Industry

2.4.2 Regional And Country-Level Trends In Trade In Leather
And Leather Products

2.5 Estimating Trade Potential In Africa Using A Gravity Model

2.6 Identifying Country-Level Export Potential In Leather And Leather Products

2.7 Identifying Potential Regional Value Chains In Leather And Leather Products

2.7.1 Leather Products Identified For Regional And Global Export

2.7.2 Inputs Identified To Be Sourced From Within The Region

2.7.3 Leather Industry Products Identified For Intra-Regional Investments,
And Potential Regional Investors

2.8 Foreign Direct Investment For The African Leather Industry

2.8.1 Factors Limiting Foreign Direct Investment Into The African
Leather Industry

2.8.2 The Policy Environment For Foreign Direct Investment In Africa

2.8.3 Exploring The Possibility Of A Regional Investment Agreement Among
Regional Economic Communities

2.9 Recommendations

2.9.1 Establish A Regional Leather Association

2.9.2 Adopt Branding For African Products

2.9.3 Promote South-South Technology Sharing

2.9.4 Accelerate Customs And Logistics Procedures

2.9.5 Accelerate And Deepen Intra-Regional Trading Arrangements

2.9.6 Improve Physical And Telecommunications Infrastructure

2.9.7 Mobilize Regional Resources
38
3 GLOBAL ECONOMIC AND FINANCIAL DEVELOPMENTS

3.1

3.2

3.3

Global Output And Price Developments

3.1.1 Global Output
3.1.2 Price Developments
International Financial Market Developments
3.2.1 Financial Markets
3.2.2 International Financing Conditions
Global Trade And Trading Environment
3.3.1 Global Trade Flows
3.3.2 Global Trading Environment
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4 ECONOMIC AND FINANCIAL DEVELOPMENTS IN AFRICA
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5 TRADE DEVELOPMENTS IN AFRICA

4.1

4.2

4.3
Output And Price Developments

4.1.1 Regional Variations
African Financial Market Developments
4.2.1 African Stock Markets
4.2.2 African Bond Markets
4.2.3 Financing Conditions In Africa
African External Reserves And Exchange Rate Developments
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5.1

5.2

5.3
The Environment For African Trade

5.1.1 Regional Integration
5.1.2 Trade-Supporting Infrastructure
African Trade
5.2.1 Regional distribution of African trade
Intra-Regional Trade In Africa
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82 6PROSPECTS

85 REFERENCES

86 ANNEX 1. BACKGROUND ANALYSIS FOR CHAPTER 2

NNEX 2. IDENTIFIED OUTPUTS AND INPUTS OF THE LEATHER
91 AINDUSTRY

LIST OF FIGURES
Figure 2.1. Contribution of Manufacturing and Services in Global Value Chains in the Textile,
Textile Products, Leather, and Footwear Industries 2009 (percent)
Figure 2.2. Participation in Global Value Chains in the Textile, Textile Products, Leather,
and Footwear Industries in selected countries (percent)
Figure 2.3. Trade in Leather and Leather Products, 2000-11 (US$ 000)
Figure 2.4. Share of Intra-Regional Trade in Total Trade of Leather and Leather
Products (percent)
Figure 2.5. Share of Intra-Regional Exports in Total Exports of Leather and Leather Products (percent)
Figure 2.6. Intra-Regional Exports in Inputs and Outputs in Leather Industry, 2002-11 (US$ 000)
Figure 2.7. Country Shares in Global Exports of Inputs and Outputs
of Leather Industry in 2011 (Percent)
Figure 3.1. Global GDP Growth and Inflation, 2013-14 percent
Figure 4.1. Average GDP Growth of African Net Oil Exporters and Importers,
2012-14 (percent)
Figure 4.2. Africa: Output, by Region, 2013-14 (percent)
Figure 4.3. Africa: Inflation, by Region, 2013-14 (percent)
Figure 5.1. Trends in Africas Merchandise Trade 2004-14 (US$ billion)
Figure 5.2. Share of Africa in Global Merchandise Trade, 2012-14 (percent)
Figure 5.3. Structure of Africas Imports 2014 (percent)
Figure 5.4. Regional Shares in Africas Merchandise Exports (percent)
Figure 5.5. Regional Shares in Africas Merchandise Imports (percent)
Figure 5.6. Africas Sources of Capital Goods Imports, 2013-14 (US$ billion)
Figure 5.7. Exports within African Regional Economic Communities, 2013-14 (US$ billion)
Figure 5.8. Composition of Intra-African Exports, 2014 (percent)
LIST OF TABLES
Table 2.1. Comparison of Import Unit Values of African Regional and Global
Importers in Leather and Leather Products
Table 2.2. Number of Potential Finished Leather Products Identified
for Regional and Global Export from COMESA, ECOWAS, and SACU
Table 2.3. Country-Wise Unique Leather Products Identified for Regional Export
Table 2.4. Comparison of Unit Values of Top Global and Top Regional Importers
in Identified Unique Products for Regional Export
Table 2.5. Number of Primary, Processed, and Chemical Leather Inputs
That Could Be Sourced From Within COMESA, ECOWAS, and SACU
Table 2.6. Comparison of Export Unit Values of Top Global and Top Regional
Exporters of Leather Inputs
Table 2.7. Number of LLP Products of COMESA, ECOWAS, and SACU Identified
for Potential Inward Foreign Direct Investment
Table 2.8. Number of LLP Products of COMESA, ECOWAS, and SACU Identified
for Potential Outward Foreign Direct Investment
Table 3.1. Developments in Global Output and Prices, 2012-14
Table 3.2. Commodity Prices, 2012-14 (current US$/mt, unless otherwise indicated)
Table 3.3. Real Commodity Price Indices, 2005=100
Table 4.1. Africa: Real GDP Growth, 2012-14 (annual percent change)
Table 4.2. Africa: Inflation by Country, 201214 (annual percent change)
Table 4.3. Reserve Position of African Countries, 201214 (US$ billion unless otherwise indicated)
Table 4.4. Africa: Exchange Rate Developments, 2012-14 (per US$ unless
otherwise indicated)
Table 5.1. Africa: Merchandise Trade, 2012-14
Table 5.2. Sector Composition of Africas Merchandise Exports 2012-14
Table 5.3. Sector Composition of Africas Merchandise Imports 2012-14
Table 5.4. Direction of Africas Merchandise Trade (percent)
Table 5.5. Intra-African Trade, 2012-14 (US$ billion unless otherwise indicated)
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CHAPTER
INTRODUCTION AND
EXECUTIVE SUMMARY
This report reviews the major developments
in African trade during 2014 and the main
global and African socioeconomic factors that
shaped trade during the period. The report
comes at a time when the expansion of the
global economy has lost steam and when
intra-African trade is seen as increasingly
critical for mitigating the adverse effects of
global shocks on the region. The major slump
in commodity prices that began in July 2014
affected the global and African economies as
well as international trade and trade finance.
But the effects were particularly adverse
in Africa, the world region that remains
the most dependent on natural resources
despite ongoing efforts to boost trade
diversification and structural transformation.
Most commodities of trade interest to Africa
showed significant price losses during 2014,
in many instances for the second consecutive
year. The effects included losses of fiscal
and export revenues, falling levels of foreign
reserves, currency depreciation, and rising
macroeconomic challenges in a number
of countries. African countries continued
exposure to adverse terms-of-trade shocks
and global volatility reinforced the urgency of
their efforts to be directed towards promoting
value addition and diversifying exports away
from primary commodities.
Against this background, the thematic

chapter of this report focuses on the leather
and leather products industry, discussing
how African countries can enhance their
international competitiveness and boost
their manufacturing export capacity through
developing regional value chains. This is
a strategic industry for Africa, well rooted
in tradition but with tremendous potential

for growth, value addition, employment
generation, and intra-African trade. Currently,
even in labour-intensive sectors like leather
and leather products, lower-income countries
tend to be at the bottom of global value chains.
But by establishing robust regional value
chains with other countries on the continent,
African countries can link more gainfully
into global value chains and increase their
bargaining power by aligning themselves with
the lead firms.
THE WORLD ECONOMY AND AFRICAN

TRADE IN 2014
The operating environment for African trade
was characterized by major challenges in
2014 including a virtual stagnation in global
output. Global growth was slow largely due
to the slow recovery of the United States
economy from the global financial crisis; the
protracted fiscal and sovereign debt crises
that held back growth in the Eurozone; and
a deceleration in the Japanese economy as
a result of weak exports and the depressing
effect on consumer demand of a hike in
consumption taxes. A significant moderation
also took place in the activity of emerging
economies in
Asiaespecially
China,
whose economy decelerated on account of
declining exports and low consumer demand.
Struggling economies in Latin America and
the Caribbean, including Brazil, which slipped
into a recession as a result of dwindling
investment,
caused
by
uncertainties
surrounding the presidential elections of
October 2014.
INTRODUCTION AND EXECUTIVE SUMMARY 11
The growth of global merchandise trade

picked up in 2014 to 3.1 percent, from 2.2
percent the previous year, but was much
slower than the 4.7 percent rate that had been
forecast. The increase was driven largely by
improvements in import demand from North
America and, to some extent, Europe, but in
those regions and in emerging AsiaChina
in particulartrade growth was slower than
anticipated. Risks remained to global growth
in trade from geopolitical tensions, regional
conflicts, and possibilities of new health
crises.
African economies themselves faced an array

of new challenges in 2014, including the
outbreak of the Ebola Virus in West Africa;
an increase in terrorist activities in some
countries; and the slump in commodity
pricesin particular, oil priceswhich
dampened exports and ultimately depressed
overall economic activity across the continent.
The average rate of growth of African output
rose by 3.4 percent (a little higher than the
3.2 percent recorded in 2013). This was lower
than projected as deceleration of the Chinese
economy and weakening of the Eurozone
economies dampened global demand for

the primary commodities that are the
main components of Africas export basket.
The positive factors underpinning African
growth included, most notably, robust public
investment in infrastructure in the energy
sector and services industriesespecially in
telecommunications, tourism, and finance;
sturdy inflows of foreign direct investment;
and increased agricultural production in
many countries across the region. Growth in
domestic demand was driven by rising private
consumption on the back of increases in
employment and robust migrant remittances.
In 2014, Africas merchandise trade

contracted for the second consecutive year,
falling by 3.79 percent to US$1.16 billion
from US$1.20 billion in 2013. Exports
from the region continued to suffer from
weaknesses in global demand, caused in part
by the continued slowdown of the Chinese
economy and other emerging markets; the
lingering impact of the Eurozone fiscal and
sovereign debt crisis; and a trade-finance
gap that was due to a shortage of liquidity
for Africa from international banks. The
sluggish growth in global output and import

demand, coupled with the weakness in global
commodity prices, created uncertainty in
global financial markets and dented investor
sentiment, distorting the trade-finance flows
to developing regions in general, especially to
Africa.
Despite Africas relatively weak economic

growth, Africas financial markets generally
performed well in 2014, except in Nigeria
and South Africa where equities slumped.
The market for Eurobonds issued by African
countries remained dynamic, with many
heavily oversubscribed issuances in 2014,
although yields were slightly higher than in
previous years.
INTRA-AFRICAN TRADE
Intra-African trade experienced a remarkable
growth in 2014. The factors at work included
the continued pursuit of export-led growth
strategies by many African countries;
the positive impact of programmes and
initiatives to diversify and develop exports;
and a deepening of sub-regional and bilateral
arrangements that aimed at removing
cross-border barriers and expanding tradesupporting infrastructure to intensify trade
within the region.
Most of the intra-African trade occurred

within
sub-regions,
within/between
regional economic communities (RECs)
or customs unions. In 2014, trade grew
faster within some of the RECs than at the
continental level. Among Africas regional
economic communities, the Southern African
Development Community (SADC) recorded
the highest exports in 2014, amounting
to US$41.8 billion. Growth in trade within
the Arab-Maghreb Union was particularly
rapid, with the value of exports increasing
by 18 percent from US$5.5 billion in 2013 to
US$6.5 billion in 2014. The structure of intraAfrican trade has changed significantly over
the last decade, with a sizeable proportion
now composed of manufactures (40 percent),
followed by trade in energy commodities and

to a lesser extent, agricultural commodities.
THE OUTLOOK FOR TRADE

Over the near term, the global economic
environment is likely to remain challenging,
mainly due to the slowdown in emerging
economies, particularly China. The moderate
recovery that is expected in advanced
economies, led by the U.S. economy, is not
expected to be sufficient to prevent the global
output growth rate from falling further in
2015, to 3.1 percent, compared with the
3.3 percent recorded in 2014. Significant
downside risks remain. The further
slowdown that is projected in emerging
market and developing economies reflects
the dampening effects of weak commodity
markets for natural resources-dependent
countries,
tighter
external
financial
conditions, and capital outflows in response
to the expected strengthening of the US dollar
and the expected rise in U.S. interest rates in
2015. Other risks to growth in these countries
stem from structural bottlenecks; rebalancing
in China; and economic distress related to
geopolitical factors, especially in East Europe,
the Middle East, and some parts of Africa.
These factors could further weaken African
economies.
Global trade growth is forecast to recover
slightly, to 3.3 percent, in 2015, as a result of
the projected moderate pick-up in advanced
economies, improvements in market access,
promotion and implementation of policies
aimed at enhancing competiveness and
limiting distortions, and continued efforts
led by the World Trade Organisation (WTO)
to reform global trade rules. Downside risks
to the trade forecast remain, however. They
include the uneven nature of the global
economic recovery and the likely tightening
of monetary policy in the United States,
coupled with protracted weaknesses in
oil prices, which could potentially depress
investment and dampen growth prospects in
oil-producing countries; high unemployment
and lack of a definitive resolution of the debt

crisis in the Eurozone, which would heighten
uncertainty over financial stability; and
further slowdown of the Chinese economy,
which would limit global demand.
African economies are forecast to achieve

a growth rate of 3.75% in 2015 reflecting
difficult global conditions including the fall
in commodity prices and the slowdown
of Chinese economy. These same factors
are also projected to affect the continents
merchandise trade which is projected to
decline by about 5% in 2015. Intra-African
trade is projected to benefit from the
continued efforts at the national and subregional levels to develop infrastructure
supporting cross-border trade, notably
banking, telecommunication, and transport
facilities; and from ongoing initiatives to
diversify exports and to establish and/or
strengthen regional blocs and economic
cooperation with the view to expanding

regional trade opportunities.
CASE STUDY: DEVELOPING REGIONAL

VALUE CHAINS IN LEATHER AND
LEATHER PRODUCTS
Chapter 2 identifies potential regional value
chains that could be created in leather and
leather products in African countries, drawing
on three regional trading blocs (COMESA,
ECOWAS, and SACU). These three blocs
together comprise 40 of the 54 countries in
Africa and contribute about 98 percent of
the continents exports and 99 percent of its
imports of leather and leather products. Three
lists are identified for each country in these
trade blocs, indicating the ways in which the
country can link into RVCs in the industry: (i)
a list of outputs or finished leather products
where the country has potential to export
and trade need to be boosted along with

extra-regional FDI. In particular, attracting
FDI into the African leather industry remains
a challenge and thus, establishing regional
investment agreements may be an important
means of attracting FDI to the industry.
to regional and global markets; (ii) a list of

inputs, i.e. primary and processed leather,
that countries could source more cheaply
from within the region than from outside; (iii)
a list of leather and leather products in which
countries need foreign direct investments to
engage in a regional value chain in the LLP
industry.
STRUCTURE OF THE REPORT
The study finds that Africa has the potential

to more than double its intra-regional trade
in the leather and leather products industry.
But it also emphasizes the need to address
key constraints including high tariff and
non-tariff barriers and poor infrastructure,
and to have a favourable global and African
macroeconomic environment. It identifies
policies at the country and regional levels
for promoting and initiating RVCs. It also
suggests policies for promoting intra-regional
direct investments in the industry. Regional
cooperation and intra-regional investments
Chapter 2 reports the research on identifying

and promoting regional value chains in leather
and leather products in Africa and draws
policy implications for African governments
and producers. Chapter 3 reviews global
economic and financial developments in
2014 and Chapter 4 discusses those global
developments particularly relevant to Africa.
Chapter 5 reviews the evolution of African
trade during the year, and Chapter 6 provides
a brief review of near-term growth and
development prospects.
END
CHAPTER
IDENTIFYING AND PROMOTING

REGIONAL VALUE CHAINS IN LEATHER
AND LEATHER PRODUCTS IN AFRICA
2.1INTRODUCTION
The African Export-Import Bank partnered
the United Nations Conference on Trade
and Development (UNCTAD) to study the
feasibility of creating regional value chains
(RVCs) in the African leather and leather
products industry as a means to improve
the profitability of the industry and expand
its contribution to the continents economic
development.1
The leather industry is one of Africas

traditional industries, employing a large
number of low-skilled workers and engaging
predominantly micro-, small- and mediumsized enterprises. Growth in this industry
can therefore have far-reaching development
implications for the region. Africa possesses
a large pool of suitable raw material, lowcost processing capabilities, and export
potential for finished leather products.
Though, the African leather industry has not
hitherto been a significant foreign exchange
earner, it occupies a special position as an
important source of basic raw material to the
leather industries of the world. Most African
countries still focus on exporting inputs for
the leather industry, especially processed
leather, to destinations outside the continent.
Though, demand for leather products in
Africa has been growing rapidly, relatively
few African producing countries have yet
benefited from this local growth.
1Much of this chapter draws on Banga et al. (2014),
which provides full details of the analysis and of
the conclusions reached.
Current global conditions have created both

challenges and opportunities for Africas
leather producers. More stringent pollution
norms and rising labour costs in processed
leather have created incentives to shift
production from developed into developing
countries, and the global economic slowdown
has raised the demand for low-cost leather
products. Rising labour costs in large leather
producing countries such as China, in
principle, would improve the opportunities
for African producers to attract foreign
direct investments from outside the region.
However, the African leather industry has
been held back by low regional integration
with intra-regional trade in leather and
leather products at only 16 percent of Africas
global exports of leatherwhich has severely
limited the scale of production and lowered
the cost-competitiveness of the industry in
world markets.
Against this background, promoting the
development of regional value chains in
leather and related products holds promise
for improving the cost competitiveness of
countries in the region, and for strengthening
their bargaining power and capability to
climb up global value chains.
2.2 REGIONAL VALUE CHAINS IN THE

ERA OF GLOBAL VALUE CHAINS
A key challenge for African countries is to
trigger structural transformation to raise
the domestic value added in exports and
create more jobs. One way to promote
IDENTIFYING AND PROMOTING REGIONAL VALUE CHAINS IN LEATHER AND LEATHER PRODUCTS IN AFRICA 17
transformation is to increase countries

competitiveness in producing and exporting
manufactured goods using the large
endowment of natural resources available
within the continent. Regional integration
and pooling of resources can be an important
step in that direction.
Global value chains (GVCs) have provided

opportunities for countries in Africa to link
into global production-sharing by supplying
primary inputs. But studies have shown that
relatively little value accrues to countries at
the lower end of these chains, and especially
to those countries that are natural resourcedependent and exporters of primary
commodities (Banga, 2013).
To climb up the value chain in GVCs, and

move from exporting primary inputs to
exporting processed and intermediate
leather products, linking into regional
value chains is vital. RVCs provide better
opportunities than GVCs for countries in
a region to capture a larger share of the
value of finished products. In a RVC, the end
product is exported by a country within the
region, and thus countries in the region can
climb up the chain by using the region to
boost their competitiveness, produce and
export higher-value products. Participating
in RVCs also improves a countrys global
competitiveness and that of the region
as a whole. Countries participating in a
regional value chain can improve their cost
competitiveness by sourcing primary and
processed inputs from domestic producers
and from other countries within the region.
Subsequent higher demand created in the
region for processed inputs can generate
economies of scale for many countries, while
intra-regional and extra-regional investments
can provide the required technical know-how
to domestic producers and help them climb
up the value chain. Participating in RVCs can
thus provide an opportunity for countries
to improve their bargaining power and that
of the region vis--vis lead firms in GVCs,
and thereby raising their chances of linking
gainfully to global value chains.
Over the years, the global leather industry

has become highly fragmented and
production has spread across different
continents, with raw hides and skins, partprocessed leather, finished leather, leather
components, and leather products being
widely imported and exported. One of the
main reasons for this fragmentation is the
shifting of leather processing from developed
to developing countries. Increasing costs
of labour, and stringent laws relating to
environmental pollution in the developed
world, have been mainly responsible for
this shift. An excess supply of raw hides and
skins in the developing countries has further
encouraged the emergence of global value
chains in the industry.
2.3 DISTRIBUTION OF VALUE-ADDED

IN THE LEATHER AND LEATHER
PRODUCTS (LLP) INDUSTRY
As the rise of globalization led to outsourcing
and offshoring of productive activities,
policymakers in the South have sought ways
to link their countries industries into GVCs.
But linking into the lower end of a GVC by
exporting raw materials can be counterproductive on the grounds that countries
may get stuck at the bottom of the chain,
compelled to continue to export low-end
and low-value inputs that add relatively little
value domestically. By contrast, countries
that contribute pre-manufacturing and
post-manufacturing services like designing,
branding, and marketing tend to capture a
larger share of the value in GVCs.
To illustrate the relative returns to countries

at the top and bottom of the global value
chain in the LLP industry, Figure 2.1 shows
the structure of gross exports in terms of
value addition in the six countries that
are the worlds top producers of LLP. It
shows, for example, that in Italy domestic
manufacturing activity (shown in blue)
contributes 50 percent of the total value
added in that countrys gross exports of
LLP, while services activity such as design
and marketing (shown in red) contributes

another 35 percent. Foreign manufacturing
i.e. manufacturing in countries lower
down the value chain that send their
products for onward processing in Italy
contributes only 8 percent of the total value
added (shown in green) in the Italian final
products, and foreign services (shown in
purple) contribute only 7 percent.
Figure 2.1. Contribution of

Manufacturing and Services in Global
Value Chains in the Textile, Textile
Products, Leather, and Footwear
Industries, 2009 (percent)
100%
80%
Figure 2.2. Participation in Global Value

Chains in the Textile, Textile Products,
Leather, and Footwear Industries in
selected countries (percent)
1%
1%
2%
2%
12.6
12.1
8.3
60%
10.6
12.5
9.9
20%
USA
Turkey
FVA by foreign services
Italy
Domestic Value Added by

Services Sector
Span
China
India
Foreign Value Added by

manufacturing
Domestic Value Added by

Manufacturing
Source: B
anga et al., 2014, based on OECD-WTO TiVA, May
2013. The figure covers textiles, textile products,
leather, and the footwear industry, which are the
categories available in the TiVA data set.
These relationships imply that if developing

countries want to link into global value
chains in LLP that are formed by, say, Italy or
the U.S., they can at best expect to contribute
around 10-12 percent of the total value
of gross exports of those countries in this
industry.
Estimates for the global LLP industry show
that OECD countries account for nearly half
(more than 47 percent) of the total value-
ROW: 18%
2%
2%
2%
3%
3%
40%
added in traded LLP products.2 Among

individual countries, Chinas share is largest,
at 17 percent. Africa, Latin America, South
Asia (other than BRICS countries), and other
East and Southeast Asian countries together
account for about 18 percent of the total valueadded trade in the industry (Figure 2.2).
OECD: 47%
CHINA: 17%
Vietnam
India
Brazil
Russian Federation
Thailand
Indonesia
Malaysia
Chinese Taipei
Saudi Arabia
Source: Banga et al., 2014, based on OECD-WTO TiVA, May

2013.
Though, a commonly perceived advantage

of participating in global value chains is to
obtain higher returns on exports, higher
per-unit returns may in fact be achievable
in regional value chains than in GVCs
especially if countries do not need to
incur high fixed costs to meet the quality
parameters established by the lead firms in
GVCs. A comparison of the import unit values
2The total value added in the global exports of an
industry is obtained by adding the backward and
forward linkages of all countries. Accordingly, the

share of each country in the total value-added
indicates the size of that countrys participation in

the global value chain for the industry.
Kenya
Kenya
Cte dIvoire
South Africa
Source: Banga et al., 2014.
Namibia
COMESA
COMESA
ECOWAS
SACU
SACU
Senegal
Nigeria
Mali
Zambia
Zambia
ECOWAS
ECOWAS
ECOWAS
COMESA
COMESA
COMESA
COMESA
Zambia
Rwanda
Uganda
Zambia
Zimbabwe
Botswana
South Africa
South Africa
Ethiopia
(excludes Eritrea)
Ethiopia
(excludes Eritrea)
Uganda
COMESA
COMESA
COMESA
COMESA
SACU
SACU
SACU
COMESA
COMESA
Country
Regional Grouping
Primary Leather
Primary Leather
Primary Leather
Primary Leather
Primary Leather
Primary Leather
Primary Leather
Processed
Leather
Processed
Leather
Processed
Leather
Processed
Leather
Processed
Leather
Processed
Leather
Processed
Leather
Processed
Leather
Processed
Leather
Processed
Leather
Chemical
Chemical
Chemical
Chemical
Product
320120
340510
320417
283010
410449
410411
411330
410411
411390
410719
410419
410691
410799
HS
6-digit
code
410320
410390
410390
410390
410120
410190
411520
410441
460
11,377
4,983
8,285
3,287
142
982
158
1,412
112
1,263
5,476
111
Countrys Average
Global Exports,
2008-10 (000 US$)
131
550
1,060
111
150
4,589
630
246
India
Tanzania
Cameroon
Brazil
United Kingdom
Papua New Guinea
Albania
Italy
India
Hong Kong, China
United Kingdom
China
Hong Kong, China
United Kingdom
Hong Kong, China
Japan
Italy
Switzerland
Hong Kong, China
Hong Kong, China
Italy
Global Importer
0.93
3.18
3.62
0.81
15.04
2.09
310.91
2.35
0.41
1.48
1.72
1.42
9.12
0.74
0.28
85.55
0.92
0.14
1.10
1.47
11.39
Global Importers
Import Unit Value
Uganda
Uganda
Ghana
Congo, Dem. Rep.
South Africa
Niger
Botswana
Senegal
Malawi
South Africa
South Africa
Kenya
South Africa
Uganda
Kenya
South Africa
South Africa
South Africa
Congo, Dem. Rep.
Zimbabwe
Zimbabwe
Importer in the
Region
Table 2.1. Comparison of Import Unit Values of African Regional and Global Importers in Leather and Leather Products
1.75
4.00
3.86
1.37
17.85
3.55
310.96
2.50
8.75
1.62
2.97
3.13
18.09
0.86
1.79
93.21
2.86
0.54
40.78
3.63
13.93
Regional Importers
Import Unit Value
500000
450000
400000
350000
300000
250000
200000
150000
Trends in this industry over the last 15 years

show demand and supply growing both
within Africa and globally, indicating that
Africa has a high potential and capacity to
form RVCs to meet both regional and global
demand.
Rising incomes have strengthened the

demand for leather products across the world,
including in Africa. Africas total imports of
leather increased from US$112 million in
2000 to US$520 million in 2011, while those
of leather products grew by 36 percent per
year, from US$95 million in 2000 to US$444
million in 2011 (Figure 2.3). Importantly,
Africas total exports of leather products rose
just as rapidly, although in absolute terms
they are about five times smaller than global
imports.
Africas share of global trade in leather
and leather products has been growing,
3Source: COMTRADE, World Integrated Trade

Solutions (WITS) using HS 41 and 42 codes
Global Imports of
Leather Products
Intra Regional Exports

of Leather Products
11
10
20
09
20
08
20
07
20
06
20
05
20
04
20
03
20
02
20
20
00
01
50000
Global Exports of
Leather Products
Source: Banga et al., 2014, from United Nations Commodity

Trade Statistics Database (COMTRADE) and World Banks
WITS using HS codes 41 and 42.
Figure 2.4. Share of Intra-Regional

Trade in Total Trade and in Trade of
Leather and Leather Products: 19622011 (percent)
22
20
18
16
14
12
10
8
4
2
0
19
6
19 2
6
19 5
6
19 8
7
19 1
7
19 4
7
19 7
8
19 0
8
19 3
8
19 6
8
19 9
9
19 2
9
19 5
9
20 8
0
20 1
0
20 4
0
20 7
10
Though leather and leather products

contribute only a small share of Africas total
exports and are small by world standards,
they have been rising rapidly in the past
15 years. Africas total exports of leather
products rose from US$17 million in 2000 to
US$83 million in 2011an increase of about
300 percent (Figure 2.3).3
100000
20
2.4 EMERGING TRENDS IN LEATHER

AND LEATHER PRODUCTS TRADE IN
AFRICA
Figure 2.3. Trade in Leather and

Leather Products, 2000-11 (US$ 000)
20
In light of the foregoing analysis, the

Afreximbank-UNCTAD study examined the
potential for African countries of forming
regional value chains in the leather and
leather products industry.
accompanied by steady growth in the

continents intra-regional trade. The intraregional share of Africas total trade increased
from 12 percent in 1985 to 21 percent in
2011 (Figure 2.4).
000 USD
of global and regional importers in leather

and leather products shows that in many
cases, regional importers actually pay more
than global importers (Table 2.1).
Share of intra regional

trade in total trade (all
products)
Share of intra regional

trade in total trade of
leather and leather
products
Source: United Nations Commodity Trade Statistics

Database (COMTRADE).
Figure 2.5. Share of Intra-Regional Exports in Total Exports of Leather and Leather
Products (percent)
Share of intra-regional
Exports in total
Exports of leather
products
8
19 0
8
19 1
8
19 2
8
19 3
8
19 4
8
19 5
8
19 6
8
19 7
8
19 8
8
19 9
9
19 0
9
19 1
9
19 2
9
19 3
9
19 4
9
19 5
9
19 6
9
19 7
9
19 8
9
20 9
0
20 0
0
20 1
0
20 2
0
20 3
0
20 4
0
20 5
0
20 6
0
20 7
0
20 8
0
20 9
1
20 0
1
20 1
12
Share of intra-regional
Exports in total
Exports of Leather
19
90.00
85.00
80.00
75.00
70.00
65.00
60.00
55.00
50.00
45.00
40.00
35.00
30.00
25.00
20.00
15.00
10.00
5.00
0.0
Source: United Nations Commodity Trade Statistics Database (COMTRADE).
In leather and leather products, by contrast,

the share of Africas intra-regional trade in
its global trade has fluctuated considerably
(Figure 2.4 and Figure 2.5). African countries
have historically traded a high proportion
of their leather products among themselves,
as compared to the rest of the world, but the
pattern over the past 30 years shows excess
volatility with extreme highs and lows: in 1985
more than 90 percent of African LLP exports
went to other countries within the region, but
only 6 percent did so in 2012 (Figure 2.5).
Most countries in Africa have increased their
exports of finished leather products to other
African countries since 2000. These products
are, broadly, leather footwear, leather bags
and suitcases, leather articles for clothing, and
leather saddles and harnesses for animals.
Africas intra-regional exports of leather
products increased three times between 2000
and 2011rising by an average annual of 19
percent from US$6 million to US$18 million
while its global exports of leather products
rose twice as fast, growing at an average rate
of 38 percent in this period and increasing
from US$17 million to US$83 million.
2.4.1 Trends in inputs and outputs of

Africas leather industry
The identification of potential value chains

in an industry calls for a good understanding
of its various inputs and outputs. Thus 50
inputs and 70 outputs of the LLP industry

were identified, using BEC (Broad Economic
Classification) codes and their concordance
with six-digit HS codes. The inputs include
some (such as chemicals used in tanning) that
are sourced from other industries, and the
outputs include some (such as leather for car
seats) that are inputs for other industries.4
The list of inputs and outputs identified is
much larger than those captured by aggregate
data on LLP and significantly affects the
interpretation of global trends. For example,
the list suggests that Africas global exports
of leather products were much greater, at
US$652 million, in 2011 than the US$83
million reported in Figure 2.3 on the basis
of the more restricted definition, and that
its global imports in that year were US$3.7
billion rather than US$444 million. Africas
global exports of processed leather have
been much greater than its global exports of
primary inputs, especially after 2006. Africas
global imports of final leather products have
been rising fast and topped US$3.7 billion in
2011 (Banga et al. 2014).
With respect to African intra-regional trade

in LLP inputs and outputs in 200211, some
important and encouraging trends emerge:
4Annex 2 reports all the identified inputs and
outputs.
intra-regional trade in final leather

products grew at about 24 percent a year;
intra-regional trade in primary inputs
grew at 13 percent;
intra-regional trade in processed inputs

grew at 28 percent;
and the remaining 12 percent from other

countries (Figure 2.7).
Figure 2.7. Country Shares in Global

Exports of Inputs and Outputs of
Leather Industry in 2011 (percent)
29%
intra-regional exports of the final outputs

of the leather industry grew steadily,
though much more slowly than global
exports and imports; and
5%
24%
intra-regional trade in processed inputs

started to increase after 2005 (Figure
2.6).
47%
Figure 2.6. Intra-Regional Exports in

Inputs and Outputs in Leather Industry,
2002-11 (US$ 000)
Nigeria
South Africa
Cote dIvoire
Other Countries
Kenya
4%
3%
24%
12%
Ethiopia (Excluding Eritrea)
1500000
Source: Banga et al., 2014
1000000
Of Africas global exports of LLP inputs, some

94 percent comes from only five countries:
Egypt, Ethiopia, Kenya, Nigeria and South
Africa. Trade in LLP outputs is equally
concentrated, with five countriesEgypt,
Madagascar, Mauritius, Nigeria and South
Africaproviding 98 percent of the exports
of leather outputs to the world.
Processed Inputs
11
10
20
09
20
08
20
07
20
06
20
05
Final Products
20
04
20
03
20
20
20
02
500000
Primary Inputs
Source: Banga et al., 2014
2.4.2 Regional and country-level

trends in trade in Leather and Leather
Products
The global exports of Africas leather
and leather products industry are quite
concentrated: 76 percent of them come from
Nigeria and South Africa; 12 percent from
Kenya, Ethiopia, and Cte dIvoire combined;
Africas intra-regional exports of LLP are also

concentrated, but within different country
groups. Burkina Faso, Namibia, Nigeria, South
Africa, and Zambia contribute 95 percent of
the intra-regional LLP trade. In chemicals,
the top six importers in Africa are Ethiopia
(excluding Eritrea), Cte dIvoire, Kenya,
Nigeria, South Africa, and Uganda. The top six
exporters are Cte dIvoire, Kenya, Namibia,
Nigeria, South Africa, and Zimbabwe.
The above findings suggest that:

Demand is growing for leather products

in Africa, and is being met by imports
from the rest of the world andat a

much lower levelby imports from other
African countries;
Africa has the necessary capability to

expand its leather production, as shown
by its growing exports of leather products
to the rest of the world as well as intraregionally;
Africa has sufficient inputs for leather

products, given that it imports significantly
more LLP inputs than it exports;
Chemicals are an important input besides

primary and processed leather to the
leather industry and need to be included
in any analyses of trends in the inputs and
outputs of the industry;
Africas demand for chemicals is growing

consistently with the rise in production of
leather products; and
Along with supply of primary and
processed leather, there is demand for
leather inputs within the regionas
seen from the rise in intra-regional trade
in leather inputs, especially processed
inputs, of recent years.
What emerges strongly is that relatively few

African countries have been able to benefit
from the growing demand in the region for
leather products. Most African countries
still focus on exporting inputs for the leather
industry, especially processed leather, to
destinations outside Africa. There is a need to
identify export potential in inputs and outputs
of the leather industry in more countries in
the region, and to promote the production
and export of leather products from a greater
number of countries.
2.5 ESTIMATING TRADE POTENTIAL

IN AFRICA USING A GRAVITY MODEL
To assess the trade potential among and
between the member countries of COMESA,
ECOWAS, and SACU, which together account

for 98 percent of Africas LLP trade, a dynamic
gravity model was estimated for intraregional trade in LLP for these countries in
terms of their shares in trade in LLP. The
model predicts bilateral trade flows between
any two countries as a positive function
of their size and a negative function of the
distance between them.5
Empirical results from the model show

that the scope for increasing intra-regional
LLP trade is high for almost all countries in
Africa. Actual trade in the region has been
much lower than the potential trade in this
industry, particularly if all inputs and outputs
are considered. Removing all tariff and nontariff barriers could increase the existing
average intra-regional trade tenfold.
2.6 IDENTIFYING COUNTRY-LEVEL

EXPORT POTENTIAL IN LEATHER AND
LEATHER PRODUCTS
The study next estimated the export potential
of each country at the product level within
the LLP industry. A potential regional export
basket was identified for each country
where a regional demand exists along with
export capacity of the countryi.e. where
the regions global imports are greater
than the countrys global exports and the
countrys global exports are greater than
US$100,000. If the regions global imports
are smaller than the countrys global
exports, the product is identified in the
countrys potential global export basket.
The results show that the region as a

whole has the potential to export 52
leather products and 152 leather inputs
(see Table A.3 in Annex 1). The greatest
number of leather products identified for
regional export is from COMESA member
countries: Kenya (8 outputs), Madagascar
(6), Mauritius (6), Ethiopia (5), Zimbabwe
5For the specification of the model and its detailed
results, see Annex 1.
(4), Egypt (3), Uganda (2), and Rwanda and

Zambia (1 each). These products include
footwear, parts of footwear, trunks, suitcases,
handbags, and leather seats. South Africa has
six leather products in its competitive basket
while Cte dIvoire has five. Cte dIvoire,
Kenya, Madagascar, Mauritius, and South
Africa have potential for exporting finished
leather products to other countries in the
region.
The greatest number of competitive leather
inputs is identified for Egypt (21 mainly
tanned leather inputs), followed by South
Africa (19), Ethiopia (17), Namibia (13),
and Kenya (12).
On average, Africas global LLP exports in

200810 were lower than its global imports.
In final leather products and chemical inputs
there is high potential for intra-regional
trade, as regional exports are much lower
than the global imports of the region. But for
processed leather and primary leather, the
regions global exports are much greater than
the regions global imports.
Intra-regional exports comprise only 16
percent of the total global exports of the
region. Demand in the region therefore exists
for almost all countries.
2.7 IDENTIFYING POTENTIAL

REGIONAL VALUE CHAINS IN
LEATHER AND LEATHER PRODUCTS
One way to exploit the high potential for
intra-regional trade in LLP would be to form
regional value chains in the industry.
To identify potential regional value chains,
the study again uses the BEC categorization
of inputs and outputs in the leather industry.
Leather inputs are divided into primary
leather, processed leather, and chemicals
used in leather. Leather outputs comprise
manufactured leather products. The analysis
again focuses on the member countries of
COMESA, ECOWAS, and SACU.
Three lists are identified for each country,

indicating the ways in which the country can
link into an RVC. First is a list of potential
outputs of finished leather products for
exports to the region, where the country has
export potential and regional demand exists.
Second is a list of potential inputs, i.e. primary
leather, processed leather, and chemicals
used by the leather industry, for which the
region has the supply capacity and which it
can supply at a lower cost than it is currently
paying for imports from outside the region.
Third is a list of LLP for potential inward FDI
where the country has export competitiveness
and the region has high demand but the
country may lose its export competitiveness
over time. Last, an attempt is made to identify
the potential investors in the region: a list of
products is identified in which the country is
the most competitive and the largest exporter
in the region, and can therefore undertake
intra-regional investments.
The findings are presented in Table 2.2
through Table 2.8.
2.7.1 Leather products identified for

regional and global export
As shown in Table 2.2, 52 LLP are identified

for 15 countries in the region that have
a competitive advantage and have global
exports of more than US$100,000. Out of the
52 products, regional demand exists for 46. In
the period 200810, average global exports of
the 15 countries in these products amounted
to US$284 million, while regional demand
was US$1.9 billion. Out of the US$284 million,
only 30 percent (US$87 million) was exported
to the region. For COMESA member countries
alone, 36 products have been identified, of
which regional demand exists for 33.
Twenty leather products have been identified

as being unique leather products for regional
exports for countries where no other country
has competitiveness (Table 2.3).
Regarding the 20 identified unique leather

products listed in Table 2.3, a comparison of
Table 2.2. Number of Potential Finished Leather Products Identified for Regional and
Global Export from COMESA, ECOWAS, and SACU
SubRegional
Group
COMESA
COMESA
COMESA
COMESA
COMESA
COMESA
COMESA
COMESA
COMESA
ECOWAS
ECOWAS
ECOWAS
ECOWAS
ECOWAS
SACU
ALL Total
Country
Egypt, Arab Rep.

Ethiopia
(excludes Eritrea)
Kenya
Madagascar
Mauritius
Rwanda
Uganda
Zambia
Zimbabwe
COMESA
Cape Verde
Cte dIvoire
Ghana
Nigeria
Senegal
ECOWAS
South Africa
SACU
Potential Final
Products for
Regional Exports
3
5
7
5
5
1
2
1
4
33
1
5
1
1
1
9
4
4
46
Potential Final
Products for
Global Exports
1
1
1
1
2
2
6
Total Number of
final products
identified
3
5
8
6
6
1
2
1
4
36
1
5
1
2
1
10
6
6
52
Countrys Global
Exports Average
2008-10 ($ 000)
8,617
7,173
30,164
11,058
15,295
1,184
3,716
1,575
4,289
83,071
2,606
25,503
391
154,750
1,030
184,279
17,188
17,188
284,538
Regions Global
Import Average
2008-10 ($ 000)
30,508
330,641
236,466
87,671
70,667
117,290
9,612
36,102
410,486
1,329,443
19,512
188,099
24,573
369,852
36,295
638,332
19,897
19,897
1,987,672
Table 2.3. Country-Wise Unique Leather Products Identified for Regional Export
S.No
1
HS 6 digit
420100
Country
South Africa
420211
Kenya
420212
Zimbabwe
420222
Madagascar
420229
Madagascar
420231
Mauritius
420292
Mauritius
420299
Ghana
420310
Mauritius
Description at 4 Digit Level

Saddlery and harness for any animal (including traces, leads, knee pads, muzzles,
saddle cloths, saddle bags, dog coats and the like), of any material.
Trunks, suit-cases, vanity-cases, executive-cases, brief-cases, school satchels, spectacle

cases, binocular cases, camera cases, musical instrument cases, gun cases, holsters and
similar containers; travelling-bags, insulated food or beverages bags, toile






Articles of apparel and clothing accessories, of leather or of composition leather.
10
430390
South Africa
Articles of apparel, clothing accessories and other articles of furskin.
11
640110
South Africa
12
640199
Cte dIvoire
13
14
640299
640319
Nigeria
Other footwear with outer soles and uppers of rubber or plastics.
15
640320
Uganda
16
640391
Footwear with outer soles of rubber, plastics, leather, or composition leather and
uppers of leather.
17
640590
Ethiopia
(excludes Eritrea) uppers of leather.
18
640620
19
650699
20
940161
Waterproof footwear with outer soles and uppers of rubber or of plastics, the uppers
of which are neither fixed to the sole nor assembled by stitching, riveting, nailing,
screwing, plugging or similar processes.
Waterproof footwear with outer soles and uppers of rubber or of plastics, the uppers
of which are neither fixed to the sole nor assembled by stitching, riveting, nailing,
screwing, plugging or similar processes.
Ethiopia
(excludes Eritrea) uppers of leather.
Ethiopia
Other footwear.
(excludes Eritrea)
Kenya
Parts of footwear (including uppers whether or not attached to soles other than outer
soles); removable in-soles, heel cushions and similar articles; gaiters, leggings and
similar articles, and parts thereof.
Madagascar
Other headgear, whether or not lined or trimmed.
Zimbabwe
Seats (other than those of heading 94.02), whether or not convertible into beds, and
parts thereof.
Table 2.4. Comparison of Unit Values of Top Global and Top Regional Importers in
Identified Unique Products for Regional Export
HS 6 digit
Country
420212
420231
420310
640110
640199
640299
640319
640391
640620
940161
Zimbabwe
Mauritius
Mauritius
South Africa
Cte dIvoire
Nigeria
Ethiopia
Ethiopia
Kenya
Zimbabwe
France
United Kingdom
Singapore
Angola
Belgium
Somalia
Italy
Tanzania
Australia
Top Global
Importer
Top Global
Importer UV
import unit values shows that in ten of these

products, listed in Table 2.4, the import unit
value of the top regional importer is greater
than that of the top global importer. Although
Top Importer in
Region
South Africa
121.75
99.15
8.31
8.93
10.41
26.96
42.07
0.57
135.00
South Africa
South Africa
Zimbabwe
Mali
Ghana
Sudan
South Africa
Rwanda
Zambia
Top Importer
UV in Region
1.94
122.39
99.36
11.85
8.94
10.41
26.98
42.08
0.83
159.31
Regions share
in Countrys
Exports (%)
99.95
0.19
0.14
44.23
97.31
27.72
99.23
25.26
68.58
99.50
such comparisons have limitations6, this

finding shows not only that the region provides
demand for regional leather products, but that
this demand is accompanied by higher returns.
6Mainly because differences in the quality of the

products demanded, and associated delivery services
provided, may not be apparent in the unit costs.
Table 2.5. Number of Primary, Processed, and Chemical Leather Inputs That Could
Be Sourced From Within COMESA, ECOWAS, and SACU
Sub-Regional
Group
Country
COMESA
COMESA
COMESA
Egypt, Arab Rep.

Burundi
Ethiopia
(excludes Eritrea)
Kenya
Madagascar
Malawi
Mauritius
Rwanda
Sudan
Uganda
Zimbabwe
COMESA
Benin
Burkina Faso
Cte dIvoire
Ghana
Mali
Niger
Nigeria
Senegal
ECOWAS
Botswana
Namibia
South Africa
SACU
Total
COMESA
COMESA
COMESA
COMESA
Egypt, Arab Rep.

Burundi
Congo, Rep.
Ethiopia
(excludes Eritrea)
Kenya
Madagascar
Malawi
Mauritius
Rwanda
Sudan
Uganda
Zambia
Zimbabwe
COMESA
Burkina Faso
Cte dIvoire
Ghana
Mali
Nigeria
ECOWAS
Namibia
South Africa
SACU
COMESA
COMESA
COMESA
COMESA
COMESA
COMESA
COMESA
COMESA
ECOWAS
ECOWAS
ECOWAS
ECOWAS
ECOWAS
ECOWAS
ECOWAS
ECOWAS
SACU
SACU
SACU
COMESA
COMESA
COMESA
COMESA
COMESA
COMESA
COMESA
COMESA
COMESA
ECOWAS
ECOWAS
ECOWAS
ECOWAS
ECOWAS
SACU
SACU
Three Region
Total
Processed
1
6
5
5
13
1
1
2
1
7
2
2
1
1
23
Primary
Chemical
At a lower cost
3
1
3
5
20
3
1
3
1
14
3
1
2
2
1
3
6
9
40
Not necessarily at a lower cost
1
4
1
1
3
2
2
1
2
3
17
5
1
2
1
2
3
4
2
26
1
2
2
1
2
8
2
2
76
Total
7
1
2
2
2
1
6
1
1
4
4
31
1
2
1
4
1
2
3
3
17
3
3
8
14
62
2
1
1
4
7
3
2
2
1
2
3
4
4
36
1
2
2
1
6
12
3
3
6
116
Countrys
Average Global
Imports 200810 ($ 000)
6,770
254
4,689
Regions
Average
Global Exports
2008-10
($ 000)
120,306
4,568
11,133
4,341
418
238
4,827
312
118
1,742
1,912
25,621
125
403
573
737
134
248
4,914
2,345
9,478
2,673
2,944
20,993
26,611
61710
23,761
21,065
643
86,378
4,558
325
21,504
14,403
308,645
7,915
12,484
602
7,646
16,525
12,484
21,512
28,748
107,914
29,424
19,136
797,189
845,749
1262308
4,250
147
850
6,476
22,782
16,499
4,569
76,672
6,443
1,511
689
3,335
651
464
2,502
6,238
1,729
35,284
103
409
2,674
237
8,642
12,065
3,478
2,236
5,714
114,772
106,091
17,753
21,023
9,504
16,499
8,558
51,135
37,309
76,944
465,336
8,398
20,679
24,413
4,565
105,467
163,522
35,413
19,716
55,129
1,946,295
16.64
1.01
India
New Zealand
731,934
7,206
0.27
64.24
1,217
1,688
411310
410190
South Africa
Kenya
SACU
COMESA
Processed
Primary
HS 6 Digit
320210
320417
283010
320417
340510
411390
410799
410411
Country
Ethiopia
Uganda
Nigeria
Senegal
South Africa
Mauritius
Nigeria
South Africa
Product
Chemical
Chemical
Chemical
Chemical
Chemical
Processed
Processed
Processed
33.65
4.42
Top Exporter in
Region
South Africa
Kenya
Botswana
Cte dIvoire
Malawi
South Africa
Botswana
Zambia
Ethiopia
(excludes
Eritrea)
Burundi
Export Unit
Value of Global
Exporter
2.30
8.88
0.52
11.68
9.08
62.65
20.72
6.06
Top Global
Exporter
Italy
Germany
UAE
France
Italy
Italy
Belgium
Australia
Regions Average
Global Exports
2008-10
(US$000)
6,564
7,915
8,403
7,757
11,530
47,287
8,540
16,331
Regions share
in Countrys
Imports (%)
13.19
7.78
6.25
56.67
0.01
0.39
0.56
0.63
Sub-regional
group
COMESA
COMESA
ECOWAS
ECOWAS
SACU
COMESA
ECOWAS
SACU
A comparison of the unit values of exports

(Table 2.6) shows that out of 107 inputs,
62 could be sourced at a lower cost from
within the region than from outside. Africa
has the capacity to supply these inputs, as
its global exports are much higher than
its demand. Out of the 62 inputs, 40 are
chemical inputs (such as synthetic organic
tanning substances, synthetic colouring
matter, and polishes and creams for
footwear). Nigeria, Kenya, and Ethiopia are
the top three importers of these chemical
inputs, importing from France, India, and
Italy, while South Africa has lower export
unit values in these chemical inputs and has
higher global exports than these countries
global imports.
Countrys
Average Global
Imports
2008-10
(US$000)
4,144
1,157
2,180
1,725
1,052
3,090
2,170
15,511
Compared to other regions or trading blocs,

SACU countries have the highest potential
to import inputs for the leather industry
regionally at a lower cost than they are
currently paying. Within SACU, South Africa
could import US$20.9 million of such inputs
from within the region rather than, as now,
from outside. Within COMESA, Mauritius
and Ethiopia could regionally import US$9.5
million worth of LLP inputs at a lower cost
regionally, while in ECOWAS, Nigeria could
import inputs worth US$5 million regionally
(Table 2.5). In total, US$54.9 million worth
of LLP inputs could be regionally imported
at a lower cost than countries are paying
now.
Table 2.6. Comparison of Export Unit Values of Top Global and Top Regional Exporters of Leather Inputs
Turning to the second of the lists introduced

above, Table 2.5 shows that 116 inputs are
identified that African LLP producers could
source regionally. Of these, 17 are primary
inputs, 23 are processed leather inputs,
and 76 are chemical inputs for the leather
industry. In the period 200810, on average,
inputs worth US$114 million a year were
imported from outside the region, while
the region exported US$1.9 billion of these
inputs globally.
Export Unit
Value of Regional
Exporter
1.36
7.04
0.52
4.25
1.39
33.00
20.70
1.77
2.7.2 Inputs identified to be sourced

from within the region
2.7.3 Leather industry products

identified for intra-regional
investments, and potential regional
investors
In total, 80 leather inputs and outputs that

may require regional or extra-regional FDI
were identified. These include 34 leather
products, 15 primary leather inputs, 22
processed leather inputs, and 9 chemicals
used for leather. Total regional exports of
these products amounted to US$1.7 billion on
average in 2008-10. Kenya has the greatest
number of leather products identified where
the country has competitive advantage
and needs to develop supply capacity. It
is followed by Madagascar, Cte dIvoire,
Ethiopia, and Mauritius. Countries with
competitive advantage in processed leather
products and therefore requiring increased
FDI include Namibia, Ethiopia, Zambia,
Egypt, and Uganda. Kenya and South Africa
were found to have rising competitiveness in
chemicals used by the leather industry and
To identify the LLP inputs and outputs for

which African producers may require inward
regional or extra-regional foreign direct
investment, products were identified where
the country has rising competitiveness
but lacks supply capacity. The rising
competitiveness of a country in the products
where regional demand exists (i.e., where the
countrys global exports are lower than the
regions global imports) was measured by
comparing its three-year averages of revealed
comparative advantage in the period 200310. Table 2.7 reports the number of products
identified for potential FDI.
Table 2.7. Number of LLP Products of COMESA, ECOWAS, and SACU Identified for
Potential Inward Foreign Direct Investment
SubRegional
Group
COMESA
COMESA
COMESA
COMESA
COMESA
COMESA
COMESA
COMESA
COMESA
COMESA
COMESA
ECOWAS
ECOWAS
ECOWAS
ECOWAS
ECOWAS
ECOWAS
SACU
SACU
Country
Burundi
Egypt, Arab Rep.
Ethiopia
(excludes Eritrea)
Kenya
Madagascar
Malawi
Mauritius
Rwanda
Uganda
Zambia
Zimbabwe
COMESA
Cape Verde
Cte dIvoire
Ghana
Mali
Nigeria
Senegal
ECOWAS
Namibia
South Africa
SACU
Total
Number of
Finished
Products
Identified for
Inward FDI
1
4
6
5
4
1
1
1
23
1
5
1
1
1
9
2
2
34
Number
of Primary
Products
Identified for
Inward FDI
1
1
2
1
1
8
4
4
1
2
3
15
Number of
Processed
Products
Identified for
Inward FDI
3
3
1
3
3
13
1
1
1
3
5
1
6
22
Number of
Chemical
Products
Identified for
Inward FDI
1
1
2
3
9
Number of
Products
Identified for
Inward FDI
1
5
7
11
5
2
4
2
6
4
2
49
1
6
1
1
2
6
17
7
7
14
80
Regions
Average Global
Imports 200810 (US$000)
1,656
67,572
327,466
175,499
80,745
10,300
62,409
118,945
56,968
26,779
66,642
994,982
19,512
253,805
24,573
1,510
334,689
49,244
683,334
50,963
40,131
91,094
1,769,410
Table 2.8. Number of LLP Products of COMESA, ECOWAS, and SACU Identified for
Potential Outward Foreign Direct Investment
SubRegional
Group
COMESA
COMESA
COMESA
COMESA
COMESA
COMESA
ECOWAS
SACU
SACU
Country
Egypt, Arab
Rep.
Ethiopia
(excludes
Eritrea)
Kenya
Madagascar
Mauritius
Zimbabwe
COMESA
Nigeria
ECOWAS
Namibia
South Africa
SACU
Total
Number of
Finished
Products
Identified for
Outward FDI
1
Number
of Primary
Products
Identified for
Outward FDI
Number of
Processed
Products
Identified for
Outward FDI
6
Number. of
Chemical
Products
Identified for
Outward FDI
1
Number of
Products
Identified for
Outward FDI
8
1
1
1
1
1
5
1
1
1
4
5
6
7
3
3
2
2
12
2
2
3
1
1
1
1
1
13
3
3
1
9
10
26
Countrys
Average Global
Exports 200810 (US$000)
109,117
24,755
7,197
7,521
7,805
11,280
167,676
671,142
671,142
5,784
212,695
218,480
1,057,297
thus to require FDI to increase their supply

capacities.
To identify countries that could undertake

intra-regional FDI in inputs and outputs,
numbers of LLP were identified in which
countries have rising competitiveness
and have global exports greater than the
regions global imports. These countries
therefore have the capacity to undertake
intra-regional investments and would gain
through economies of scale. Table 2.8 lists the
countries in the region that could undertake
intra-regional FDI in the identified products.
With reference to Table 2.8, about 26 leather
outputs and inputs were identified where
intra-regional investments can be undertaken
by the identified countries in the region. Using
the criterion of rising competitiveness as well
as regional supply capacity, South Africa was
identified as a potential regional investor in
leather output-HS code 420100 (saddlery and
harness for any animal); tanning of leather;
and production of chemicals used for tanning
(HS codes 284130 and 320120). Egypt was
identified as a potential regional investor

in eight products, including six processed
leather products. Kenya was identified as
a potential regional investor in waterproof
footwear; Madagascar for other articles of
leather or of composition of leather (HS code
420500); and Mauritius for articles of apparel
and clothing accessories made of leather or of
composition of leather.
2.8 FOREIGN DIRECT INVESTMENT

FOR THE AFRICAN LEATHER
INDUSTRY
The number of African countries that need
investments in identified leather outputs
exceeds the number of countries in the region
that can undertake such investments. Though
Africa has adequate supplies of inputs, it
lacks the capacity to increase the production
of outputs sufficiently on its own. For this
purpose, regional cooperation and intraregional investments and trade need to be
boosted, and supported by extra-regional
FDI. Extra-regional FDI may not be readily
attracted to the production of leather in the

region, so targeted policy interventions,
possibly including a regional investment
agreement, may be required to boost the LLP
industry.
2.8.1 Factors limiting foreign direct

investment into the African leather
industry
Africas strengths in the LLP industry are

based on the availability and growing supply
of raw material and its relatively low labour
costs, particularly in light of the growing
labour costs in China and other emerging
market economies in Asia. On most businessrelated indicators, such as time required to
start a business, or time required to resolve
insolvency, many African countries fare
better than even some of the most successful
developing countries outside the region.
However, African countries lag behind other
developing countries in other continents
including Asian emerging market economies
such as China and Vietnam in attracting
FDI in the leather industry, due to their high
trade costs, poor transport facilities and
trade infrastructure, and overall low logistic
performance.
Not only in the LLP industry but more
generally, infrastructure deficiencies present
a major stumbling block for attracting FDI
inflows and for expanding intra-African
trade. These deficiencies include poor
transport and communications facilities;
deficient maintenance of road networks;
and inflexible, unreliable, and inefficient rail
transport, electric power, and water supply.
The World Bank (2006) has estimated that
Africa could gain in the range of US$20
billion annually from projects to upgrade its
trade-related infrastructure. Furthermore,
African Development Bank (AfDB) studies
suggest that the poor state of infrastructure
in Africa cuts potential economic growth
by 2 percentage points a year and reduces
business productivity by as much as 40
percent (AfDB, 2010). Several initiatives
are underway to improve essential African
infrastructure in the areas of energy, ICT,

transport, and trans-boundary water.7
Low regional integration, associated with

relatively small markets, high trade costs, low
labour productivity, unfavourable business
environments, and relative instability in
many African countries, is another factor that
discourages FDI in Africa. Inward FDI has
concentrated in a small number of countries
and an even smaller number of sectors,
predominantly those like oil and minerals
that yield quick returns and have weak links
with the domestic economy. Foreign firms
prefer to import raw materials and processed
leather from African countries rather than
making investments in leather products and
exporting value-added and finished products.
Low labour productivity may be another

major hindrance to extra-regional investment
in Africas LLP industry. Labour productivity
in Africa is held back by the low level of
technology and the low quality of traderelated infrastructure.
2.8.2 The policy environment for

foreign direct investment in Africa
Though Africa remains the smallest recipient

of FDI inflows among the developing
regions, a sharp rise has taken place in
its annual average inflows, from US$6.7
billion between 1990 and 1999 to US$33.5
billion between 2000 and 2011. The rise in
inflows is explained by strong performance
in the commodities sector, the start of oil
production in some countries, political and
macroeconomic stability, and robust GDP
growth prospects.
7They include the AU/NEPAD African Action
Plan launched in 2009; the AUC Heads of State

and Governments Program for Infrastructure
Development in Africa (PIDA) launched in 2010;

the North-South Corridor Initiative approved
by the COMESA-SADC-EAC taskforce; and two
ECOWAS flagship programs: the West African

Power Pool and the West Africa Gas Pipeline.
Today the policy environment related to

FDI has improved remarkably across much
of Africa. First, regulatory restrictions on
external (current and capital accounts)
transactions have been eliminated, with
several countries moving from fixed to
market-based exchange rates. Second, many
countries in the region have signed and
are participating in bilateral, regional, and
multilateral agreements. Even aside from
these agreements, tariffs have been steadily
reduced and harmonized in most countries
in the region. Such policy reforms and
participation in treaties contribute to the
creation of a favourable climate for FDI in the
region (Pigato, 2001).
Efforts are under way to harmonize

investment-related laws and incentives in
Africa. One example is the Cross-Border
Initiative by a number of countries in Eastern
and Southern Africa8 to promote and facilitate
investment by simplifying and merging their
rules and regulations into a single systematic
code and a single published document.
Countries belonging to regional bodies such
as COMESA, the West African Economic and
Monetary Union (WAEMU), and SADC are
preparing similar codes related to investments
in their respective member countries.
The established codes are meant to set out
common rules for promoting both domestic
and foreign investment, a single common
fiscal regime, harmonized fiscal incentives,
and transparent and non-discriminatory
procedures for entry and operations of
investments.
For
instance,
COMESAs
establishment in 2007 of a Regional
(Common) Investment Area seeks to attract
higher and sustainable levels of investment
into the region by forming an internationally
competitive investment area that consents to
freer cross-border investment and mobility
of labour, goods, and services among member
8Burundi, Comoros, Kenya, Madagascar, Malawi,

Mauritius,
Swaziland,
Zimbabwe.
Namibia,
Tanzania,
Rwanda,
Uganda,
Seychelles,
Zambia,
and
states. Another example is the ECOWAS

Treaty, which favours the implementation
of measures aimed at improving the
investment climate and increasing the
attractiveness of the ECOWAS region as a
single (common) market. A large number of
ECOWAS member countries have taken steps
to implement policies aimed at improving
their investment climate. The overarching
objective for the setting up of the ECOWAS
Common Investment Market is to attract
higher and sustainable levels of investment
through the formation of an internationally
competitive investment region, devoid of
restrictions on cross-border movement of
capital, labour, goods, and services. The basic
challenge confronting that initiative is the
slow process towards the implementation
of appropriate regulations and policies and
constraints imposed by national legislation,
notwithstanding regional integration.
In spite of these initiatives, regulatory

restrictions still impede the inflow of direct and
portfolio investment into Africa. In addition,
there are significant differences in procedures
and requirements for FDI entry among
countries in the continent. In some instances,
FDI into sectors such as minerals, petroleum,
and tourism requires special approval and must
satisfy certain criteria. In many countries, entry
requirements are demanding. An example is the
case of a prospective manufacturing investor
in Botswana who should obtain an investment
license and approvals from the land board
and district councils and must satisfy certain
criteria on technical skills, capital adequacy, and
the interests of the economy. Also, in a number
of countries including Botswana and Ghana,
multinational corporations and foreign citizens
are not allowed in activities reserved for
domestic small and medium-sized enterprises.
2.8.3 Exploring the possibility of a

regional investment agreement among
regional economic communities
One way to promote FDI in Africa would

be to have in place regional investment
agreements, especially between COMESA,
ECOWAS, and SACU. Such agreements are

now gaining significance globally, and
developing countries are also opting for
regional investment agreements within their
free-trade agreements. For instance, ASEAN
signed the ASEAN Comprehensive Investment
Agreement in February, 2009, with the
view to creating a free and open investment
regime within ASEAN to attract FDI and boost
economic integration.
Countries in Africa and regional blocs like

COMESA have entered into bilateral/regional
investment treaties among themselves to
boost investor confidence. However, there
is currently no regional investment treaty
between regional blocs like COMESA, SACU,
and ECOWAS. In this regard, and learning
from the ASEAN experience, African countries
could explore the option of establishing
regional investment agreements with the
potential for promoting both intra-regional
and extra-regional FDI.
2.9RECOMMENDATIONS
2.9.1 Establish a regional leather
association
Cooperation and collaboration are essential
in any regional integration effort, and depend
on sharing of information and knowledge
within the region. The leather industry has
been a major thrust area for development
in most countries across the region, in view
of its potential for job creation. But while
a lot of effort and money is being invested
in modernizing the industry and devising
policies to enhance its exports at the national
level, more attention needs to be paid to the
industry at the regional level. High tariffs
are still present intra-regionally, especially
on leather products. Protection of domestic
markets against competition from within the
region has left a large untapped potential for
intra-regional trade and has also prevented
the industry from taking advantage of the
large pool of cheap resources available to
increase the scale of production.
To address these challenges, there is a need

for regional blocs to establish leather industry
associations which can then together form
a Leather Industry Association of Africa.
One such regional association for Europe:
the Confederation of National Associations
of Tanners and Dressers of the European
Community is a non-profit organization
founded to represent the European leather
industry internationally and enhance its
interests. The International Council of Hides,
Skins, and Leather Traders Associations
draws its members from more than 30
countries.
A regional leather industry association
of Africa could play a catalytic role in
information sharing with respect to ongoing
projects, policies, incentives, and concerns in
the region. It could voice common interests
and concerns of its member countries in
international fora and improve the bargaining
power of the industry in extra-regional
bilateral and other free-trade areas that
the countries in the region may negotiate.
Collaboration and discussions between
industry representatives from across the
region could lead to important decisions with
respect to non-tariff barriers and would also
improve the bargaining power of countries in
the region if they link into GVCs.
2.9.2 Adopt branding for African

products
Adopting a common label for African leather

products could be an important step for
branding the continents products. For
developing countries including Turkey and
Brazil, having a prestigious brand for their
leather products in international markets
has been extremely important. Companies
in these countries have been able to position
themselves in the global market through
branding and product differentiation,
especially in leather garments, which has
created a niche market for them. Such
labelling could be explored by African
countries. A regional association could help
in establishing such a common brand for
LLP produced in the region, especially those

produced from high-quality leather.
Common design studios for African countries

could be set up, perhaps using expertise from
countries such as India and China. South-South
cooperation in services used in the production
of leather products can bring tremendous gains
to collaborating countries. Pre-manufacturing
services such as R&D, and design and postmanufacturing services like branding and
marketing could dramatically help the
continent to add value to its leather products.
2.9.3 Promote South-South technology

sharing
On the technology front, most of the tanneries

in Africa use outdated technology, which
inhibits them from producing good quality
processed leather, even from the good
quality hides and skins they have available.
The tanneries require high doses of capital
investment and R&D in order to improve
their technology. Many successful innovative
projects have been launched in South Asian
countries including Bangladesh, India, and
Pakistan for upgrading technologies in the
tanning industry. For example, the Central
Leather Research Institute at Chennai, a unit
of the Council for Scientific and Industrial
Research, has developed a bio-refinery to
produce biodiesel, bioethanol, bio-hydrogen,
and bio-methane from tannery solid waste.
Joint ventures with other developing
countries that have adapted technology to
suit their absorption capacities can help
to promote R&D in this sector and achieve
synergy between different projects. Intraregional investments can lead to effective
technology spillovers and help to make
available high quality leather in the region.
2.9.4 Accelerate customs and logistics

procedures
Trade facilitation measures could be a catalyst

for the promotion of intra-regional trade
in Africa. Many studies have highlighted the
gains of accelerating customs and logistics

procedures. For example, reducing transit time
leads eventually to lower production costs
and is also important in making countries
and regions more attractive for value chains.
Djankov et al. (2010) found that an extra day
of transit time reduced trade volumes by
one percent. According to the World Bank
(2007), the category of trade facilitation
that produces the greatest gains is servicesector infrastructure, followed by efficiency
in air and maritime ports. Africa requires
upgraded ports and information technology
infrastructure and continued reforms in
customs clearance procedures, as well as
regulatory harmonization. Many countries on
the continent have undertaken substantive
trade facilitation measures and now compare
favourably to developing countries such as
India in terms of time taken to import and
export. But moving towards consistency of
trade facilitation measures across countries
and trading blocs is the next challenge.
2.9.5 Accelerate and deepen intraregional trading arrangements
Intra-regional
cooperation
and
trade
agreements can go a long way in promoting
and forming intra-regional value chains in
LLP. The tripartite trade agreement between
COMESA, ECOWAS, and SACU was signed in
June 2014. Regional trading arrangements
play a critical role in reducing transit cost
and time across borders. They can also be
expected to help in harmonizing technical
standards and regulations and procedures,
along with lowering tariffs and addressing
non-tariff trade barriers.
Africa lacks an adequate mechanism for
monitoring non-tariff barriers. While a
dedicated executive body could be set up to
oversee reductions in reported barriers, and
a robust dispute-settlement mechanism could
be put in place to enforce decisions within
regional economic blocs. In the medium and
long term, ongoing efforts to establish the
Continental Free Trade Area could emerge as
a lasting solution.
2.9.6 Improve physical and

telecommunications infrastructure
capital investments. Sources of invested

capital can be either internal or external. For
LDCs the main source of external investment
capital is FDI. It is important that countries
define (and emphasise) their comparative
advantage and provide the necessary
information to potential investors with
regard to those advantages. With respect to
regional value chains, much of the production
expansion is likely to come as firms within
a region expand from the more advanced
economies into the less advanced ones in
the region. Accordingly, particular attention
needs to be paid to the environment for flows
of continental and regional FDI.
Improvements in Africas road and rail

infrastructure are an imperative for
reducing transport time and direct cost
and for maintaining quality in production.
Ports and cargo-handling facilities are an
important part of that infrastructure (Brooks,
2008). Cheap and reliable communication
networks are a necessary part of ensuring
that right goods are shipped at the right
time between production nodes in a supply
chain. Therefore, reducing the transaction
costs of trade also means improving the
means of communication within and across
national borders. This is also an area where
the presence of large externalities suggests
significant rewards to regional cooperation.
For Africa to hasten the process of developing
regional value chains, adequate attention
must be given to putting in place a robust and
reliable infrastructure.
Another source of finance that could be

tapped into is intra-firm trade credit. Larger
or better-financed firms may be able to
provide trade credit to less financed firms
within their network if given the right
incentives such as tax concessions, insurance,
or limited guarantees. This may have the
added benefit of making production within
value chains more attractive to nascent firms.
The use of development banks and exportimport banks such as the African ExportImport Bank can be leveraged for developing
regional value chains.
2.9.7 Mobilize regional resources
The development and expansion of regional

value chains requires the development and/
or expansion of new firms and the required
END
CHAPTER
GLOBAL ECONOMIC AND

FINANCIAL DEVELOPMENTS
3.1 GLOBAL OUTPUT AND PRICE
DEVELOPMENTS
3.1.1 Global output
The expansion of the global economy
continued to be slow in 2014, at 3.31 percent.
The rate of output growth in developed
economiesparticularly Japan, developing
Asia, Latin America and the Caribbean,
newly industrialized Asian countries, and
the Commonwealth of Independent States
continued to lose steam as a result of both
domestic and international challenges, as
well as the slow speed of recovery in the U.S.
economy, at least until the third quarter of the
year (Table 3.1 and Figure 3.1).
slow and weak in advanced economies. In

Europe where countries have been mired
in fiscal and sovereign debt crises, growth
rates have been particularly low with
several countries undergoing economic
contractions. Geopolitical risks that emerged
in 2014 raised new challenges to the global
economic environment, compounding the
difficulties that countries in the Eurozone
were facing from global financial volatility,
high unemployment, and incomplete repair
of bank and corporate balance sheets. In
emerging markets, tighter external financing
conditions exposed vulnerabilities from
rapid build-up of leverage, and balance-sheet
mismatches precipitated financial instability.
Even though the global economy has

been gradually turning the corner of the
Great Recession, growth has remained
Several factors contributed to the modest

expansion of global output in 2014. In the
United States, the extension of a budget and
debt ceiling set the stage for normalization
Real GDP Growth
Inflation
Figure 3.1. Global GDP Growth and Inflation, 2013-14 (percent)

5
4.5
4.5
3.5
3.5
2.5
2.5
1.5
1.5
0.5
0
World
2013
Advanced
Economies
2014
Developing
Countries
Africa
0.5
0
World
2013
Advanced
Economies
2014
Developing
Countries
Africa
Sources: I MF, World Economic Outlook, 2014 (Available at www.imf.org); World Bank, Global Economic Prospects, 2014;
EIU Country Report, 2014 (various issues).
GLOBAL ECONOMIC AND FINANCIAL DEVELOPMENTS 39

0.76
/$
0.73
0.82
1.00
0.64
0.82
121.00
0.82
1.16
0.82
$/$
/$
/$
/$
/$
C$/$
/$
1.00
0.61
0.73
101.60
0.73
1.07
0.73
1.00
0.62
0.76
86.80
0.76
1.00
0.76
Unit
-0.66
1.43
5.08
5.19
6.65
4.84
2.90
6.19
1.36
3.45
-0.43
1.51
4.74
3.19
6.59
2.30
2.74
5.24
2.78
2.15
0.83
1.71
4.43
3.35
6.48
2.55
1.32
4.67
2.72
0.75
Real GDP Growth

(annual percent change)
2012*
2013* 2014**
3.37
3.28
3.31
1.23
1.39
1.83
2.32
2.22
2.15
0.28
1.74
3.21
0.33
0.29
0.37
1.46
1.52
0.89
-2.37
-1.85
-0.17
1.71
2.02
2.27
0.90
0.53
1.39
2.50
1.90
6.08
8.27
4.71
9.62
6.12
3.83
5.91
6.22
1.35
1.33
5.87
6.04
4.69
9.22
7.13
4.60
4.23
6.41
0.54
1.72
5.55
6.16
4.08
7.53
n/a
4.57
3.99
7.88
Inflation Rate
(annual percent change)
2012*
2013* 2014**
4.24
3.88
3.80
1.99
1.37
1.57
2.08
1.46
1.98
2.82
2.56
1.63
2.22
0.99
0.70
-0.04
0.36
2.66
3.30
1.28
0.10
1.52
0.96
1.94
2.13
1.60
0.90
Sources: The Economist (various issues); EIU Global Forecast Services, December 2014; EIU Country Risk Service: Main Report (various issues); IMF World Economic Outlook
Database (October 2014).
Notes: * Revised. ** Estimates
a) Figures cover the G7 and other industrial countries.
b) Eurozone countries are: Austria, Belgium, Cyprus, Estonia, Finland, France, Germany, Greece, Ireland, Italy, Luxembourg, Malta, the Netherlands, Portugal, Slovakia,
Slovenia, and Spain.
c) The G7 comprises the U.S., the U.K., Japan, Canada, Germany, France, and Italy.
d) Emerging market and developing countries.
e) Asia other than the newly industrialized economies (which are Hong Kong SAR, Korea, Singapore, and Taiwan Province of China).
Memo Item
EURO Area b)
G7 c)
DEVELOPING COUNTRIES d)
Africa
Developing Asia e)
Middle East
Latin America and the Caribbean
Newly Industrialised Asian Countries
Central & Eastern Europe
Commonwealth of Independent States
WORLD
ADVANCED ECONOMIES a)
US
UK
France
Japan
Italy
Canada
Germany
Exchange Rate
(End of period)
2012*
2013*
2014**
Table 3.1. Developments in Global Output and Prices, 2012-14
0.13
0.37
0.31
0.52
0.13
0.13
0.13
1.24
0.13
0.27
0.29
0.25
0.53
0.27
0.15
0.27
1.17
0.27
0.07
0.33
0.25
0.53
0.07
0.10
0.07
1.24
0.07
Interest Rate (3-month), %

(end of period)
2012*
2013* 2014**
of monetary policy and the removal of

uncertainties that had clouded the outlook. In
Europe, tail risks were reduced as the result
of implementation of monetary and fiscal
policies at the national and regional levels, and
in almost all European countries the return
ofalbeit modestgrowth led to substantial
improvements in market confidence in both
sovereigns and banks. In Japan, the recovery
guided by the Abenomics reform agenda
made a good start but was then derailed by
the depressing effects of a new consumption
tax. Emerging market economies, having
experienced several bouts of volatility, adjusted
policies in the right direction.
Five of the Group of Seven Industrialised
Countries (G7), namely Canada, France,
Germany, Italy, and the U.K., improved their
growth in 2014 while growth stagnated in the
United States and decelerated in Japan (Table
3.1). After a lacklustre performance in the first
quarter, the U.S. economy rebounded during
the third quarter, though the growth rate for
the year as a whole was a relative stagnant 2.2
percent. The third-quarter growth was driven
by 4.3 percent growth in personalconsumption
expenditures, which wasmade possible
partly as lower oil prices freed funds for other
purchases. Other factors contributing to growth
were increased private inventory investment,
exports, fixed investments, and non-federal
government spending. Further, a stronger
US dollar contributed to a shifting balance of
imports and exports. The Canadian economy
grew by 2.27 percent in 2014; having slowed
in the first quarter it rebounded somewhat
during the rest of the year. Protracted weak
global demand, high household debt, and a
relatively overvalued housing market adversely
affected growth during the year. Among the
factors that contributed to Canadas rebound
were improved export demand from the slowly
recovering U.S. economy, and a stimulation
of investment driven by a weakening of the
Canadian dollar.
In Japan, the incipient recovery seems to have
been derailed, mainly due to an increase in
consumption tax which depressed household
consumption expenditure and domestic

demand. Growth in 2014, at 0.89 percent,
was significantly lower than in 2013 (1.52
percent). Though fixed investment (including
in government, business, and residential
investments) had been a key driver of
Japanese growth since the Tsunami broke in
2011, and a stimulus package helped raise
residential investment by about 7.9 percent
in 2013, the effects of both seem to have been
dampened during 2014.
The U.K. economy continued its strong

recovery in 2014, registering growth of 3.2
percent (Table 3.1). Growth was driven mainly
by robust domestic demand, a strong business
environment, and rapid employment growth,
but was also supported by a rise in the volume
growth of merchandise exports (at 3.2 percent
in 2014 vs. 1.6 percent in 2013). A number
of downside risks remain, however. For
instance, a ten percent rise in housing prices
during 2014 is likely to dampen demand, and
household debt remains high at about 140
percent of gross disposable income.
The Eurozone economy posted a modest
growth rate of 0.8 percent in 2014, after
contracting in two consecutive years.
Recovery remained slow and tentative, held
back by weak demand, high debt, and high
unemployment, and low level of investments
in many economies. Eurozone financial
markets nonetheless remained resilient. In
the last quarter of the year, a strong pick-up in
Germany, aided by activity in Spain, helped to
boost growth for the Eurozone as a whole, but
large parts of the currency area either stayed
close to stagnation or contracted.1 Germany,
1The experience emphasized that politically
difficult reforms in labour markets are the only
way to achieve lasting growth in Europe. For
instance, Germany revamped its economy more
than a decade ago, and its reformsparticularly
to improve flexibility in labour marketshave
been credited with making its economy more
competitive. Spain, which reformed its labour
markets in 2012, has emerged from its slump
much faster than Italy and other southern
European countries that have been slower at
restructuring their economies.
which accounts for about 30 percent of the

regions GDP, rebounded to achieve a growth
rate of 1.4 percent in 2014, its strongest since
2011. Firm domestic demand was driven by
increased consumption of non-oil products,
made possible by savings on oil import bills;
by record-low unemployment; and by small
increases in household and government
consumption. The weak euro offered a
strong impetus for German exporters, who
achieved export growth of 3.7 percent in
2014 (compared with 1.6 percent in 2013).
The French economy experienced nearzero growth for the third successive year,
while Italy endured a third year of economic
contraction. The confrontation between
Greeces New Leftist government and its
German counterpart over the terms of the
Greek bailout was part of a voter backlash
against political establishments that pushed
fiscal retrenchment, and it raised questions
about the degree of political and economic
integration needed for the Eurozone to
prosper.
fall in export growth rates that took place

as demand in China receded. Other factors
that influenced Asias growth performance
included political tensions, for instance in
Thailand, and the sharp slowdown in growth
in Japan.
Africas economic growth picked up slightly

to 3.4 percent in 2014, from 3.2 percent in
2013. The economy of developing Asia2 had a
second year of reduced growth, expanding at
6.5 percent in 2014. Indeed, growth slowed
across most of Asia, largely as a result of a
Growth in the Middle East economy, which

had weakened to 2.3 percent in 2013,
picked up slightly to 2.6 percent in 2014
(Table 3.1). The growth was supported by
a rapid expansion in public spending and by
robust domestic investment and consumer
demand in a few countries within the region.
The average growth rate reflects the mixed
fortunes of oil-exporting3 and oil-importing
economies. In the regions oil-exporters,
activity in the Gulf Cooperation Council (GCC)
economies picked up slightly in 2014, driven
by higher oil production and government
spending, and the Islamic Republic of Iran
showed signs of recovery. However, in nonGCC oil exporting countries where security
concerns remained a challenge, the pace of
economic activity deteriorated. The conflict in
northern Iraq affected non-oil growth. Though
most of Iraqi oil output comes from the south,
the departure of skilled personnel limited
Iraqs ability to expand or even maintain oil
production. Ongoing political tensions and
security concerns disrupted oil production
in Libya and undermined oil production
in Yemen. In the regions oil-importers,
economic activity remained lacklustre as
the result of deep-rooted inefficiencies in
economic structures; regional conflicts;
and the continuing political instability,
social unrest, and geopolitical tensions that
hampered economic activity in a number of
economies in the region. The Syrian crisis
spilled over and adversely impacted sociopolitical and economic activity in nearby
countries, impacting cross-border trade and
tourism activities and reducing private capital
inflows into Jordan, Lebanon, and Yemen and
weakening these countries economic activity.
economies (which are Hong Kong SAR, Korea,
Iraq, Kuwait, Oman, Qatar, Saudi Arabia, United
The Eurozones long slump has taken a

toll on confidence. Businesses have grown
accustomed to weak growth and are wary
of investing as a result, and in many parts
of the region unemployment at near-record
highs has constrained household income
and reduced the prospects for expanding
household consumption.
Economic
activity
across
developing
economies slowed somewhat to 4.4 percent
in 2014, consistent with developments in
advanced economies (Table 3.1 and Figure
3.1).
2Asia
other
than
the
newly
industrialized
Singapore, and Taiwan Province of China).
3Oil exporters in the Middle East are Bahrain, Iran,

Arab Emirates, and Yemen.
Growth in Latin America and the Caribbean

was considerably slower in 2014 than in the
two preceding years. It fell to 1.3 percent for
2014 from the 2.9 percent and 2.7 percent
recorded in 2012 and 2013, respectively
(Table 3.1). External conditions played a key
role, as exports fell short of expectations in
early 2014 and terms of trade deteriorated in
some countries. Domestic factors were also
important in several economies. For instance,
supply bottlenecks and policy uncertainty held
back business confidence and investment, while
commodity prices were weak and consumer
spending fell amid softening labour markets.
Weak economic activity in Brazil and nearstagnation in Argentina contributed greatly to
the regions poor growth performance in 2014.
In Brazil, weak competitiveness, low business
confidence, tighter financing conditions, and
a slowing pace of job creation, among other
growth-limiting factors, weighed heavily on
consumption.
The Commonwealth of Independent States
(CIS) did not recover from its economic
weakness of the first half of 2014, and
thus registered a growth rate of only 0.8
percent for the full year. This was the third
consecutive year of deceleration (Table
3.1). Contributing to the poor performance
was a drop in investment in Russia, where
geopolitical tensions further weakened
business confidence. The crisis in Ukraine
deepened, with output contraction driven
by falling industrial production and exports.
Capital outflows from Russia intensified on
the back of worsening financial conditions,
exerting pressure on the exchange rate and
generating inflationary tendencies. Some of
the regions other economies also slowed
as a result of weakening in their trade and
remittance flows to and from Russia.
Growth in Central and Eastern Europe
(CEE) remained little changed in 2014 at
2.7 percent, from 2.8 percent in 2013 (Table
3.1). In Turkey, stronger net exports were
partly offset by the effects of faltering private
investment following policy tightening,
which adversely affected growth. Hungarys
acceleration of economic activity led to a pickup in investment, falling unemployment, and

higher public spending, which contributed
to the output figures for the CEE region as a
whole.
3.1.2 Price developments
Global inflationary pressures eased for the

second consecutive year in 2014, on the
back of the weaker-than-expected global
economy, falling commodity and oil prices,
and fiscal tightening in a number of advanced
and emerging economies. The global rate of
inflation retreated to 3.80 percent from 3.88
percent in 2013 (Table 3.1 and Figure 3.1).
In the advanced economies, inflation inched

up from 1.4 percent in 2013 to 1.6 percent
in 2014, contrary to the falling trend in
developing economies (Table 3.1 and Figure
3.1). The average rate of inflation for the G7
economies4 as a group increased marginally,
from 1.3 percent in 2013 to 1.7 percent in
2014, mainly driven by inflationary pressures
in Japan and the United States (Table 3.1).
In the U.S., inflation increased from 1.5

percent in 2013 to 2 percent in 2014 as the
Federal Reserve confirmed its expansionary
monetary policy stance. In the Eurozone,
inflation rate decreased substantially from
1.4 percent in 2013 to 0.5 percent in 2014,
well below the ECB target of 2%, on the
back of fragile domestic demand, lower
energy, oil, and food prices, among other
factors. In Japan, higher consumption taxes,
and continued pursuit of an expansionary
monetary policy, ensured that the economy
stayed clear of the deflation that had
characterised it over the previous decade.
Accordingly, Japans consumer price index
soared to 2.7 percent in 2014, from the 0.4
percent recorded in 2013. Inflation in the U.K.
fell substantially, from 2.6 percent in 2013
to 1.6 percent in 2014, driven down by weak
government investment and business fixed
4The G7 comprises the US, the U.K., Japan, Canada,
Germany, France, and Italy.
investment; continued fiscal tightening;; and

lower prices of food, energy, and fuel during
2014.
Inflationary pressures in the group of

developing economies eased marginally from
5.9 percent in 2013 to 5.6 percent in 2014,
largely in reflection of the general decline
taking place in global price levels. Except in
the Commonwealth of Independent States,
where inflation increased, inflation rates
were lower than in 2013 in all the regional
groups under developing economies, as a
result of subdued global demand, moderating
international food and fuel prices, and tighter
fiscal policy. Africas average inflation rate
saw little change in 2014, rising from 6.0
percent to 6.1 percent.
3.2 INTERNATIONAL FINANCIAL

MARKET DEVELOPMENTS
3.2.1 Financial markets
Global financial markets remained largely
buoyant in 2014, in spite of several episodes
of volatility that reflected growing uncertainty
about the global economic outlook and
increasing geopolitical tensions. Uncertainty
about the global outlook was caused by the
continued economic weaknesses in Japan,
China, and some major emerging market
economies. The sharp fall in the prices of oil
and other commodities further dampened
global economic activity and in turn,
adversely affected investor sentiment in the
financial markets.
Generally, interest rates fell internationally

as most monetary authorities adopted
accommodative policies in an attempt to
stimulate growth. In the Eurozone countries
of France, Germany, and Italy, short-term
(three-month) interest rates declined from
0.27 percent in 2013 to 0.07 percent in 2014.
In the U.K. and U.S., these rates remained
unchanged, at 0.53 percent and 0.25 percent
respectively. Market expectations of mediumterm interest ratesas implied by the cost
of U.K. and U.S. government borrowing for

five years, and for above five yearsfell
by around 100 basis points and 60 basis
points, respectively, in 2014. In the Eurozone,
medium-term expectations for government
bond yields, as estimated using German
and French bonds, fell by more than 100
basis points. In advanced economies, term
premiums for sovereign bonds remained low
across the board, relative to expectations for
growth and inflation. They were particularly
low for bonds in Germany, Japan, and other
advanced economies.
In the major developing economies, monetary

policy responses were diverse, responding
to a diverse range of macroeconomic
developments.
In the United States, whose economy

performed relatively strongly in the third
quarter of 2014, the Federal Reserve ended
quantitative easing in the last quarter of the
year. The effective federal funds rate remained
low, however, averaging 0.09 percent in 2014
compared to an average of 0.11 percent
in 2013. Estimates of the term premium
on Treasury yields remained negative and
even declined further. Yields on the ten-year
Treasury bond fell by 47.4 basis points, from
2.64 percent in January 2014 to 2.17 percent
in December 2014.
In contrast to the U.S. Federal Reserve, the

European Central Bank (ECB) further
loosened its monetary policy stance in 2014.
It lowered the (fixed) interest rate on its main
refinancing operations by 10 basis points
to 0.05 percent, and also lowered the rate
on the deposit facility, by 10 basis points to
0.20 percent. The ECBs Governing Council
announced in the last quarter of the year
that the ECB would purchase asset-backed
securities with underlying assets consisting
of claims against the Euro zone non-financial
private sector, as well as Euro-denominated
covered bonds issued by monetary and
financial institutions domiciled in the Euro
zone. This measure triggered a further decline
in ten-year government bond yields, which
sank to all-time lows for countries including

France, Ireland, and Spain by the end of the
year. The only exception was Greece, where
the ten-year government bond yield increased
from 8.18 percent in January 2014 to 8.42
percent in December 2014.
Japans Central Bank increased its
quantitative
and
qualitative
easing
programme (QQE) in 2014 by raising its
target for enlarging the monetary base from
6070 trillion to 80 trillion a year. The
measure had little impact on already-low
Japanese government bond yields, partly
because the market had already anticipated
that the extreme volatility seen in bond
markets after the introduction of QQE was
unlikely to repeat itself.
China cut its benchmark policy rates in the

last quarter of 2014, owing to the general
slowdown in its economic growth. The oneyear benchmark lending rate was cut by 40
basis points to 5.6 percent, and the one-year
benchmark deposit rate was reduced by 25
basis points to 2.75 percent. Rates for loans
and deposits at different maturities were
lowered accordingly.
On international currency markets, the

US dollar strengthened significantly against
the currencies of most advanced economies
in 2014, in anticipation of an increase in
interest rates post-quantitative easing and
of further monetary easing in the Eurozone,
which adopted its own version of QE. The
dollar strengthened by 12 percent against the
euro5, by 11 percent against the Swiss franc,
by about 5 percent against the British pound,
and by 19 percent against the Japanese yen,
and by an average of about 12 percent against
5The strengthening of the US dollar against the
euro in 2014 came on the back of a slowdown
in the economic performance of the Eurozone

economies, unresolved matters relating to the
Greek fiscal and sovereign debt crisis and the
possibility of Greece pulling out of the Euro
common currency market, and the loosening of

monetary policy in the Eurozone.
the currencies of developing economies.

The currencies of most emerging market
economies fell against the dollar, though those
of net commodity importers depreciated less
than those of net commodity exporters, which
were more vulnerable to the weakness in
global commodity prices.
In Japan, the weakening of the yen in 2014
occurred in the context of a prolonged
economic contraction, which in turn was
caused by significant declines in capital
expenditure as well as in private consumption.
The Japanese Government attempted to jumpstart the economy through a bond-buying
programme that was designed to lower
interest rates as part of quantitative and
qualitative easing. The monetary authorities
allowed the value of the yen to weaken in an
effort to aid Japanese exporters.
The Chinese central bank or the Peoples Bank

of China, continued to manage the renminbi in
2014 by pegging it to the US dollar. Given the
slowdown in the Chinese economy and the
desire of the Chinese monetary authorities to
boost exports, there is now renewed pressure
to abandon the currency peg and let the
renminbi depreciate.
Among the currencies of developing

countries, the Brazilian real, the Indian
rupee, and the South African rand all
weakened against the US dollar in 2014 by
12.5 percent, 2 percent, and 10 percent,
respectively. They depreciated mainly as a
result of an anticipation of reduced capital
inflows from the U.S. in the post-QE period,
but also reflected falling global commodity
prices and the relatively high interest rates in
some of those economies. In Russia, economic
sanctions against the country, a worsening of
the conflict in Ukraine, and the sharp drop in
the price of oil led the rouble to depreciate
against the US dollar by 82.5 percent in 2014.
3.2.2 International financing conditions
International financial conditions in 2014

were
accommodative
because
global
economic growth was tepid and because

markets expected low interest rates to
continue for much longer. In particular, the
easing of monetary policy in China, Europe,
and Japan boosted U.S. equity markets to
new all-time highs and pushed long-run
government bond yields to record lows in
many Euro zone economies. The external
imbalances that had led to significant
currency and bond sell-offs in 2013 improved
somewhat in 2014, although some countries
current accounts remained deeply in deficit.
The average current account balance of
developing countries was estimated at
US$144 billion in 2014, down from US$184
billion in 2013.
According to the IMFs World Economic
Outlook (2014), credit-focused mutual
funds and exchange-traded funds witnessed
significant asset inflows in 2014. In the
United States, for example, these funds have
collectively become among the largest owners
of U.S. corporate and foreign bonds. During
2014, strong financial flows into mutual funds
boosted liquidity in credit markets.
Developments in 2014 emphasized the

growth in importance of emerging market
economies as destinations for portfolio
investors
from
advanced
economies.
These investors now allocate an estimated
13 percent of their total investments to
emerging-market equities and bonds. As a
result of the closer financial links between
emerging markets and advanced economies,
shocks to asset prices emanating from
advanced economies now tend to propagate
more quickly to emerging markets.
Developing countries increased their inflows
of private capital (comprised of net FDI
inflows, net portfolio equity inflows, bonds,
and short-term debt flows) in 2014 by 5
percent, from US$1,554 billion in 2013 to
US$1,634 billion.
Capital outflows in 2014 were most
pronounced in the U.S. high-yield corporate
bond market, where they amounted to around
6 percent of total net assets in July August.

Outflows from the European market were
smaller.
Capital markets have become more significant

providers of credit since the global financial
crisis, shifting the risks to the shadow
banking system. According to the IMF, the
share of credit instruments held in mutual
fund portfolios has been growing, doubling
since 2007, and now amounts to 27 percent of
global high-yield debt. At the same time, the
fund management industry has become more
concentrated.
Global trade finance volumes fell in 2014

for the third consecutive year, dropping by
7 percent from US$131.2 billion in 2013
to US$122.1 billionthe lowest annual
total since 2007. Countering the broader
trend, export credit agencies increased their
financing by 22 percent, from US$72.7 billion
in 2013 to US$88.6 billion in 2014. Turkey
accounted for the largest share of global trade
finance volume (14 percent) for the second
consecutive year, followed by the U.S. with
a market share of 12 percent, and Australia
with 7 percent. The volume of pre-export
credit increased by 5 percent to US$6.2 billion
in 2014.6
International equity markets were generally

active in 2014, attracting more capital than
in 2013, as they were buoyed by the low
interest-rate environment that prevailed
for much of the year. Developed countries
stock markets attracted more capital than
the money market as investors sought
better returns. In the U.S., the relatively good
economic performance and a strong dollar
helped keep investor sentiment high. As a
result, the Dow Jones index reached an alltime high of 18,053.71 points in December
2014, rising by 8.8 percent during the year.
In the Eurozone, though, the performance
of stock markets was mixed; speculation
over interest-rate increases, the worsening
6For more details, refer to the Dealogic Trade
Finance Review, 2014.
political situation in Ukraine, and the Greek

debt crisis weighed down equity prices
during the year. The FTSE 100 and FTSE AllShare indices closed the year down by 2.71
percent and 2.13 percent, respectively.
3.3 GLOBAL TRADE AND TRADING

ENVIRONMENT
3.3.1 Global trade flows
The rate of growth of world merchandise
trade picked up from 2.2 percent in 2013 to
3.1 percent in 2014, boosted by the growth
of trade in both North America and Europe,
at 3.8 percent and 2.4 percent, respectively.
Meanwhile, trade growth slowed down in
South and Central America, Developing Asia,
Africa, the Commonwealth of Independent
States, and the Middle East.
The European Union normally accounts for a

third of global trade. Despite the slowdown
in the EUs economic activity, the growth of
both its exports and imports of merchandise
speeded up in 2014, rising from 1.50 percent
and -0.50 percent in 2013 to 2.3 percent and
2.5 percent, respectively, in 2014. Germany
and the U.K. led the recovery in trade
volumes. In North America, merchandise
trade growth in 2014 was slow but steady,
at 3.7 percent on the export side and 3.9
percent on the import side.
Developing Asias rate of growth in the
volume of merchandise exports increased a
little, from 4.7 percent in 2013 to 5 percent in
2014, driven by strong performance in China
and India. But growth in the regions imports
slowed down, from 4.5 percent to 4 percent.
According to the World Trade Organization
(World Trade Report, 2014), Chinas economy
is now shifting away from export-driven
manufacturing and investments in domestic
infrastructure towards more consumption,
thereby generating increased demand for
consumer durable goods. Looking ahead,
Chinas probable move towards further
exchange-rate liberalization and peg to
appreciating US Dollar could potentially affect

the competitiveness of its exports.
At the global level, risks to growth in trade

remain in the form of geopolitical tensions,
regional conflicts, and possibilities of further
health crises such as the Ebola outbreak,
which occurred in 2014.
3.3.2 Global trading environment
Some trade restrictions introduced by WTO

members since the 2008 global economic
and financial crisis remain in place, but in
2014 the WTOs multilateral trading system
continued to act as an effective backstop
against protectionism. During the year, the
WTO enhanced its trade facilitation agenda
and implemented various capacity building
and training programmes, while WTO
member states contributed to efforts aimed at
improving developing countries participation
in the Doha Development Round of trade
negotiations. The WTO also continued to use
its dispute settlement system to resolve trade
disputes among its members (see below).
3.3.2.1 The World Trade Organization
(WTO) activities
Membership of the WTO stood at 160 in 2014,

and the accession of Seychelles, as the 161st
member, was approved by the General Council
Meeting in December 2014. The WTO was
in active discussions with 23 more countries
seeking to become members, among them
the following African countries: Algeria,
Equatorial Guinea, Ethiopia, Liberia, Libya,
and Sudan.
During 2014 most WTO members continued
to negotiate new regional trade agreements
(RTAs). According to the WTO, most of the
RTA activity was in Europe, which accounted
for 22 percent of the RTAs in force; followed
by East Asia (15 percent); South America
(11 percent); and the CIS (11 percent). Other
regions, including Africa, accounted for the
other 41 percent. The WTO reported an
improvement in the notifications of regional
trade agreements (RTAs).7 While the number

of RTAs notified during the 2014 period
was lower at 16 notifications against 36
notifications recorded in 2013, a number
of negotiations were ongoing or had been
completed but their agreements had not yet
come into force.
According to the WTO, 2014 was one of the
most active years for dispute settlement
activity to date. The disputes brought before
the WTO dispute settlement body covered
issues such as provisions in the Marrakesh
Agreement, the General Agreement on
Tariffs and Trade (1994), the Subsidies and
Countervailing Measures Agreement, the
Anti-Dumping Agreement, the Technical
Barriers to Trade Agreement, the Sanitary
and Phytosanitary Agreement, the TradeRelated Investment Measures Agreement,
Chinas Accession Protocol, and the Import
Licensing
Agreement.
During
2014,
developing countries participated more in
the WTO dispute settlement system with
the WTO; the nine panel reports that were
circulated during the year each involved at
least one developing-country party, either
as a complainant (five cases) or respondent
(four cases).
Two new WTO facilities were introduced in

2014 to help developing countries that cannot
obtain suitable support from the development
community to implement the provisions of the
December 2013 Trade Facilitation Agreement:
the WTO launched its Trade Facilitation
Agreement Facility in July 2014 and also,
in partnership with the World Bank Group,
announced a new Trade Facilitation Support
Program. To facilitate the fuller participation of
least-developed countries in global trade, the
WTOs Enhanced Integrated Framework (EIF)
Steering Committee decided in December
7This was due mainly to a simplification of the

various notification formats and active efforts
by the Chairman of the Committee on Regional
Trade Agreements and the WTO Secretariat in
monitoring RTAs and reminding members about

their notification obligations.
2014 to extend the mandate of the multi-donor

EIF by another phase, starting in 2016. The
EIF currently helps 50 of the poorest countries
worldwide. The WTO is one of the six partner
agencies of the programme and hosts the
Executive Secretariat.
In 2014, the WTO intensified its technical

assistance and training programmes. The
2014 Regional Trade Policy Course for
Frenchspeaking Africa attracted 27 officials
from developing countries, LDCs, and
acceding countries. Its objective was to widen
participants understanding of trade policy
matters, the multilateral trading system,
international trade law, andthe functioning
of the WTO. Six other similar training courses
were held during the year for officials from
Central and Eastern Europe, Latin America,
Asia-Pacific, English-Speaking Africa, Arab
and Middle Eastern countries, and Caribbean
countries, respectively, between March and
December 2014. The WTO organized three
advanced trade policy courses in Geneva
in 2014 that were attended by more than
60 government officials from developing
countries; the courses focused on the legal
and economic implications of WTO rules and
disciplines. During the year, the WTO also
carried out regional and sub-regional capacitybuilding programmes in Latin America and
Africa; these covered the multilateral trading
system, trade agreements in the Americas, and
rules governing regional trade agreements in
the context of trade in services.
During 2014, many OECD and emerging
economies contributed to financing a wide
range of trade-related technical assistance
activities. These activities were designed to
help developing and least-developed countries
to participate effectively in the Doha Round
and better integrate into the world economy.
3.3.2.2 Trade relations and plurilateral
agreements
The continued impasse of the Doha Round in

2014 stimulated initiatives and negotiations
on the development of major regional trade
agreements and plurilateral agreements.

These imply notable increases in the
proportion of trade governed by regional
agreements that exclude African countries.
They include the Transatlantic Trade and
Investment Partnership between the United
States and the European Union; the TransPacific Partnership; the ASEAN Regional
Comprehensive Economic Partnership; and
the Free Trade Area of the Asia-Pacific.
The Transatlantic Trade and Investment

Partnership is a free trade agreement that
was under negotiation between the European
Union and the United States during 2014.
Designed to promote growth and job creation
on both sides of the Atlantic by removing trade
barriers, it has three main pillars: (i) improving
market access by removing customs duties on
goods and restrictions on services, providing
better access to public markets, and making
it easier to invest; (ii) improving regulatory
coherence and cooperation by dismantling
unnecessary regulatory barriers; and (iii)
improving cooperation in setting international
standards.
The Trans-Pacific Partnership (TPP) is the
trade agreement under negotiation between
the U.S.A. and Australia, Brunei, Canada,
Chile, Japan, Malaysia, Mexico, Peru, New
Zealand, Singapore, and Vietnam. It will cover
trade issues such as investment, intellectual
property, competition policy, e-commerce,
environment standards and protection,
services, and movement of service providers.
The TPP market is expected to cover more
than 658 million people and has an estimated
combined gross domestic product of about
US$28 trillion. During 2014, progress on the
negotiations continued but was slower than
expected, mainly because of unresolved issues
on agricultural subsidies in Canada and Japan.
The countries of the Association of Southeast
Asian Nations (ASEAN)8, at their August
8Brunei, Cambodia, Indonesia, Laos, Malaysia,
Myanmar, the Philippines, Singapore, Thailand,

and Vietnam.
2014 summit, intensified their negotiations

for setting up a Regional Comprehensive
Economic Partnership with six partner
countries: Australia, China, Japan, South
Korea, India, and New Zealand. The
partnership will cover trade in goods
and services; investment; economic and
technical cooperation; intellectual property;
competition; dispute settlement; and other
issues. Once established, it is expected to
be one of the worlds biggest trading blocs,
accounting for 40 percent of the worlds trade
and with a combined GDP of about US$17
trillion.
At their summit in November 2014, the
Asia Pacific Economic Cooperation (APEC)
countries resolved to move ahead with
setting up a Free Trade Area of the AsiaPacific (FTAAP). A two-year strategic study
for the establishment of the FTAAP will be
undertaken, to be delivered by the end of
2016.
It is important to note that the explosion of

new discriminatory bilateral and regional
trade agreements is not a substitute for
multilateral negotiations under the Doha
Round, which is sometimes called the Doha
Development Agenda in reference to its
special emphasis on changes targeting the
needs of developing countries. If the new
regional initiatives now being negotiated are
not paralleled by an acceleration of economic
integration in Africa, they may heighten
the risk of preference erosion and further
marginalize Africa in global trade.
3.3.2.3 Commodity price developments
Most commodities of trade interest to Africa

experienced significant nominal price losses
during 2014, largely due to the slow economic
growth in many advanced and developing
economies and weak global demand for
commodities in general. The average nominal
prices for all three broad commodity groups
of trade interest to Africa, namely Agriculture,
Energy, and Minerals/Metals, declined by
1.7 percent, 7.5 percent, and 4.2 percent,
respectively in 2014 compared to their

average levels in 2013 (Table 3.2). In the oil
market in particular, weak global demand,
and oversupply driven by lack of agreement
between OPEC members to reduce oil supply,
led to a significant drop in the price of crude
oil during the year.
In real terms, however, the prices of the three
commodity groups ended 2014 very much
higher than their average levels in 2005:
by about 78 percent, 77 percent, and 107
percent respectively (Table 3.3).
The average nominal price of Cocoa Beans

increased by 26 percent to US$3,062 per
metric tonne in 2014 (Table 3.2), having
reached a three-year high of US$3,394
per metric tonne in September 2014. The
rise in prices stemmed from strong global

demand, precipitated by increased demand
from major grinding industries in Western
Europe and North America, and a growing
appetite for chocolate in Asia. In Indonesia,
the worlds third-largest producer, falling
domestic cocoa production compelled the
booming processing industry to raise its
imports of the commodity. Another reason
why the international market price for cocoa
rose, particularly in the last quarter of 2014,
was that the potential impact of the Ebola
outbreak in West Africa on cocoa production,
coupled
with
unfavourable
weather
conditions in the region, heightened concerns
over a global supply deficit.
The nominal price of Coffee rose by 44
percent to US$4,424 per metric tonne in
Table 3.2. Commodity Prices, 2012-14 (current US$/mt, unless otherwise indicated)
Commodities
AGRICULTURE
Barley
Cocoa Bean
Coffee (Arabica)
Copra
Cotton
Maize
Palm Oil
Rubber TSR20
Soyabean
Sugar
Tea
Wheat
Average
CRUDE OIL
Crude Oil (US$/bbl)
Average
METALS & MINERALS
Aluminium
Copper
Gold
Lead
Platinum
Silver
Tin
Zinc
Average
2012
Annual Growth Rate

2014 2012/2013 2013/2014
2012
Price Volatility
2013
2014
240.28
2,391.87
4,110.96
740.58
1,967.12
298.42
999.33
3,377.26
591.42
474.95
2,897.79
313.24
1,533.60
202.18
2,438.85
3,075.99
627.00
1,992.70
259.39
856.90
2,794.55
538.42
390.04
2,862.00
312.25
1,362.52
137.57
3062.24
4423.79
854.25
1831.97
192.88
821.44
1956.63
491.77
374.99
2720.48
284.90
1429.41
-15.86
1.96
-25.18
-15.34
1.30
-13.08
-14.25
-17.25
-8.96
-17.88
-1.24
-0.32
-10.51
-31.96
25.56
43.82
36.24
-8.07
-25.64
-4.14
-29.98
-8.66
-3.86
-4.94
-8.76
-1.70
105.01
105.01
104.08
104.08
96.24
96.24
-0.89
-0.89
-7.54
-7.54
0.07
0.07
0.03
0.03
0.15
0.15
2,023.28
1,846.67
7,962.35
7,332.10
58,890,566.17 49,787,921.23
2,064.64
2,139.79
54,704,183.18 52,436,393.08
1,098,340.94 841,273.83
21,125.99
22,282.80
1,950.41
1,910.26
14,341,027.12 12,887,637.47
1,867.42
6,863.40
44,641,980.74
2,095.46
48,804,077.57
672,725.15
21,898.87
2,160.97
11,769,208.70
-8.73
-7.92
-15.46
3.64
-4.15
-23.41
5.48
-2.06
-6.57
1.12
-6.39
-10.34
-2.07
-6.93
-20.03
-1.72
13.12
-4.15
0.06
0.04
0.04
0.06
0.06
0.08
0.08
0.04
0.06
0.06
0.05
0.11
0.05
0.07
0.17
0.07
0.05
0.08
0.07
0.04
0.04
0.04
0.07
0.09
0.06
0.06
0.06
Sources: 1) Financial Times (various issues).

2013
2) World Bank Commodity Prices, 2014
0.07
0.05
0.13
0.21
0.09
0.09
0.13
0.14
0.10
0.15
0.08
0.13
0.11
0.18
0.10
0.08
0.18
0.03
0.18
0.04
0.11
0.07
0.04
0.03
0.04
0.09
0.11
0.04
0.13
0.08
0.14
0.11
0.11
0.11
0.11
0.08
0.05
0.11
0.10
Table 3.3. Real Commodity Price Indices, 2005=100

COMMODITY
2012
(2)
2013
(3)
2014
2013
2014
(4) (5) = (3) - (2) (6) = (4) - (3)
AGRICULTURE
Barley
Cocoa Bean
Coffee Arabica
Copra
Cotton
Maize
Palm Oil
Rubber
Soyabean
Sugar
Tea
Wheat
Average
252.71
155.32
162.49
179.01
161.24
302.44
236.76
242.97
215.30
215.88
175.62
230.80
210.88
212.65
158.37
121.58
151.56
163.34
262.89
203.02
201.05
196.01
177.29
173.45
230.07
187.60
144.69
198.85
174.85
206.49
150.16
195.48
194.62
140.76
179.03
170.45
164.88
209.91
177.51
-40.07
3.05
-40.91
-27.45
2.10
-39.55
-33.75
-41.92
-19.29
-38.59
-2.17
-0.73
-23.27
-67.96
40.48
53.27
54.93
-13.17
-67.40
-8.40
-60.28
-16.98
-6.84
-8.58
-20.15
-10.09
CRUDE OIL
Crude Oil
Average
192.93
192.93
191.21
191.21
176.81
176.81
-1.71
-1.71
-7.54
-7.54
METALS AND MINERALS

Aluminium
Copper
Gold
Lead
Platinum
Silver
Tin
Zinc
Average
106.58
216.43
375.31
211.46
172.98
425.96
286.27
141.20
242.02
97.28
199.30
317.30
219.16
165.81
326.26
301.94
138.29
220.67
98.37
186.56
284.50
214.62
154.33
260.89
296.74
156.44
206.56
-9.30
-17.13
-58.01
7.70
-7.17
-99.70
15.68
-2.91
-21.36
1.09
-12.74
-32.79
-4.54
-11.49
-65.37
-5.20
18.15
-14.11
Sources: 1) Financial Times (various issues).

2) World Bank Commodity Prices, 2014
2014 (Table 3.2). The sturdy prices of coffee

were driven by concerns over reduced
global supply following a drought in Brazil,
the worlds largest coffee grower, vis--vis
relatively firm global demand from roasters
in the U.S. and European markets. According
to the International Coffee Council, Brazils
official production estimates showed a 9.3
percent decline in 2014 to 44.57 million
bags, the lowest output level in three years.
The decline in Brazil heavily influenced a
worldwide fall in coffee production from 150
million bags in 2013 to 143.5 million bags in
2014.
Nominal prices of Tea maintained their
downward trend in 2014, culminating in
a year-on-year loss of about 5 percent.
The decline partly resulted from market

disruptions in Iran, Iraq, and Russia
three of the main destinations for tea from
India and Bangladesh. Meanwhile, good
weather conditions in Kenya, the worlds
largest producer of black tea, improved
harvests in that country and contributed to
the oversupply of tea in the global market.
The poor quality of green tea in Kenya, too,
helped to undermine the market value of the
commodity during the year.
Prices of Natural Rubber have been suffering

a significant decline since 2011. During 2014,
the average nominal price of the commodity
maintained its downward trend, posting a
decline of 30 percent to US$1,957 per metric
tonne. Rising inventories in Japan, Indonesia,
Malaysia, and Thailand, in the face of feeble

global demand, helped push prices down to
a five-year low in SeptemberOctober 2014.
Slow recovery of the European economies
and lower-than-expected growth in emerging
market economies, especially China and
Brazil, contributed to lower rubber prices as
did the lower vehicle sales in many developed
and developing economies.
The nominal price of Cotton declined by 8
percent to US$1,832 per metric tonne in 2014.
Cotton was in excess supply as a result of good
harvests in the worlds largest producing
countries, namely the U.S., China, and India.
This excess of supply severely affected cotton
farmers in main African producing countries
such as Egypt. On the demand side, China,
the worlds largest cotton consumer, reduced

its imports on account of huge stockpiles and
the slowdown of its economy, influencing the
global price decline during the year.
Average nominal prices of Sugar suffered

another year of loss, posting a decline of
about 4 percent during 2014. The decline
was driven by robust production in Brazil, the
worlds largest sugar producer, on the back
of good weather conditions, and by Indias
release of sugar stockpiles at a time of weak
demand from China, whose economic activity
was weakening and which made more use of
its own sugar stockpiles.
Soybean prices maintained a 9 percent
year-on-year contraction in 2014. The
decline largely stemmed from good weather

conditions, which led to better-than-expected
harvests, and from the existence of huge
stockpiles in North and South America
the largest soybean-producing regions
that swelled global supplies and caused
disequilibrium in the market. Prices were also
adversely affected by a push from consumers
for diversification. Hence, demand rose for
rapeseed, the second most consumed oilseed
globally behind soybeans.
The average nominal price of Maize declined

by 26 percent to US$193 per metric tonne in
2014. Maize harvests that year added to an
existing global supply glut. The oversupply
rose by 1 percent during 2014 to 1,020
million tonnes, on the back of high production
in China, the European Union, Mexico, and
Southern Africa and higher-than-expected
global stockpiles. Favourable weather
conditions in the United States, the worlds
largest supplier of maize, helped to drive that
countrys maize production to an all-time
high of 366 million tonnes in 2014, further
exacerbating the supply glut. According to
the Food and Agriculture Organization (FAO)
of the United Nations, Europes maize output
rose by 3 percent to 120.4 million tonnes in
2014 largely because higher yields resulted
in a larger crop size. Total maize production
in Southern Africa, anchored by high output
from South Africa, increased significantly, by
21 percent, to 27.4 million tonnes in 2014
compared to 2013.
The nominal price of Wheat had declined

by 0.3 percent during 2013 and slid further,
by 9 percent, during 2014, as a result of
oversupply precipitated by rising inventories
and production in major wheat producing
countries, especially India, the U.S., Canada,
and Russia. For instance, wheat production
in India reached 95.9 million tonnes during
the 2013-14 season compared to 93.5 million
tonnes during the 2012-13 season.
The year 2014 saw mixed movements in the
nominal prices of Fats and Oils. Palm Oil prices
declined by 4 percent, reflecting an excess
supply in the world market caused notably by

weak demand from China and India, the worlds
largest importers, in the face of robust exports
from Indonesia and Malaysia, which produce
more than 80 percent of the worlds supply.
Rising supplies of competing oils, Soy oil in
particular, further undermined the palm oil
price during the year. In contrast, Copra prices
registered a strong recovery, posting a nominal
price gain of 36 percent in 2014 (compared
to the significant price loss of 15 percent
they suffered in 2013). The copra price surge
largely stemmed from the effects on supply of
adverse weather conditions in India and the
Philippinestwo of the major suppliers of this
cropat a time of robust global demand from
emerging markets, coupled with strong global
demand for copra as a feedstock by the biofuel
and biodiesel industries.
Nominal prices of Minerals and Metals
suffered a second consecutive year of losses,
declining by 4 percent in 2014. The reasons
included the strengthening of the US dollar,
weak recovery of economies in the Eurozone,
and the slowdown in the Chinese economy
and in most industrialized economies.
Copper prices remained weak, reflecting the
deceleration of demand from the electronics
industry and from the construction sector in
China, which accounts for about 40 percent
of world copper consumption. On the supply
side, a steady build-up of copper stocks
globally contributed to dampen the price of
this commodity.
The prices of Gold weakened for the second

consecutive year, with a decline by 10
percent during 2014. Although investors
still view gold as an inflation hedge and a
safe-haven asset, the strengthening of the
US dollar in 2014 and the strong demand for
alternative investment assets such as global
equities adversely affected the precious
metal during the year. Tepid demand for
gold in the main consumption economies
China and Indiaas a result of lowerthan-expected economic growth helped to
dampen the prices of the commodity during
2014.
Lead and Tin suffered losses with the

nominal prices of both falling by about 2
percent during 2014. Responsible for the
price weaknesses of these two metals were
a deceleration in Chinese consumption,
resulting from slowdowns in demand for
lead-acid batteries, as commercial vehicle
sales receded, and for lead- and tin-based
construction materials. Slow recovery in the
U.S. and Western Europe also dented global
demand for these metals and undermined
their nominal prices. Nominal prices of
Platinum maintained a downward trend,
with a year-on-year decline of 7 percent
during 2014. Behind the decline was
investors concern that global demand for the
commodity would be adversely affected by
the uncertainties surrounding the economies
of Western Europe and North America and

by the slowdown of the Chinese economy.
Nominal prices of Silver also maintained a
downward trend, with a year-on year decline
of 20 percent as investors greater appetite for
riskier assets slowed down global demand for
silver in the face of rising supplies.
Exceptions to the falling price trend in
metals were aluminium and zinc. Nominal
prices of Aluminium recovered slightly,
posting a year-on-year gain of 1 percent
during 2014, compared to the significant
loss of about 9 percent they experienced in
2013. The aluminium price rise was driven
by several factors including strong demand,
precipitated by concerns that an export ban
on mineral ores implemented by Indonesia
Nominal prices of Crude Oil declined

sharply in 2014, reversing their four-year
trend of high and stable prices. The oil
price dropped from an average of US$104
per barrel in 2013 to US$96 per barrel in
2014. The decline largely resulted from low
global demand, owing to weak economic
activity; increased efficiency in the main oil
producing countries in the face of high global
supply precipitated by increased production
of shale oil in the U.S. and Canada; and lack
of agreement among OPEC members to cut
their oil production.
could lift the price of the commodity; the

stoppage of a reform introduced by the
London Metals Exchange which required
aluminium warehouses to supply more
of the commodity than they take in; and
an increase in the capacity of aluminium
smelter industries in China. Zinc prices
rallied significantly, registering a gain of 13
percent after suffering a 2 percent loss in
2013. Their strong rebound is attributable to
declining inventories and supplies at a time
of firm demand for zinc for infrastructure
projects, especially in China.
END
CHAPTER
ECONOMIC AND FINANCIAL

DEVELOPMENTS IN AFRICA
4.1 OUTPUT AND PRICE
DEVELOPMENTS
During 2014, the African economic
environment
featured
such
daunting
challenges as the outbreak of the Ebola Virus
Disease in West Africa; the continued surge
in terrorist activities in some countries;
and the economic costs of deficiencies in
infrastructure, most notably illustrated by
power blackouts in South Africa. Economic
conditions in Africa were also affected by
external factors, notably the slowdown of
the Chinese economy and continued fiscal
and sovereign debt crises in the Eurozone.
Consequently, the level of economic activity
across many sectors weakened. Africa achieved
a marginal increase in its average rate of GDP
growth, which rose to 3.4 percent in 2014 from
3.2 percent in 2013 (Table 3.1 above).
The growth of African economies was
driven by factors including strong public
investment in telecommunications, energy,
and transport infrastructure; development
in tourism infrastructure such as hotels;
growing financial markets; and increased
agricultural production in many countries
across the continent. It was sustained by
growing domestic demand, spurred by
increased consumption on the back of
growing employment opportunities and
sturdy migrant remittances. Growth was
further boosted by robust inflows of capital
especially in the form of foreign direct
investment, which grew from US$50.1 billion
in 2013 to US$52.7 billion in 2014.
In African Oil-Exporting Countries (OECs),
overall economic activity rose by 3.1 percent
in 2014, up from 2.7 percent in 2013 (Figure

4.1). They achieved this acceleration in
their growth despite the sustained decline
in crude oil prices during the second half
of 2014 and the persistent socio-political
challenges in some parts of North Africa,
notably Libya, Sudan, and South Sudan. Their
growth was supported by inflows of foreign
direct investment to the oil and gas sector
and robust economic activity in a number of
oil-exporting countries, including Chad, the
Republic of Congo, and Nigeria.
Figure 4.1. Average GDP Growth

of African Net Oil Exporters and
Importers, 2012-14 (percent)
Real GDP
6.0
5.0
4.0
3.0
2.0
1.0
0.0
2012*
Oil Exporters
*Revised **Estimates.
Source: Derived from Table 4.1.
2013*
2014**
Non-oil Exporters
Conversely, African Oil-Importing Countries

(OICs) saw a slight deceleration in the rate of
growth of their GDP to 4.3 percent in 2014,
from 4.9 percent in 2013. The slowdown
was mainly caused by the weak commodity
market conditions precipitated by falling
ECONOMIC AND FINANCIAL DEVELOPMENTS IN AFRICA 57
Table 4.1. Africa: Real GDP Growth,

2012-14 (annual percent change)
Country Name
Algeria
Angola
Benin
Botswana
Burkina Faso
Burundi
Cameroon
Cape Verde
Central African Republic
Chad
Comoros
Congo, Dem. Rep. of
Congo, Rep. of
Cote d'Ivoire
Djibouti
Egypt
Equatorial Guinea
Eritrea
Ethiopia
Gabon
Gambia
Ghana
Guinea
Guinea-Bissau
Kenya
Lesotho
Liberia
Libya
Madagascar
Malawi
Mali
Mauritania
Mauritius
Morocco
Mozambique
Namibia
Niger
Nigeria
Rwanda
Sao Tome and Principe
Senegal
Seychelles
Sierra Leone
Somalia
South Africa
South Sudan
Sudan
Swaziland
Tanzania
Togo
Tunisia
Uganda
Zambia
Zimbabwe
2012*
3.29
5.20
5.42
4.30
9.00
4.02
4.60
1.20
4.11
8.90
3.00
7.15
3.83
10.70
4.84
2.22
3.20
7.02
8.80
5.57
5.27
8.80
3.80
-2.20
4.60
6.00
8.31
104.48
2.50
1.89
0.00
6.89
3.20
2.70
7.20
5.00
11.24
4.30
8.80
4.00
3.40
2.90
15.16
n/a
2.55
-47.55
-3.27
1.90
6.93
5.90
3.60
2.78
6.80
10.60
2013*
3.05
6.80
5.60
5.90
6.60
4.47
5.50
0.50
-36.00
3.60
3.52
8.50
3.30
8.70
5.00
2.20
-2.30
1.30
9.70
5.60
6.43
7.10
2.30
0.30
4.60
5.70
8.70
-5.12
2.40
5.20
1.70
6.42
3.20
5.14
7.10
4.36
4.10
5.40
4.70
4.00
3.50
3.50
20.10
n/a
2.00
27.10
3.91
2.80
7.00
5.10
3.00
5.80
6.70
3.30
2014**
2.90
4.10
5.10
5.00
6.80
4.70
5.10
1.30
1.00
8.50
3.40
8.70
4.80
8.20
5.60
2.20
-2.30
4.50
6.70
5.00
4.10
4.20
2.30
2.30
5.20
4.50
-0.50
-5.20
3.00
5.30
5.60
5.40
3.40
2.40
7.50
4.80
5.60
6.30
6.10
4.10
4.40
3.90
3.00
n/a
1.60
n/a
2.10
2.30
7.10
5.40
2.20
5.20
6.50
3.00
* Revised** Estimatesn/a: not available.

Sources: I MF (2014) World Economic Outlook Database;
IMF (2014) World Economic Outlook (October);
EIU: various country reports; World Bank (2014),
World Development Indicators (October).
commodity prices and by the challenges

that arose in the advanced and emerging
economies during the year. Growth in the
OICs was supported by vibrant activity in
services, especially telecommunications,
banking, and construction; improvements in
legal and regulatory frameworks and political
governance; and continued inflows of FDI and
other forms of capital such as tourist receipts
and migrant remittances.
4.1.1 Regional variations
GDP growth and price movements varied

widely across the sub-regions of Africa during
the year. Economic activity strengthened in
North Africa, resulting in a growth rate of
2.4 percent in 2014, up from 1.5 percent in
2013, despite the decline in crude oil prices
(Figure 4.2). Factors underpinning the strong
growth included increased government
spending on infrastructure projects related
to housing, roads, and rail lines. The regions
growth performance was also supported by
continued inflows of FDI to the natural gas
and minerals sectors in Algeria, and by rising
domestic consumption in Egypt as the sociopolitical situation improved following the
presidential elections. The average rate of
inflation for the region rose to 4.7 percent in
2014, compared to 4 percent in 2013. It was
pushed up by the rising government spending
and domestic demand in parts of North
Africa, high average price levels in Sudan and
Egypt, and the overall increase in the regions
economic activity (Table 4.2 and Figure 4.3).
In Southern Africa, the level of economic
activity weakened. The rate of output growth
fell to 1.6 percent in 2014 from the 2.2
percent reported in 2013 (Figure 4.2). The
weak performance of the region as a whole
strongly reflected the pattern in the South
African economythe regions largest
where recurrent power shortages and
weak domestic demand adversely impacted
manufacturing industries and work stoppages
disrupted production in the mining sector.
Another contributing factor was a slowdown
of the economy of Zimbabwe, largely caused
Table 4.2. Africa: Inflation by Country,

201214 (annual percent change)
Figure 4.2. Africa: Output, by Region,

2013-14 (percent)
Real GDP
8.0
6.0
4.0
2.0
0.0
North
2013*
South
2014**
West
East
Central
*Revised. ** Estimates.
Sources: IMF (2014), World Economic Outlook Database;
EIU: various reports.
Figure 4.3. Africa: Inflation, by Region,

2013-14 (percent)
Inflation
12.0
10.0
8.0
6.0
4.0
2.0
0.0
North
2013*
South
2014**
West
East
Central
*Revised. ** Estimates.
Sources: IMF (2014), World Economic Outlook Database;
EIU: various reports.
by a weakening of tobacco prices and by

declining copper prices in neighbouring
Zambia. As a silver lining, the average rate of
inflation across the region slowed slightly to
5.7 percent in 2014, from 6.3 percent in 2013,
on the back of falling commodity prices and
the depreciation of the South African rand
(Figure 4.3).
Africa
Algeria
Angola
Benin
Botswana
Burkina Faso
Burundi
Cameroon
Cape Verde
Chad
Comoros
Congo, Dem. Rep. of
Congo, Rep. of
Cote d'Ivoire
Djibouti
Egypt
Equatorial Guinea
Eritrea
Ethiopia
Gabon
Gambia
Ghana
Guinea
Guinea-Bissau
Kenya
Lesotho
Liberia
Libya
Madagascar
Malawi
Mali
Mauritania
Mauritius
Morocco
Mozambique
Namibia
Niger
Nigeria
Rwanda
Senegal
Seychelles
Sierra Leone
Somalia
South Africa
South Sudan
Sudan
Swaziland
Tanzania
Togo
Tunisia
Uganda
Zambia
Zimbabwe
2012*
9.70
10.29
6.74
7.53
3.82
18.00
2.90
2.54
5.23
14.00
1.70
9.70
3.90
1.31
3.74
7.10
3.41
12.26
22.90
2.70
4.30
9.16
15.23
2.06
9.38
6.10
6.83
6.07
6.40
21.67
5.32
4.90
3.85
1.29
2.09
6.70
0.47
12.22
6.29
10.64
1.44
7.11
12.90
n/a
5.65
n/a
37.30
8.94
16.00
2.63
5.58
14.01
6.58
1.6
2013*
4.10
8.80
1.00
5.90
0.60
8.00
1.90
1.50
6.83
-0.60
2.30
1.60
6.00
2.94
2.65
9.50
5.00
12.26
8.10
0.50
5.50
11.05
12.00
0.70
5.70
4.90
7.70
3.61
5.80
27.10
-0.60
4.17
3.50
1.90
4.20
5.60
2.30
8.50
4.20
8.65
0.70
4.40
10.34
n/a
5.85
n/a
n/a
5.60
7.90
1.80
6.00
5.50
7.06
-0.2
2014**
2.90
8.40
-1.20
3.80
-0.60
4.30
3.70
-0.30
16.00
3.50
1.50
1.40
0.90
0.90
2.90
10.10
6.10
11.20
7.70
4.80
6.10
17.00
10.20
-1.10
6.00
5.50
11.50
4.30
6.50
25.50
1.00
4.40
2.40
0.40
1.10
5.30
-0.80
8.10
2.40
7.00
0.10
1.50
8.30
n/a
5.70
n/a
26.70
5.70
4.80
n/a
5.50
4.40
7.80
0.10
* Revised.** Estimates.n/a not available.

Sources: IMF (2014) World Economic Outlook Database;
IMF (2014) World Economic Outlook (October);
EIU: various country reports; World Bank (2014),
World Development Indicators (October).
The growth of GDP in West Africa maintained

its upward momentum, strengthening to
6.5 percent in 2014, from 5.7 percent in
2013 (Figure 4.2). Growth was propelled
by continued expansion of the Nigerian
economy, the largest economy in the region,
on the back of a thriving services sector
led by telecommunications, banking, and
construction, coupled with high private
consumption. It was also supported by strong
activity in Cte dIvoire (with growth of 8.2
percent), led by investments in infrastructure
projects
related
to
construction/
extension of roads, ports, airports, and
telecommunications facilities; and strong
growth in a number of other countries
including Burkina Faso (6.8 percent) and Mali
(5.6 percent), coupled with continued inflows
of FDI to the extractive sector. The strong
growth is fuelling overheating in countries
across the region. The average rate of inflation
in West Africa rose slightly, to 5.8 percent in
2014 from 5.4 percent in 2013 (Figure 4.3).
Major factors pushing up inflation rates are
the fiscal slippages in most parts of the region;
high consumer demand in Nigeria; and high
food prices in Guinea, Liberia, and Sierra
Leone caused by disruptions in domestic
food supplies arising from the outbreak of the
Ebola Virus Disease in these countries.
Economic growth in Eastern Africa has been
robust and slowed down only slightly in 2014.
The GDP growth rate declined to 6.4 percent
in 2014, from 6.8 percent in 2013 (Figure
4.2), on the back of falling commodity prices,
coupled with decreasing numbers of tourist
arrivals, especially in Kenya, due to security
concerns. Growth was however supported by
strong private consumption and investment,
especially in infrastructure, by both the
public and private sectors. The average rate
reflected the strong growth performance of
Tanzania (7.1 percent), Kenya (5.2 percent),
and Seychelles (3.9 percent), buoyed by
continued investments in the extractive and
services industries. Inflation in Eastern Africa
moderated slightly, to 9.4 percent in 2014
from 10 percent in 2013 (Figure 4.3), on the
back of falling oil prices, lower housing and
utility prices in Kenya, declining food prices in

Uganda, and lower transport costs across the
region.
In the Central African region, economic

activity slowed down in 2014 (Figure 4.2),
due primarily to falling oil prices; persistent
socio-political challenges in the Central
African Republic; militant activity in the
Lubumbashi, Goma, and Katanga areas in the
Democratic Republic of Congo; and insecurity
in the northern part of Cameroon and in Chad.
Growth was buoyed up by continued FDI
inflows to the mining and oil and gas sector
across the regionespecially in Chad, the
Republic of Congo, and the Democratic Republic
of Congocoupled with improved agricultural
output supported by increased public spending
on agriculture-related infrastructure in the
Democratic Republic of Congo. Inflationary
pressures in the region receded as a result of
falling oil prices and improved agricultural
output (Table 4.2 and Figure 4.3).
4.2 AFRICAN FINANCIAL MARKET

DEVELOPMENTS
Excepting South Africas, African financial
markets are among the least developed and
least liquid in the world. Though the largest
African stock exchanges are increasingly
attracting foreign portfolio investments,
their level of integration with global financial
markets is still low. But the market for
Eurobonds issued by African countries
remained dynamic in 2014 with many heavily
oversubscribed issuances in 2014.
4.2.1 African stock markets
During 2014, the major equity indices of

African stock markets were affected by both
global and local developments. By the end
of the year, the Nigerian stock exchanges
All Share Index had plunged by about 30
percent after reaching a peak in July 2014.
Unsurprisingly, this drop was closely linked
to the slump in global oil prices. While energy
stocks suffered the most, other sectors
including banks recorded losses, on concerns

that lower oil prices would affect Nigerias
economic performance for the year.
The main index of the BRVM (Bourse
Rgionale des Valeurs Mobilires)the
regional West African stock exchange
covering eight francophone West African
countriessaw a gain of 7 percent in 2014.
The gain was mainly due to the increasing
investments and buoyant services sector in
the two largest economies in West Africa:
Cte dIvoire and Senegal.
East African stock exchanges performed well
in 2014, with those of Kenya and Tanzania
leading the way. This performance was mainly
explained by the attractiveness of the region
as an international investment destination,
especially following the 6.8 percent growth
rate it recorded in 2013.
In North Africa, EGX30 and Tunindex, Egypts

and Tunisias main stock indices, respectively,
gained by 25 percent and 16.5 percent,
respectively, in 2014. The success of the
political elections that took place in the two
countries eased investors concerns about the
economic outlook and lifted equity returns
despite regional and terrorism challenges.
South Africas All Share Index lost 6 percent

of its value in 2014. Prominent factors
underlying the loss were the domestic
challenges that affected economic activity and
capital flight and outflows that were triggered
by the decision of the U.S. Federal Reserve to
taper its monetary easing program.
4.2.2 African bond markets
In 2014, African countries raised about US$15

billion of funds on Eurobond markets, mainly
to finance large infrastructure projects as
well as their health and education sectors.
The dynamic market attested to the growing
interest of international investors in African
sovereign bonds. Except in Ghana, sovereign
spreads on African Eurobonds returned to
their post-crisis low levels regardless of the
fiscal position of the issuing countries.
During the year, South Africa issued two

Eurobond tranches of US$1 billion and
US$500 million. Cte dIvoire, Senegal, and
Tunisia also issued Eurobonds with respective
values of US$500 million, US$750 million, and
US$500 million. All the African Eurobond
issuances were largely oversubscribed,
with acceptable yields, despite the belowinvestment grade rating assigned to them by
major rating agencies.
The vibrant African Eurobond market was
mainly driven by the good performance
of African economies in 2014, but it also
benefited from the growing risk appetite of
international investors seeking high-yield
investments. Moreover, U.S. and European
sanctions on Russia meant that funds that
could have gone to Russian issuers were
redirected to other emerging destinations
including in Africa.
From
African
countries
perspective,
the terms of the bond issuances were
unfavourable as compared with those of
concessional loans that can be obtained
from international financial institutions such
as the IMF and the World Bank. Moreover,
because all the African Eurobonds have
been denominated in US dollars and euros,
appreciation of these currencies could have
unwelcome fiscal implications for the issuing
governments.
4.2.3 Financing conditions in Africa
Financing and liquidity conditions in Africa

are related to domestic and global economic
and financial developments as well as to the
impact of the slump in commodity prices. In
2014, capital flows to Africa were marked by a
slowdown mainly due to two factors: the U.S.
Federal Reserves tapering of its monetary
easing policy and the fall in prices of oil and
other commodities.
In 2013, the U.S. Federal Reserve started
tapering its quantitative easing programme by
lowering the value of its monthly purchases

of financial securities (mainly treasury and
mortgage-backed securities) from US$85
billion in 2013 to US$35 billion in June 2014.
It announced the end of the program in
October 2014 although it maintained interest
rates at low levels.
The phase-out of the QE program led

investors to withdraw liquidity from some
African countries, especially those with
the most developed and liquid financial
markets, notably South Africa, Kenya, and
Nigeria. Currency depreciation in these
countries was partly the reflect of foreign
capital outflows. Yet the impact on Africa
was tempered because other major central
banks such as the European Central Bank
and the Bank of Japan were maintaining
their accommodative monetary policies.
Global investors were also encouraged
by the potential for growth in Africa and
the business-friendly environment that
has emerged from the structural reforms
adopted in many African countries over the
past few years.
Another major economic development that

affected African financial conditions is the
fall of oil and commodity prices globally
by more than 50 percent in nominal terms
between June and December 2014. Exports
of oil and other commodities are a major
source of foreign reserves and government
revenues in a number of African countries
including Algeria, Angola, Equatorial Guinea,
Congo Republic, the Democratic Republic of
Congo, Gabon, and Nigeria. For Nigeria, for
example, oil exports account for about 90
percent of export earnings and 70 percent
of fiscal revenue. Nigerias foreign direct
investment inflows dwindled for the third
year in a row reaching US$4.90 billion in 2014
from US$5.50 billion in 2013, mainly because
of the U.S. tapering of quantitative easing and
the fall in oil prices. This led to deterioration
of Nigerias fiscal balances and forced the
central bank to tighten its monetary policy
and to actively intervene on exchange markets
in order to support the local currency in 2014.
Nigerias foreign exchange reserves fell from
US$42.8 billion at end-December 2013 to
US$35.2 billion at end-December 2014.
4.3 AFRICAN EXTERNAL

RESERVES AND EXCHANGE RATE
DEVELOPMENTS
The foreign exchange reserve holdings of
African economies suffered a year-on-year
decline of about 6.4 percent, from US$544.74
billion in 2013 to US$509.8 billion in 2014
(Table 4.3). The weakening arose partly from
declines in export earnings and receipts from
tourism. In a number of countries, such as
the Central African Republic, Egypt, Libya,
Sudan, and Tunisia, socio-political difficulties
occasioned capital flight and compelled
central banks to defend their currencies. As a
result of the year-on-year decline in reserve
holdings, import coverage for Africa fell to 8.6
months in 2014, from 10.9 months in 2013
(Table 4.3).
The value of several African currencies
weakened against the US dollar in 2014
(Table 4.4). The factors at work included
falling commodity prices and export
receipts, widening trade deficits, inflationary
pressures, and socio-political difficulties. The
drop in oil prices and the consequent decline
in export receipts and external reserves
adversely impacted the currencies of some
oil-producing countries, notably the Nigerian
naira, which depreciated by 13.44 percent
in 2014 as the oil price declined and the
countrys Central Bank stopped defending the
currency. The South African rand fell by more
than 10 percent against the US dollar as a

result of economic and political uncertainties,
labour unrest, weak growth performance, and
capital outflows in response to Fed tapering.
In Ghana, increased demand for the US
dollar by local firms and lack of confidence
in the financial sector as a result of a recently
reversed exchange control law, put downward
pressure on the cedi, which suffered a sharp
depreciation of 34.76 percent during the
year (Table 4.4). The CFA franc, the common
currency of 15 member countries in West,
Central, and Eastern Africa, depreciated along
with the euro to which it is pegged.1
Though some African countries suffered losses

as a result of the sharp drop in oil prices, and
from the depressed prices in some other
commodity markets, others are likely to have
gained from the upward adjustments in the
producer prices of their export crops. These
adjustments could stimulate production,
thereby creating opportunities for the African
Export-Import Bank to expand its business.
1The CFA franc is the common currency of 15
Francophone African countries. In West Africa,
members of the CFA franc zone are: Benin, Burkina

Faso, Cte dIvoire, Guinea-Bissau, Mali, Niger,
Senegal, and Togo. In Central Africa, members are:

Cameroon, the Central African Republic, Chad, the
Republic of Congo, Equatorial Guinea, and Gabon.
The Islamic Republic of the Comoros in East Africa

is the 15th member of the CFA franc zone.
Table 4.3. Reserve Position of African Countries, 201214 (US$ billion unless
otherwise indicated)
Country Name
Algeria
Angola
Benin
Botswana
Burkina Faso
Burundi
Cameroon
Cape Verde
Chad
Comoros
Congo, Democratic
Republic of Congo
Congo, Republic of Congo
Cote d'Ivoire
Djibouti
Egypt
Equatorial Guinea
Eritrea
Ethiopia
Gabon
Gambia
Ghana
Guinea
Guinea-Bissau
Kenya
Lesotho
Liberia
Libya
Madagascar
Malawi
Mali
Mauritania
Mauritius
Morocco
Mozambique
Namibia
Niger
Nigeria
Rwanda
Senegal
Seychelles
Sierra Leone
Somalia
South Africa
South Sudan
Sudan
Swaziland
Tanzania
Togo
Tunisia
Uganda
Zambia
Zimbabwe
Total
Average
Total Reserves (Excl. Gold)
2012*
191.30
33.42
0.71
7.63
1.03
0.31
3.38
0.38
0.16
1.16
0.19
1.63
5.55
3.93
0.25
11.63
2.92
0.16
2.07
2.35
0.24
5.37
0.15
0.16
5.71
1.03
0.50
110.50
1.05
0.22
1.34
0.95
2.84
16.36
2.77
1.75
1.01
46.41
0.85
0.05
2.08
0.48
0.48
n.a
50.69
0.19
0.19
0.74
4.05
0.44
8.36
3.17
3.04
0.57
543.90
10.26
2013*
2014**
5.77
4.24
0.43
13.61
4.40
0.18
2.15
2.69
0.21
5.25
0.17
0.19
6.60
1.06
0.49
115.20
0.78
0.41
1.40
0.99
3.34
18.40
3.14
1.51
1.17
33.90
1.07
0.06
2.25
0.53
0.53
n.a
49.71
0.19
0.19
0.76
4.67
0.51
7.29
3.34
2.68
0.47
544.74
10.28
5.47
4.32
0.41
13.45
4.81
0.21
3.12
2.91
0.18
4.24
0.18
0.29
7.72
1.03
0.40
93.29
0.85
0.48
0.83
1.07
3.62
20.90
3.20
1.51
1.18
35.25
1.15
0.06
1.82
0.49
0.54
n.a
44.27
0.19
0.19
0.69
4.31
0.50
7.32
3.11
3.29
0.46
509.80
9.62
194.71
32.78
0.70
7.74
-0.63
0.33
3.47
0.48
0.19
1.18
0.17
1.68
* Revised ** Estimates n.a not available.
185.97
28.05
0.95
8.24
0.47
0.33
2.84
0.47
0.26
1.10
0.19
1.62
Growth Rate (%)
2012 / 2014/2013
2013
1.78
-4.49
-1.92
-14.43
-1.41
35.57
1.48
6.42
-161.07
-174.72
6.83
0.56
2.64
-18.16
26.38
-1.05
18.75
34.74
2.11
-6.78
-10.67
9.64
2.88
-3.39
3.96
7.96
70.96
17.02
50.68
9.76
3.86
14.40
-12.50
-2.20
12.31
13.19
15.53
2.64
-0.80
4.25
-26.22
85.12
4.66
4.27
17.75
12.52
13.36
-13.44
14.99
-26.95
26.27
20.38
8.23
11.41
11.41
n.a
-1.93
0.00
0.16
2.92
15.34
14.81
-12.80
5.33
-11.78
-17.41
0.15
0.15
-5.20
1.81
-3.53
-1.18
9.32
16.67
45.12
8.18
-14.29
-19.27
3.44
55.75
17.01
-2.37
-18.86
-19.02
9.52
16.22
-40.71
8.08
8.38
13.56
1.91
-0.07
1.15
3.98
7.43
-5.96
-19.22
-7.99
1.41
n.a
-10.94
0.00
-1.50
-9.51
-7.78
-1.38
0.45
-6.82
22.59
-2.40
-6.41
-6.41
Months of Imports Covered by

Reserves
2012*
2013*
2014**
45.26
16.90
2.64
10.71
4.12
4.67
5.29
4.20
4.42
6.01
9.05
3.11
10.76
6.80
0.73
2.28
4.63
1.93
2.48
6.31
9.27
3.59
0.79
5.50
3.99
4.24
6.30
40.50
3.83
1.01
4.29
3.66
6.09
3.86
4.46
2.90
4.18
7.97
4.63
4.28
3.75
7.49
2.50
n.a
4.81
n.a
0.25
4.39
3.67
2.84
3.75
6.07
4.20
1.37
428.07
8.23
42.70
15.29
2.60
10.87
-2.52
4.99
5.43
5.31
5.25
6.14
10.51
3.20
11.19
7.34
11.31
2.36
6.98
2.12
2.58
7.22
8.11
3.51
0.88
6.22
4.61
4.35
6.25
31.70
2.83
1.87
4.49
3.81
7.17
4.35
5.06
2.51
4.80
6.19
5.85
5.16
4.06
8.35
2.79
n.a
4.41
n.a
0.25
4.52
4.23
3.26
3.27
6.39
3.70
1.13
566.68
10.90
38.41
14.08
2.80
16.06
1.27
5.54
5.38
7.28
23.34
9.71
12.08
2.71
7.85
4.08
1.48
2.60
20.31
5.31
2.54
8.19
6.33
6.05
1.13
10.27
5.24
7.32
0.32
55.89
3.15
2.00
3.45
3.06
7.91
5.26
3.80
2.12
8.02
8.18
7.57
4.57
3.67
6.98
4.56
n.a
5.32
n.a
0.26
4.74
4.24
2.95
3.44
6.22
4.17
0.64
448.56
8.63
Sources: World Bank: World Development Indicators, 2014; CIA: World Factbook, 2014; EIU Country Reports, various issues.
Table 4.4. Africa: Exchange Rate Developments, 2012- 14 (per US$ unless otherwise
indicated)
Africa
Algeria - dinar
Angola - kwanza
Benin - franc
Botswana - pula
Burkina Faso - franc
Burundi - franc
Cameroon - franc
Cape Verde - escudos
Central African Republic - franc
Chad - franc
Comoros - franc
Congo, Democratic Republic of Congo - Congo franc
Congo, Republic of Congo - franc
Cote d'Ivoire - franc
Djibouti - franc
Egypt - pound
Equatorial Guinea - franc
Eritrea - nakfa
Ethiopia - birr
Gabon - franc
Gambia - dalasi
Ghana - cedi
Guinea - Guinea franc
Guinea-Bissau - franc
Kenya - shilling
Lesotho - loti
Liberia - Liberia dollar
Libya - dinar
Madagascar - Ariary
Malawi - kwacha
Mali - franc
Mauritania - ouguiyas
Mauritius - rupee
Morocco - dirham
Mozambique - meticals
Namibia - namibia dollar
Niger - franc
Nigeria - naira
Rwanda - franc
Sao Tome and Principe - dobra
Senegal - franc
Seychelles - rupee
Sierra Leone - leone
Somalia - shilling
South Africa - rand
Sudan - pound a
Swaziland - lilangeni
Tanzania - shilling
Togo - franc
Tunisia - dinar
Uganda - shilling
Zambia - kwacha
Zimbabwe - US Dollar*
2012 (1)
78.28
95.82
495.35
7.78
495.35
1,534.10
495.40
83.05
495.40
495.40
371.82
915.18
495.40
495.35
180.50
6.19
495.40
15.11
18.25
495.40
32.49
1.91
6,995.91
495.35
85.91
8.46
72.50
1.27
2,258.00
326.69
495.35
301.34
30.60
8.43
29.00
8.46
495.35
155.92
619.84
18,497.00
495.35
13.11
4,307.00
1,605.00
8.46
3.05
8.46
1,580.90
495.35
1.55
2,682.06
5,194.86
1.00
2013 (2)
77.48
97.36
494.14
8.66
494.14
1,530.54
494.11
80.24
494.11
494.11
356.40
907.00
494.11
494.14
176.00
6.91
494.11
15.00
19.00
494.11
37.28
2.36
6,888.83
494.14
85.09
10.49
86.95
1.22
2,219.09
412.60
494.14
288.81
29.02
8.06
29.85
10.49
494.14
159.54
667.89
17,781.80
494.14
11.35
4,290.00
1,104.66
10.49
5.69
10.49
1,556.71
494.14
1.64
2,493.90
5,176.20
1.00
2014 (3)
87.45
102.99
539.63
9.42
539.63
1,537.83
539.66
90.14
539.66
539.66
404.28
908.79
539.66
539.63
177.00
7.13
539.66
15.00
20.03
539.66
42.50
3.18
6,892.46
539.63
89.05
11.60
91.00
1.18
2,165.04
466.37
539.63
286.60
30.43
9.02
33.00
11.60
539.63
180.98
679.57
19,925.40
539.29
12.75
4,190.00
696.14
11.56
5.67
11.60
1,700.97
539.63
1.86
2,740.55
5,250.82
1.00
Percentage change between

(2) & (1)
(3) & (2)
-1.02
12.87
1.61
5.78
-0.24
9.21
11.29
8.80
-0.24
9.21
-0.23
0.48
-0.26
9.22
-3.38
12.34
-0.26
9.22
-0.26
9.22
-4.15
13.43
-0.89
0.20
-0.26
9.22
-0.24
9.21
-2.49
0.57
11.67
3.15
-0.26
9.22
-0.73
0.00
4.11
5.42
-0.26
9.22
14.74
14.00
23.84
34.76
-1.53
0.05
-0.24
9.21
-0.96
4.66
23.97
10.60
19.93
4.66
-3.71
-3.19
-1.72
-2.44
26.30
13.03
-0.24
9.21
-4.16
-0.76
-5.16
4.86
-4.40
11.93
2.93
10.55
23.97
10.60
-0.24
9.21
2.32
13.44
7.75
1.75
-3.87
12.06
-0.24
9.14
-13.45
12.36
-0.39
-2.33
-31.17
-36.98
23.97
10.22
86.48
-0.31
23.97
10.60
-1.53
9.27
-0.24
9.21
5.71
13.52
-7.02
9.89
-0.36
1.44
0.00
0.00
* US dollar used as official currency since 2009. a) Currency for both North and South Sudan.
Sources: Economist Intelligence Unit Country Report (various issues); IMF (2014) International Financial Statistics Database;
Oanda (available at http://www.oanda.com/currency/historical-rates/).
CHAPTER
TRADE DEVELOPMENTS
IN AFRICA
5.1 THE ENVIRONMENT FOR AFRICAN
TRADE
5.1.1 Regional integration

Regional integration has been an important
aspiration of African countries since the
1960s, following the wave of political
independence. Today, it remains an
important priority. Many African countries
are small, lack access to the sea, and/or have
fragmented domestic markets. For these
countries, regional integration is likely to
provide and even expand opportunities for
economies of scale, allowing greater access
to capital markets. It could also enable
participating countries to pool resources
for large-scale, long-term infrastructure
projects.
Regional integration plays a key role in
intra-regional trade, which is important for
economic growth and development. As part
of efforts to pursue regional integration,
the following eight regional economic
communities (RECs) were created:

The Arab Maghreb

established in 1989
Union
(AMU),
The Common Market for Eastern and

Southern Africa (COMESA), established in
1994
The Community of Sahara-Sahel States
(CEN-SAD), established in 1998
The East African Community (EAC),

established in 1999
The Economic Community of Central

African States (ECCAS), established in
1983
The Intergovernmental Authority on

Development (IGAD), established in 1986
The Economic Community of West African

States (ECOWAS), established in 1975
The Southern African Development
Community (SADC), established in 1992
RECs play a very important role in supporting

trade and value chains as well as the
development of infrastructure. They usually
achieve this through the harmonization of
policies and standards using well-targeted
policy dialogue and advisory services.
The remainder of this section discusses

selected
trade-related
activities
of
regional and sub-regional institutions and
arrangements in 2014.
Economic Partnership Agreement (EPA)

between European Union and West Africa.
West Africa is the European Unions largest
trading partner in Africa, and the EU is West
Africas largest trading partner, ahead of China
and the U.S. In 2014, significant progress
was made in negotiations for this economic
partnership, which have been in progress for
ten years. The trade deal has been structured
so that the EU opens its markets completely
to participating countries in West Africa from
day one, while the countries in West Africa
will gradually remove import tariffs on EU
products only partially over a 20-year period.
TRADE DEVELOPMENTS IN AFRICA 67
Trade between West Africa and the EU is

worth more than EUR60 billion, split almost
equally between imports and exports. West
Africa accounts for more than 38 percent
of the total trade between the EU and all
African, Caribbean, and Pacific regions.
West African countries export commodities
and agricultural and fisheries products,
and import machinery from the EU. The
agreement foresees enhanced cooperation in
agriculture and fisheries with the EU agreeing
to stop subsidizing exports of its farm
products to the region.
The EPA negotiations were conducted on

the basis of the EU supporting sub-regional
integration in West Africa with all participating
16 countries (Benin, Burkina Faso, Cape
Verde, Gambia, Ghana, Guinea, Guinea Bissau,
Cte dIvoire, Liberia, Mauritania, Mali, Niger,
Nigeria, Senegal, Sierra Leone, and Togo) and
two sub-regional institutions, ECOWAS and
the West African Economic and Monetary
Union, working together to define common
policies. The EPA creates a WTO-compliant
arrangement to replace the previous nonreciprocal regime that had guided trade
relations between the EU and West Africa.
The new EPA was endorsed by the ECOWAS
heads of state at their summit in July 2014
and the European Council of Ministers signed
the text of the Agreement on 12 December
2014. However, the EPA will only become
operational once it has been ratified by all
the countries involved. While several of the
countries that participated in the negotiations
seemed set to sign the agreement, Nigeria
has expressed concerns about the countries
in the region opening up their economy to
the EU particularly in certain sectors. That
country believes it is important to develop the
impacted industries and not create a situation
where Nigeria and the other ECOWAS
countries would become and remain importdependent.
Other ECOWAS trade-related activities.
Following nine years of negotiations, the West
African Heads of States formally launched
the ECOWAS Common External Tariff (CET)

on 15 December 2014, to become effective
from 1 January 2015. The CET is seen as one
of the most important integration objectives
of ECOWAS. It will promote investment
and industrialization, facilitate the export
of processed products, safeguard customs
revenues, and protect emerging industries
and agriculture against unfair competition
from imported goods. The CET draws on
the basic CET of the West African Economic
and Monetary Union and contains five tariff
bands: 0 percent for essential social goods; 5
percent for goods of primary necessity, raw
materials, and specific inputs; 10 percent for
intermediate inputs and products; 20 percent
for final consumption goods; and 35 percent
for specific goods for economic development.
In another development, the Presidents of

Benin, Cte dIvoire, Ghana, Nigeria, and
Togothe five countries involved in the
1,028-km road project linking West Africas
major capital citiesendorsed a formula
for jointly providing the US$50 million seed
fund needed for the implementation of the
project. The sharing formula is a function of
the proportion of population, GDP, and the
length of the road to be built in each of the
countries. Based on the formula, Nigeria is
expected to contribute US$27.044 million,
Ghana US$13.063 million, Cte dIvoire
US$4.993 million, Benin US$3.311 million,
and Togo US$1.587 million. The project is
expected to cost about US$2 billion. The treaty
for the project was signed in March 2014.
The African Development Bank committed
to source grant funding for the projects
feasibility and technical studies, including
capacity building. Discussions are underway
to secure support from the German Technical
Assistance Agency GTZ, through the African
Union Commission, as part of the continental
drive for flagship projects under the
Programme for Infrastructure Development
in Africa. China, Japan, and other development
partners have also expressed interest in the
project, as part of efforts aimed at boosting
trade as well as free movement of persons,
goods, and services in West Africa.
The Tripartite Free Trade Area (TFTA)

that is envisaged for COMESA-EAC-SADC
comprises 26 countries with a combined
population of nearly 600 million and a total
GDP of approximately US$1.0 trillion. Its
main objective is to strengthen and deepen
economic integration of the Southern and
Eastern Africa region. This will be achieved
through harmonisation of policies and
programmes across the three RECs in the
areas of trade, customs, and infrastructure
development. In February 2014, negotiating
structures for the TFTA became fully
operational. The official launch of the TFTA
was initially scheduled for December 2014
in Egypt, but was delayed until June 2015
with issues related to rules of origin
including how they should be measured and
how stringent they should beremaining a
sticking point.
The TFTA is planned to be implemented

in two phases: phase one is to focus on
tariff liberalization, rules of origin, trade
remedies, customs and transit procedures;
and phase two will address trade in services
and other issues such as intellectual
property, competition policy, and trade
competitiveness.
Although the TFTA has been hailed by
many as a very important step for regional
integration in Africa, it will undoubtedly
face some challenges. Chief among these
challenges is how the distribution of gains
from deep integration will be achieved.
Uneven distribution could potentially lead
to compensation mechanisms that will be
distortionary, as occurred under the first
wave of regional integration in the immediate
post-independence period.
On the positive side, in addition to political
benefits, the TFTA holds out prospects for
its members to reap efficiency gains, exploit
scale economies, and reduce the thickness
of borders. Should the implementation of the
TFTA be a success, it will undoubtedly serve
as a template for the broader and muchanticipated Continental Free Trade Area
(CFTA), which will incorporate countries

within ECOWAS.
5.1.2 Trade-supporting infrastructure
African countries ability to establish a

competitive industrial sector and promote
industrial development with strong forward
and backward linkages has been hindered
by poor infrastructure, which has resulted in
high production and transaction costs.
Across all sectors, Africas infrastructure
lags behind that in the rest of the developing
world in both access and quality. The figures
are telling:

Only 38 percent of Africas people have

access to electricity;
Fewer than 10 percent have access to the
Internet;
Only a quarter of Africas road network is
paved;
Poor port facilities add 30-40 percent to

intra-African trading costs.
All these disadvantages result in expensive

infrastructure services, constrain industrial
productivity, limit participation in global
trade, and hold back the competitiveness of
production.
African countries recognise the huge

infrastructure gap and are making efforts to
bridge it. According to India Infrastructure
Research, African infrastructure projects
worth at least US$366 billion are in the
pipeline across several infrastructure
sectors: roads, seaports, railways, oil and
gas, water and sanitation, electricity, and air
transport. The majority of them are in Algeria,
Angola, Egypt, Ethiopia, Ghana, Morocco,
Mozambique, Nigeria, South Africa, and
Uganda.
The recent trend has been to take a regional
or cross-border approach to infrastructure
projects. To make use of scarce resources

more efficiently and enhance trade, many
economies are now pursuing regional projects
with their neighboursfacilitated mostly by
the RECs. With regard to funding, global and
regional development institutions like the
World Bank, African Development Bank, the
Asian Development Bank, and the European
Investment Bank remain key players, but a
new breed of investorsnotably pension
funds, private equity, and infrastructure
fundsare now being attracted to invest in
Africas infrastructure.
In 2014, several activities were initiated
with a view to improving the state of tradesupporting infrastructure in Africa. A selected
few are discussed below.
Dakar Financing Summit for Africas
Infrastructure. In June 2014, the President
of Senegal organised and hosted the Dakar
Financing Summit for Africas Infrastructure,
aimed at building and strengthening
innovative synergies between the public
and private sectors towards mobilizing panAfrican and global financial investments for
infrastructure development in the continent.
The Summit endorsed the establishment

of a Continental Business Network on
Infrastructure Financing, coordinated by the
NEPAD in partnership with the organizing
institutions of the Dakar Financing Summit.
The new Network comprises leading
African and global business and finance
bodies, as well as regional and international
organizations whose objective is to drive
infrastructure investments through improved
project preparation, capacity development,
and project implementation. The Summit
concluded that the time has come to fund
Africas development from African financial
sources in line with the thrust of the African
Unions AGENDA 2063.
Trans-Sahara Highway (TSH). One of
the priority projects of the Programme
for Infrastructure Development in Africa,
the TSH began its implementation in
2014. This is a US$584 million project that

involves construction and asphalting of 565
kilometres of roads linking the main axis and
the Chadian branch of the TSH; construction
of a 543-meter-long bridge on the River
Niger at Fari, with three kilometres of access
roads, and the construction of infrastructure
to ease transport and transit congestion at
the Algeria/Niger and Niger/Chad borders.
When completed, the six-lane highway will
provide connectivity to six countries: Algeria,
Chad, Mali, Niger, Nigeria, and Tunisia. The
project is expected to: (i) increase traffic and
trade between North Africa, West Africa,
and Central Africa; (ii) reduce the costs of
transport and logistics; (iii) improve the living
conditions of residents of the project area and
their access to basic social services (drinking
water, schools, health units, etc.); and (iv)
contribute to the overall improvement of
security in the Sahara region. Along with
the governments of Algeria, Niger, and Chad,
the project is funded by AfDB and other
multilateral agencies including the Arab Bank
for Economic Development in Africa, Kuwait
Fund for Arab Economic Development, Saudi
Fund for Development, and the OPEC Fund for
International Development.
5.2 AFRICAN TRADE

Major
commodity
exporting
African
countries continue to feel the impact of
weak commodity prices. The continents
merchandise trade contracted for the second
consecutive year in 2014, shrinking by 3.79
percent from US$1.20 billion in 2013 to
US$1.16 billion in 2014 (Table 5.1 and Figure
5.1). Weaknesses in global demand, caused
by the continued slowdown of the Chinese
economy and other emerging markets, the
lingering impact of the EU recession, and
uncertainty about the timing of the Federal
Reserves winding down of monetary
stimulus in the United States, continued to
depress Africas merchandise exports and
hence its total trade. Aside from stifling
exports, these developments also heightened
uncertainties in global financial markets and
thus reduced the flows of trade finance to

developing economies, particularly those in
Africa.
Figure 5.1. Trends in Africas

Merchandise Trade 2004-14 (US$
billion)
1400
1200
1000
800
600
Import
14
13
20
12
20
11
20
10
20
09
20
08
20
07
20
06
20
20
05
Export
20
20
200
04
400
Total Trade
Sources: W
orld Bank World Development Indicators,
October 2014; EIU country report, (various issues);
UNCTAD UNCTADstat, 2014.
Africas merchandise exports suffered a

third year of decline in 2014. The fall in
2013 and 2014 reflected several factors: a
plateau in production of major commodities,
including oil, gold, cocoa, and cotton; weak
commodity prices; flat import demand
in developed economies (with growth of
only 0.2 percent in 2014); and moderate
import growth in developing economies (4.4
percent). After their steep decline in 2012, of
10.1 percent from US$664.6 billion, Africas
merchandise exports fell further in 2013 to
US$597.4 billion, and to US$555.6 billion in
2014 (Table 5.1).
The decreases in commodity prices cut deeply

into the exports of Africas five largest trading
economies: Nigeria, South Africa, Algeria,
Angola, and Egypt.1 Nigeria, Africas largest
commodity exporting country, suffered a 31.6
percent decline in its merchandise exports
in 2013 and an estimated further decline of
5 percent in 2014, on account of weak crude
1These countries accounted for a combined share
of 60.5 percent of Africas total merchandise

exports in 2012 and 55.3 percent in 2013.
oil prices and a cut in crude oil imports by the

U.S., which affected Nigerias exports of crude
oil. The drop in world oil prices also affected
other African oil exporters. In Angola, where
crude oil accounts for more than 98 percent
of merchandise exports, the weakening oil
prices and low crude oil production in 2013
and 2014 caused merchandise exports to fall
by an estimated 3.3 percent in 2014. Algeria
and Egypt also suffered significant losses:
their receipts from merchandise exports
declined by 6.48 percent and 5.53 percent,
respectively, in 2014. Libyas merchandise
exports suffered a near collapse in 2014,
declining by 67 percent (from US$42 billion in
2013 to an estimated US$14 billion in 2014),
though the impact of oil price shocks was
compounded by protracted political unrest
and the rise of terrorism.
South Africa suffered two successive

contractions of its merchandise exports,
owing to the effects of labour unrest on its
production and exports of minerals, the
countrys largest export commodity group,2
and to sharp declines in the world prices
of metals and minerals. In 2014, South
Africas merchandise exports declined by
an estimated 4.8 percent, largely as a result
of a 9 percent drop in exports of metals and
minerals (Table 5.1).
Africas merchandise imports suffered a

slight decline in 2014 after growing well in
2013. As shown in Table 5.1, they grew in
2013 by 5.16 percent to US$605.58 billion,
and then declined in 2014 by 0.6 percent to
US$601.81 billion. The relatively flat trend
in 2014 reflects the mixed performance
of Africas five largest trading economies:
merchandise imports of South Africa and
Egypt suffered declines of 3.45 percent
and 6.95 percent, respectively in 2014,
contrasting with those of Nigeria and Algeria
whose growth was relatively strong. Algerias
2South Africas exports are relatively more
diversified than those of other African countries.

Metals and minerals account for about 20 percent
of its merchandise exports.
2013* 2014**
2012
/2013
2013
/2014
2012*
2013* 2014**
Share of Merchandise
Exports (%)
2012*
2013* 2014**
9.01
7.81
62.12
-6.10
33.44
-26.83
-7.41
-3.76
-41.60
31.40
-3.04
11.53
13.92
27.77
1.83
-4.58
33.76
12.90
-8.04
11.88
-7.84
-28.50
-4.70
-3.39
8.88
3.18
-17.42
23.83
16.04
15.59
-17.08
33.93
-6.49
1.84
63.49
6.20
1.74
36.98
4.75
7.67
-5.73
17.78
-17.65
31.25
-0.66
n/a
11.77
-22.13
6.91
20.24
-0.83
-3.75
15.41
4.64
5.16
2012
/2013
2012*
2013* 2014**
Share of Merchandise
Imports (%)
5.82
8.75
9.07
9.65
7.50
3.58
3.67
3.97
7.14
0.41
0.63
0.68
-18.28
1.39
1.24
1.02
1.93
0.57
0.72
0.74
-2.61
0.17
0.12
0.12
5.00
1.13
1.00
1.05
6.69
0.13
0.12
0.13
1.93
0.04
0.02
0.02
25.92
0.14
0.18
0.23
3.23
0.03
0.03
0.03
7.00
1.04
1.11
1.19
-0.15
1.28
1.38
1.39
1.91
1.70
2.06
2.11
12.02
0.51
0.49
0.55
-6.95
12.13
11.01
10.31
-7.61
0.40
0.51
0.47
9.67
0.07
0.07
0.08
34.35
2.07
1.81
2.45
8.20
0.61
0.65
0.71
-2.59
0.07
0.06
0.06
-16.15
2.43
1.65
1.40
-1.61
0.35
0.32
0.32
14.57
0.05
0.05
0.06
7.00
2.64
2.73
2.94
0.96
0.28
0.28
0.28
12.00
2.78
2.19
2.46
-60.00
3.42
4.03
1.62
5.01
0.46
0.51
0.54
1.12
0.43
0.47
0.48
0.58
0.60
0.47
0.48
5.55
0.52
0.66
0.70
1.77
1.00
0.89
0.91
4.51
7.78
7.53
7.92
0.02
1.07
1.67
1.68
13.00
1.24
1.25
1.42
3.06
0.29
0.28
0.29
5.21
6.23
8.11
8.59
7.13
0.28
0.28
0.30
3.58
0.02
0.03
0.03
-1.81
1.12
1.00
0.99
5.39
0.12
0.13
0.14
8.83
0.28
0.22
0.24
13.28
0.19
0.23
0.26
-3.45
18.09
17.08
16.60
n/a
n/a
n/a
n/a
5.95
1.30
1.39
1.48
2.01
0.38
0.28
0.29
-2.57
2.03
2.07
2.03
1.68
0.29
0.33
0.34
5.36
4.25
4.01
4.25
3.13
1.05
0.96
1.00
-6.83
1.53
1.68
1.57
12.34
1.28
1.27
1.44
-0.62 100.00 100.00 100.00
2013
/2014
Merchandise Imports(US$ Growth Rate (%)

Billion)
71.87
66.00
61.72
-8.16
-6.48
10.81
11.05
11.11
50.37
54.91
58.10
74.42
71.55
69.20
-3.85
-3.30
11.20
11.98
12.46
20.62
22.23
23.90
0.47
0.64
0.68
34.98
7.32
0.07
0.11
0.12
2.34
3.79
4.07
5.97
7.71
6.81
29.16 -11.73
0.90
1.29
1.23
8.03
7.54
6.16
2.14
2.65
2.38
23.68 -10.23
0.32
0.44
0.43
3.27
4.37
4.45
0.24
0.21
0.26 -13.98
26.36
0.04
0.03
0.05
1.00
0.73
0.71
4.27
4.90
4.93
14.67
0.61
0.64
0.82
0.89
6.52
6.03
6.33
0.06
0.07
0.08
24.12
16.74
0.01
0.01
0.01
0.75
0.73
0.77
0.12
0.05
0.05 -58.37
7.64
0.02
0.01
0.01
0.22
0.13
0.13
0.82
1.08
1.38
31.40
27.57
0.12
0.18
0.25
0.82
1.08
1.36
0.05
0.05
0.06
1.92
4.80
0.01
0.01
0.01
0.19
0.18
0.19
6.93
7.62
8.00
9.95
5.00
1.04
1.28
1.44
6.02
6.71
7.18
7.44
10.45
9.22
40.54 -11.80
1.12
1.75
1.66
7.35
8.37
8.36
10.86
12.08
13.77
11.26
13.98
1.63
2.02
2.48
9.77
12.48
12.72
0.09
0.09
4.24
5.50
0.01
0.01
0.02
2.92
2.98
3.33
0.08
29.42
28.78
27.19
-2.17
-5.53
4.43
4.82
4.89
69.87
66.67
62.04
15.61
14.54
12.34
-6.83 -15.15
2.35
2.43
2.22
2.30
3.08
2.84
0.40
0.26
0.29 -36.12
12.86
0.06
0.04
0.05
0.38
0.43
0.47
2.89
2.59
2.98 -10.39
14.93
0.44
0.43
0.54
11.91
10.96
14.72
10.22
9.72
9.49
-4.97
-2.31
1.54
1.63
1.71
3.52
3.94
4.26
0.12
0.11
0.11 -10.64
1.24
0.02
0.02
0.02
0.38
0.35
0.34
18.76
15.58
15.28 -16.96
-1.96
2.82
2.61
2.75
14.01
10.02
8.40
2.14
1.51
1.43 -29.22
-5.32
0.32
0.25
0.26
2.04
1.94
1.91
0.18
0.23
0.26
31.96
10.00
0.03
0.04
0.05
0.31
0.30
0.34
5.21
5.29
5.73
1.57
8.28
0.78
0.89
1.03
15.18
16.52
17.68
0.69
0.92
0.92
33.32
0.96
0.10
0.15
0.17
1.62
1.67
1.69
1.16
1.25
1.13
7.85 -10.00
0.17
0.21
0.20
16.03
13.23
14.82
58.27
42.22
14.07 -27.54 -66.67
8.77
7.07
2.53
19.72
24.42
9.77
1.22
1.84
2.16
50.10
17.41
0.18
0.31
0.39
2.66
3.09
3.24
1.22
1.21
1.17
-0.83
-3.35
0.18
0.20
0.21
2.46
2.84
2.88
0.50
0.44 -80.76 -12.68
0.39
0.08
0.08
3.46
2.87
2.89
2.61
2.62
2.46
2.22
-6.15 -10.02
0.39
0.41
0.40
2.97
3.98
4.20
2.26
2.34
2.51
3.85
7.18
0.34
0.39
0.45
5.77
5.40
5.49
21.42
22.18
24.08
3.55
8.59
3.22
3.71
4.33
44.79
45.62
47.67
3.47
4.02
4.01
15.96
-0.44
0.52
0.67
0.72
6.18
10.10
10.10
5.38
6.34
6.53
17.86
3.01
0.81
1.06
1.18
7.13
7.57
8.56
1.31
1.34
1.41
2.33
5.54
0.20
0.22
0.25
1.68
1.71
1.77
143.15
97.89
92.96 -31.62
-5.03
21.54
16.39
16.73
35.87
49.14
51.70
0.51
0.62
0.65
22.68
4.48
0.08
0.10
0.12
1.62
1.70
1.82
0.01
0.01
0.01
14.73
6.98
0.00
0.00
0.00
0.14
0.15
0.16
2.53
2.49
2.50
-1.79
0.66
0.38
0.42
0.45
6.43
6.07
5.96
0.48
0.61
0.57
27.66
-7.29
0.07
0.10
0.10
0.68
0.80
0.84
1.04
1.90
1.96
82.58
2.76
0.16
0.32
0.35
1.59
1.31
1.42
0.40
0.54
5.06
34.55 841.81
0.06
0.09
0.91
1.07
1.40
1.58
99.21
95.22
90.61
-4.01
-4.84
14.93
15.94
16.31 104.15 103.46
99.89
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
6.65
6.83
74.61
2.65
0.57
1.11
1.23
7.51
8.39
8.89
3.81
2.09
2.11
2.05
0.87
-2.85
0.31
0.35
0.37
2.20
1.71
1.75
5.55
4.41
4.73 -20.45
7.17
0.83
0.74
0.85
11.72
12.53
12.20
0.90
1.00
1.04
11.31
3.42
0.14
0.17
0.19
1.67
2.00
2.04
17.01
17.06
16.40
0.31
-3.84
2.56
2.86
2.95
24.47
24.27
25.57
2.36
2.41
2.26
2.13
-6.26
0.35
0.40
0.41
6.04
5.82
6.00
9.36
10.59
9.87
13.13
-6.79
1.41
1.77
1.78
8.81
10.16
9.47
3.88
3.51
3.70
-9.66
5.48
0.58
0.59
0.67
7.36
7.70
8.65
664.61 597.42 555.57 -10.11
-7.01 100.00 100.00 100.00 575.89 605.58 601.81
2012*
Growth Rate (%)
n/a not available

Sources: World Bank World Development Indicators, October 2014; EIU Country Report, (various issues); UNCTAD UNCTADSTAT, 2014
* Revised. ** Estimates.
Algeria
Angola
Benin
Botswana
Burkina Faso
Burundi
Cameroon
Cape Verde
Central African Rep.
Chad
Comoros
Congo, Dem. Rep.
Congo, Rep.
Cote d'Ivoire
Djibouti
Egypt, Arab Rep.
Equatorial Guinea
Eritrea
Ethiopia
Gabon
Gambia, The
Ghana
Guinea
Guinea-Bissau
Kenya
Lesotho
Liberia
Libya
Madagascar
Malawi
Mali
Mauritania
Mauritius
Morocco
Mozambique
Namibia
Niger
Nigeria
Rwanda
Senegal
Seychelles
Sierra Leone
Somalia
South Africa
South Sudan
Sudan
Swaziland
Tanzania
Togo
Tunisia
Uganda
Zambia
Zimbabwe
Total
Country Name
Merchandise Exports
(US$ Billion)
Table 5.1. Africa: Merchandise Trade, 2012-14
122.24
95.05
2.81
14.00
5.41
1.25
10.79
0.81
0.34
1.64
0.24
12.95
14.79
20.63
3.01
99.28
17.91
0.79
14.80
13.75
0.50
32.77
4.18
0.48
20.39
2.31
17.19
77.99
3.88
3.68
6.07
5.59
8.03
66.21
9.65
12.51
2.99
179.02
2.13
0.15
8.97
1.16
2.63
1.46
203.36
n/a
11.32
4.29
17.26
2.57
41.48
8.40
18.17
11.24
1,240.50
2012*
120.91
93.79
4.43
15.25
7.02
0.94
10.93
0.80
0.18
2.16
0.24
14.33
18.82
24.57
3.06
95.45
17.62
0.69
13.55
13.66
0.46
25.60
3.46
0.53
21.82
2.59
14.49
66.64
4.92
4.05
3.37
6.44
7.74
67.79
14.12
13.91
3.05
147.03
2.32
0.16
8.55
1.41
3.21
1.94
198.69
n/a
15.04
3.82
16.94
3.00
41.33
8.23
20.76
11.21
1,203.00
119.82
93.10
4.75
12.97
6.83
0.98
11.27
0.86
0.18
2.74
0.24
15.18
17.58
26.49
3.43
89.22
15.18
0.77
17.70
13.75
0.45
23.68
3.35
0.60
23.41
2.61
15.95
23.84
5.40
4.04
3.33
6.42
8.01
71.76
14.11
15.09
3.18
144.66
2.47
0.16
8.46
1.41
3.38
6.64
190.50
n/a
15.72
3.80
16.93
3.07
41.97
8.26
19.34
12.35
1,157.37
2013* 2014**
Total Merchandise Trade

(US$ Billion)
2013
/2014
2012*
2013* 2014**
Share of Total Merchandise Trade (%)
-1.09
-0.90
9.85
10.05
10.35
-1.32
-0.74
7.66
7.80
8.04
57.57
7.16
0.23
0.37
0.41
8.94 -14.97
1.13
1.27
1.12
29.57
-2.66
0.44
0.58
0.59
-24.32
3.80
0.10
0.08
0.08
1.34
3.03
0.87
0.91
0.97
-1.84
7.57
0.07
0.07
0.07
-47.37
3.48
0.03
0.01
0.02
31.40
26.75
0.13
0.18
0.24
-1.97
3.58
0.02
0.02
0.02
10.68
5.93
1.04
1.19
1.31
27.31
-6.62
1.19
1.56
1.52
19.08
7.85
1.66
2.04
2.29
1.90
11.84
0.24
0.25
0.30
-3.86
-6.52
8.00
7.93
7.71
-1.62 -13.83
1.44
1.46
1.31
-12.24
10.86
0.06
0.06
0.07
-8.50
30.63
1.19
1.13
1.53
-0.65
0.72
1.11
1.14
1.19
-8.50
-1.70
0.04
0.04
0.04
-21.89
-7.51
2.64
2.13
2.05
-17.26
-3.24
0.34
0.29
0.29
9.55
12.55
0.04
0.04
0.05
7.01
7.31
1.64
1.81
2.02
12.15
0.96
0.19
0.22
0.23
-15.71
10.10
1.39
1.20
1.38
-14.55 -64.23
6.29
5.54
2.06
26.78
9.64
0.31
0.41
0.47
10.16
-0.21
0.30
0.34
0.35
-44.45
-1.39
0.49
0.28
0.29
15.13
-0.40
0.45
0.54
0.55
-3.58
3.41
0.65
0.64
0.69
2.40
5.85
5.34
5.64
6.20
46.40
-0.11
0.78
1.17
1.22
11.21
8.45
1.01
1.16
1.30
2.00
4.14
0.24
0.25
0.27
-17.87
-1.61
14.43
12.22
12.50
9.01
6.42
0.17
0.19
0.21
7.96
3.73
0.01
0.01
0.01
-4.62
-1.09
0.72
0.71
0.73
21.87
-0.10
0.09
0.12
0.12
22.12
5.23
0.21
0.27
0.29
32.15 243.12
0.12
0.16
0.57
-2.30
-4.12
16.39
16.52
16.46
n/a
n/a
n/a
n/a
n/a
32.92
4.49
0.91
1.25
1.36
-10.91
-0.67
0.35
0.32
0.33
-1.88
-0.03
1.39
1.41
1.46
17.11
2.26
0.21
0.25
0.27
-0.36
1.56
3.34
3.44
3.63
-2.10
0.38
0.68
0.68
0.71
14.23
-6.81
1.46
1.73
1.67
-0.30
10.19
n/a
n/a
1.07
-3.02
-3.79 100.00 100.00 100.00
2012
/2013
Growth Rate (%)
merchandise imports grew by 5.8 percent

to US$58.1 billion in 2014, aided by growth
in imports of automatic data processing
machines; pearls, precious stones, metals,
coins; and electrical/electronic equipment,
machinery, nuclear reactors, and boilers.
Nigerias merchandise imports grew by 5.21
percent to US$51.7 billion, on the back of an
expansion of imports of petroleum oils (not
crude), machinery parts, electric generating
sets, and rotary converters. Angolas grew
by 7.5 percent to US$23.9 billion. In Libya,
political developments severely affected
imports, which contracted by 60 percent to an
estimated US$9.77 billion in 2014.
The shrinkage in Africas merchandise trade

contributed to Africas share of global markets
declined. Africas share dwindled from 3.42
percent of global merchandise trade in 2012
to 3.28 percent in 2013 and 3.12 percent
in 2014 (Figure 5.2). Its share in global
merchandise exports fell from 3.7 percent in
2012 to 3.3 percent and 3.1 percent in 2013
and 2014, respectively. And its share of global
merchandise imports, which had inched up
from 3.15 percent in 2012 to 3.24 percent in
2013, retreated back in 2014 to its 2012 level.
Figure 5.2. Share of Africa in Global

Merchandise Trade, 2012-14 (percent)
3.80
3.70
3.60
3.50
3.40
3.30
3.20
3.10
3.00
2.90
2.80
2.70
2012
Merchandise Exports
2013
2014
Merchandise Imports
Source: UNCTADstat, 2015; ITC Trade Map, 2015.
Africas export revenues are still overdependent on primary commodities, which

are highly susceptible to price shocks.3
Primary commodities account for more
than 75 percent of the continents total
merchandise exports (Table 5.2), and
exports of these commodities have been
declining. They fell by 7 percent in 2013
and an estimated 5 percent in 2014 (Table
5.2), in response to continued weakening
of commodity prices, particularly prices of
energy commodities and metals and minerals:

African energy exports, of which crude

oil accounts for 75 percent, suffered the
highest rate of decline during 2013 and
2014, contracting by 9.7 percent in 2013
and an estimated 10.5 percent in 2014.
African metals and minerals exports
declined only marginally in 2014 (Table
5.2). The decline was the result of weak
gold and silver exports and a strong US
dollar, which reduced the reliance on
these minerals as safe-haven assets. Gold
exports from Africa declined by 26.5
percent in 2013 and are estimated to have
fallen by 14 percent in 2014. Similarly,
silver exports declined by 22.6 percent in
2013 and 10 percent in 2014.
African agricultural exports also trended

downwards in 2013 and 2014 on account
of low levels of production and exports
of major agricultural commodities,
particularly cocoa and coffee, and weak
prices of cotton, rubber, soybeans, and
tea. International cocoa prices rose
substantially in 2014, as seen above, but
cocoa production and exports from the
four largest-origin countries in Africa
namely Cte dIvoire, Ghana, Nigeria, and
Cameroonare estimated to have declined
by 4 percent from 3.1 million tonnes in
2013 to 2.97 million tonnes in 2014.4
3Primary
commodity
exports
comprise
agricultural raw materials, food and beverages,

metals and minerals, and energy commodities.
4ICCO Quarterly Bulletin of Cocoa Statistics XLI (1).
Table 5.2. Sector Composition of Africas Merchandise Exports (2012-14)

Commodity Group
Total (All Products)

Primary Commodities
Agriculture
Cocoa
Cotton
Coffee
Metals & Minerals
Copper
Gold
Lead
Silver
Energy
Crude oil
Natural gas
Manufactured Goods
Unclassified
Exports (US$ billion)
2012
664.60
500.61
66.08
10.09
3.51
4.22
51.46
11.76
26.91
0.21
0.28
383.07
297.01
46.75
91.97
72.03
2013
597.42
463.37
65.66
9.40
3.05
3.63
51.07
11.80
19.77
0.18
0.21
346.64
258.37
46.66
95.38
38.66
2014
555.56
426.14
65.24
8.71
2.60
3.04
50.69
11.85
12.62
0.16
0.15
310.21
219.72
46.56
98.80
30.63
Percentage Share in Total
2012
100.00
75.32
9.94
1.52
0.53
0.63
7.74
1.77
4.05
0.03
0.04
57.64
44.69
7.03
13.84
10.84
2013
100.00
77.56
10.99
1.57
0.51
0.61
8.55
1.98
3.31
0.03
0.04
58.02
43.25
7.81
15.97
6.47
2014
100.00
76.70
11.74
1.57
0.47
0.55
9.12
2.13
2.27
0.03
0.03
55.84
39.55
8.38
17.78
5.51
Source: Compiled from UNCTADstat/UN COMTRADE.
By contrast with its primary commodity

exports, Africas manufactured exports grew
by 3.56 percent in 2014 to reach US$98.8
billion, up from US$95.4 billion in 2013 (Table
5.2). The share of manufactures in Africas
total exports rose a little, to 17.8 percent in
2014 from 16 percent in 2013, while that
of primary commodities declined to 76.7
percent (Table 5.2).5
Africas imports of primary commodities fell

in 2014. This was partly as a result of a drop
in value caused by the decline in commodity
prices but also because of the deliberate
attempts that many African governments
made to cut their national import bills,
particularly for food imports. Imports of
primary commodities declined by a hefty
9.2 percent, from US$207.4 billion in 2013
to US$188.4 billion in 2014 (Table 5.2).
Consequently, the share of manufactured
goods in Africas total merchandise imports
rose from 65.7 percent in 2013 to an
estimated 68.7 percent in 2014, while the
share of primary commodities fell from 34.3
percent in 2013 to 31.3 percent (Table 5.2).
5This includes only classified commodities. See
Table 3.2.
Africas imports of manufactures, at an

estimated US$413.2 billion in 2014, are
dominated by intermediate goods (chemical
products; machinery and transport equipment;
and other manufactured goods, including iron
and steel and textile fibres). They grew by 6.3
percent during 2014 (Table 5.2). If anything,
their growth emphasizes the need to expand
industrial production and infrastructure
development across the continent. Machinery
and transport equipment accounts for nearly
half (48 percent) of Africas manufactured
imports and one third (33.8 percent) of its
total imports. Imports in this category rose by
5.8 percent from US$192.1 billion in 2013 to
US$203.3 billion in 2014 (Table 5.2). Imports
of chemical products, which account for 12
percent of Africas merchandise imports,
rose by 6 percent from US$67.5 billion to
US$71.5 billion in 2014 (Table 5.2). Other
manufactured goods imports, including
iron and steel and textile fibres, grew by 7.2
percent from US$138.4 billion in 2013 to
US$148.4 billion in 2014, to represent 24.7
percent of Africas total merchandise imports.
Manufactured goods have increased their
share of Africas total imports during the past
few years, rising from 65.3 percent in 2012 to
68.7 percent in 2014.
Table 5.3. Sector Composition of Africas Merchandise Imports (2012-14)

Commodity Group
Total (All Products)

Primary Commodities
Agricultural Raw Materials
Food
Basic Food
Beverages and Tobacco
Metals & Minerals
Metals
Minerals
Energy
Manufactured Goods
Chemical products
Machinery and transport equipment
Electronic excluding parts
and components
Parts and components for electrical
and electronic goods
Other machinery and transport
equipment
Other manufactured goods
Iron and steel
Textile fibres, yarn, fabrics, and clothing
Imports (US$ billion)

2013
605.43
207.41
9.17
89.30
82.11
7.20
24.49
14.96
9.53
101.19
398.02
67.54
192.11
12.93
2014
601.65
188.43
9.05
80.51
73.72
6.78
20.23
14.93
7.38
87.69
413.22
71.53
203.33
13.61
2012
100.00
34.74
1.39
15.73
14.57
1.16
3.76
2.65
1.11
18.32
65.26
11.04
31.62
2.19
2013
100.00
34.26
1.51
14.75
13.56
1.19
4.04
2.47
1.57
16.71
65.74
11.16
31.73
2.13
2014
100.00
31.32
1.50
13.38
12.25
1.13
3.36
2.48
1.23
14.57
68.68
11.89
33.80
2.26
145.83
154.35
165.53
25.33
25.49
27.51
23.58
130.15
24.33
27.79
Source: Compiled from UNCTADstat/UN COMTRADE.
Figure 5.3. Structure of Africas

Imports 2014 (percent)
80
70
60
50
40
30
20
10
0
Percentage Share in Total
2012
575.75
200.03
8.02
90.58
83.89
6.69
21.65
15.28
6.36
105.48
375.72
63.54
182.03
12.62
Agricultural Food Metals & Energy Manufactured

raw materials
Minerals
Goods
Source: Derived from Table 5.2.
5.2.1 Regional distribution of African

trade
Since the early 2000s, African countries
have been diversifying their trade relations
towards
developing
economies,
also
24.84
138.37
24.89
30.25
24.19
148.36
26.46
32.15
4.10
22.60
4.23
4.83
4.10
22.86
4.11
5.00
4.02
24.66
4.40
5.34
known as the global South.6 In 2014, weak

external demand from advanced economies
encouraged them to accelerate this shift. The
Souths share of Africas merchandise exports
grew from 46.7 percent in 2012 to 51.7
percent in 2013 and further to 59.1 percent
in 2014 (Table 5.3). Commensurately, the flow
of exports to economies in the North shrank
considerably: Europe and North America
saw their combined share of Africas exports
declining from 51.2 percent in 2012 to 46
Much of the rise in the Souths share of African

exports is due to an expansion of African trade
with Asia, particularly China and India. Asian
countries now take about 32 percent of African
merchandise exports, compared to 29 percent
in 2012; nearly two-thirds (62 percent) of
these exports are of energy commodities.
Chinas share of Africas merchandise exports
rose from 17.5 percent in 2012 to 19.4 percent
6The South is defined as the group of economies

in Asia, Latin America and Caribbean, the Middle
East, and Africa.
2014
100.00
33.87
17.11
5.51
36.22
4.00
3.25
2.25
5.05
2.87
1.90
7.04
5.97
4.39
14.03
2013
100.00
33.31
16.54
5.08
35.49
3.71
3.00
3.60
5.59
3.51
2.19
7.26
7.42
6.46
13.00
2012
100.00
32.28
15.41
5.07
35.35
3.58
3.07
3.73
5.51
4.11
2.44
7.10
9.11
7.89
12.05
2014
100.00
36.04
15.10
5.26
33.54
4.49
2.37
1.63
4.88
2.79
1.23
8.98
5.22
4.42
13.43
2013
100.00
36.01
13.89
4.55
32.77
4.16
2.16
2.47
5.18
3.40
1.67
9.63
5.78
5.18
12.42
Merchandise Imports
2012
100.00
35.56
13.33
4.11
31.97
4.55
1.72
2.94
5.02
4.07
2.24
10.49
5.70
5.13
12.21
2014
100.00
31.45
19.37
5.79
39.21
3.46
4.23
2.95
5.25
2.96
2.64
4.88
6.80
4.36
14.70
2013
100.00
30.30
19.48
5.66
38.52
3.21
3.94
4.85
6.03
3.64
2.78
4.64
9.24
7.89
13.66
Merchandise Exports
Total to All Regions

Asia
China
India
Europe
Germany
Netherlands
United Kingdom
France
Latin America & Caribbean
Brazil
Middle East
North America
US
Africa
Source: UNCTADstat/UN COMTRADE, 2015
2012
100.00
29.04
17.46
6.02
38.69
2.62
4.40
4.52
5.99
4.14
2.63
3.75
12.48
10.61
11.89
Table 5.4. Direction of Africas Merchandise Trade (percent)
Commodity Group
in 2014. Exports to Asia have been dominated

by three primary commodity groups: energy
(including crude petroleum and petroleum
gas); metals and minerals (including iron ore
and concentrates, platinum, and copper); and
agricultural raw materials (cocoa, coffee, etc.).
Middle Eastern countries, too, increased their

share of Africas exports in 2014, on the back
of the stronger trade and investment relations
achieved between many countries in North
Africa and those in the Gulf Cooperation
Council (GCC).7 Exports to the GCC have
largely consisted of petroleum gases,
coal, petroleum oils (not crude), gold, and
diamonds. Merchandise exports from Africa
to the Middle East gradually rose, from 3.75
percent of the total in 2012 to 4.64 percent in
2013 and further to 4.88 percent in 2014.
The share of African exports going to
Latin America and the Caribbean trended
downwards during the last two years,
declining to 2.96 percent in 2014 from 4.14
Europe is still the largest destination for

Africas exports, with a share of 39.2 percent,
but this share is significantly smaller than it
was in the early 2000s (50 percent). Europes
prolonged recession weakened its industrial
production and hence the demand for
industrial raw materials from Africa.
The United States, Africas largest trading

partner among the countries in North America,
continued to cut its imports of commodities,
particularly crude oil, from Africa. Coupled
with the worldwide decline in commodity
prices, the cuts caused a sharp reduction in
the U.S. share of Africas exports, from 10.6
percent in 2012 to 7.89 percent in 2013 and
4.36 percent in 2014. This heavily influenced
the trend for North America as a whole, whose
share trended downwards from 12.48 percent
in 2012 to 9.24 percent in 2013 and 6.8
7The GCC comprises Bahrain, Kuwait, Oman, Qatar,
Saudi Arabia, and the United Arab Emirates.
A similar diversification has been taking place

over the past decade in the origins of Africas
imports. By 2012-14, the Souths share of
Africas imports averaged about 61 percent.
Asia surpassed Europe in 2010 to become

Africas largest source of imports, accounting
for an average share of 36 percent during
2012-14 (Figure 5.5). Imports from Asia
include machinery and electrical/electronic
equipment (20 percent of all imports from
Asia), and refined petroleum products
(20 percent). Apart from the weakness in
industrial production in the North, major
reasons for the growth in Asias share are
the relatively lower costs of technologies
Figure 5.6. Africas Sources of Capital

Goods Imports, 2013-14 (US$ billion)
35
30
25
20
15
10
5
0
2012
2013
2014
Africas imports from North America declined

marginally from 5.78 percent in 2013 to
5.22 percent in 2014 (Table 5.3). Machinery
imports from North America averaged about
US$8.1 billion in 2014 (Figure 5.6).
ic
a
ric
Af
ia
As
Eu
ro
La
pe
t
& in A
Ca m
rib er
be ica
an
M
id
dl
e
Ea
st
No
rt
h
Am
er
ic
a
10
er
20
Am
30
40
rt
Figure 5.5. Regional Shares in Africas

Merchandise Imports (percent)
No
2012
2013
2014
La
t
& in A
Ca m
rib er
be ica
an
a
ric
Af
As
ia
Eu
ro
La
pe
t
& in A
Ca m
rib er
be ica
an
M
id
dl
e
Ea
st
No
rt
h
Am
er
ic
a
10
20
Imports from Europe, Africas second-largest

source of imports, rose slightly from 32.71
percent in 2013 to 33.54 percent in 2014.
These shares are much smaller than the 50
percent that Europe was supplying as late as
the mid-2000s, but Europe thus far remains
Africas most important source of capital goods
imports (Figure 5.6). In 2014, imports from
Europe of agricultural/mining equipment/
machinery
(including
self-propelled
bulldozers, graders, and excavators) and
energy-related machinery and parts (including
turbo-jets, turbo-propellers, and other gas
turbines) and other forms of machinery
amounted to US$31.7 billion, compared to
US$24.5 billion from Asia. Europe is Africas
biggest source of iron and steel imports.
Asia, on the other hand, has become Africas
largest source of imports of electrical and
electronic equipment; imports in this category
in 2014 amounted to US$22 billion from Asia
compared to US$16.47 billion from Europe.
Eu
ro
p
30
40
used in Asia and increases in foreign direct

investment and trade finance from Asian
economies into Africa.
As
i
Figure 5.4. Regional Shares in Africas

Merchandise Exports (percent)
Machinery
Electricals & Electronics
Iron & Steel
8See the examples reported earlier in this chapter.
9Together these two countries account for more

than 31 percent of intra-African exports.
45
40
35
30
25
20
15
10
2013
2014
W
AE
M
UM
A
Bucking the general trend, exports from

Liberia and Sierra Leone to the rest of Africa
decreased by 22 percent and 11 percent,
respectively, in 2014 as the outbreak of
the Ebola Virus Disease disrupted cross-
Figure 5.7. Exports within African

Regional Economic Communities, 201314 (US$ billion)
SA
D
The strong growth in intra-African exports

by 10.98 percent in 2014, from US$82
billion to US$91 billionreflected strong
performance by Nigeria and South Africa,
which saw their intra-African exports growing
by 8.3 percent and 5.7 percent, respectively
(Table 5.4).9 Growth in exports from Algeria,
Namibia, and Zambia, too, supported the
overall expansion in intra-regional trade.
Most of the intra-African trade occurs within

sub-regions, between countries that are
members of regional economic communities
or customs unions. Countries within the South
African Development Community (SADC)
registered the highest intra-REC exports
in 2014, at an average of US$41.8 billion,
followed by members of the Community of
Sahel-Saharan States (CEN-SAD); Economic
Community of West African States (ECOWAS);
the Common Market for Eastern and Southern
Africa (COMESA); the Arab-Maghreb Union
(UMA); and the Economic Community of
Central African States (ECCAS) (Figure 5.7).
EC
CA
S
EC
OW
AS
Intra-African merchandise trade grew by

11.46 percent in 2014, to US$183.87 billion
from US$164.97 billion in 2013 (Table
5.4). This vigorous growth, which was
simultaneous with the decline in Africas
total merchandise trade, led to a notable rise
in the intra-African share of this trade, from
13 percent in 2013 to 14 percent in 2014.
Nonetheless, intra-regional trade remains
by far the lowest in Africa of all world
regions. The comparable share for Europe
is 72 percent; for Asia 52 percent; for North
America 48 percent; and for Latin America
and Caribbean 26 percent (WTO, 2014).
Like exports, intra-African imports also rose

rapidly in 2014, expanding by an estimated
11.9 percent to US$92.87 billion, from
US$82.97 billion in 2013. The expansion was
aided by strong growth of imports by Nigeria,
Botswana, and Burkina Faso from the rest of
Africa.
EA
C
Intra-African trade has grown rapidly over

the last decade, owing in part to the success
of efforts by African governments to promote
cross-border trade, regional integration, and
diversification of exports into manufactured
and processed goods.8 Initiatives and
programmes on export development,
diversification, and liberalization of markets
under the auspices of the African regional
economic communities continued to expand
the volume and composition of trade flows
among African countries.
border trade. The closure of the Liberian

border during the second half of the year
brought trade with neighbouring countries
to a halt. Nonetheless, because neither of the
affected countries accounted for more than
0.25 percent of intra-African exports, this
development had no significant impact on
intra-African export statistics.
CE
NSA
D
CO
M
ES
A
5.3 INTRA-REGIONAL TRADE IN

AFRICA
Sources: UNCTADstat; COMTRADE; Afreximbank staff

estimates.
0.20
0.20
1.79
0.78
2.04
1.36
3.23
3.17
82.00
1.16
0.09
0.22
0.22
17.40
0.23
0.23
2.16
0.63
2.03
1.30
2.72
3.13
77.14
1.18
0.09
0.24
0.24
16.03
0.58
1.09
0.09
3.81
0.09
0.09
1.32
0.01
0.20
1.48
0.17
0.32
0.10
0.10
0.42
1.95
1.16
3.48
0.46
9.47
0.59
0.01
3.49
1.74
0.23
1.20
0.59
0.04
0.69
0.00
0.00
0.27
0.03
3.07
1.85
5.28
0.09
4.36
0.22
0.63
0.39
0.10
6.41
0.17
0.06
1.23
0.01
0.20
1.32
0.09
0.34
0.15
0.15
0.45
2.04
0.85
2.19
0.32
9.16
0.47
0.01
2.91
1.71
0.21
1.08
0.33
0.01
0.77
0.00
0.01
0.22
0.03
2.91
1.38
3.78
0.06
4.56
0.20
2013*
2013
2014
/2012
/2013
19.74
20.65
1.83
25.46
9.42
16.18
10.96
4.27
78.65
35.07
770.48 341.63
-10.63
15.79
18.20 580.73
-66.68 -61.12
19.07
9.32
0.71
8.50
5.41
13.35
33.58
-2.78
39.51
26.73
32.11
20.67
-4.34
0.73
7.35
-0.24
Growth Rate, %
0.14
0.14
1.87
1.00
2.05
1.55
3.90
3.44
91.00
1.15
0.09
0.19
0.19
18.39
-12.77
-12.77
-17.34
23.14
0.76
4.81
19.02
1.32
6.30
-1.96
1.15
-8.95
-8.95
8.52
1.80
0.14
0.36
0.36
24.53
0.97
0.59
0.15
9.81
0.26
0.10
1.88
0.01
0.30
2.02
0.14
0.52
0.23
0.23
0.69
3.12
1.29
3.34
0.48
14.02
0.72
0.01
4.46
2.62
0.32
1.66
0.51
0.01
1.17
0.00
0.02
0.34
0.05
4.46
2.12
5.79
0.10
6.98
0.31
1.41 1.27
0.11 0.10
0.26 0.21
0.26 0.21
21.22 20.21
0.71 0.65
1.33 2.34
0.12 0.11
4.64 2.65
0.11 0.12
0.11 0.12
1.60 1.36
0.01 0.02
0.25 0.17
1.81 1.84
0.21 0.20
0.38 0.27
0.12 0.13
0.12 0.13
0.51 0.49
2.38 2.58
1.42 1.53
4.25 4.76
0.56 0.98
11.55 11.27
0.71 1.43
0.01 0.01
4.26 4.63
2.13 2.40
0.28 0.29
1.47 1.38
0.72 0.88
0.05 0.21
0.84 0.87
0.00 0.01
0.00 0.00
0.33 0.32
0.04 0.04
3.75 3.83
2.26 1.98
6.43 7.35
0.10 0.11
5.32 4.83
0.27 0.24
Country Share of Total

Intra-African Exports, %
2012*
2013* 2014**
-29.86
0.36
0.25 0.16
-29.86
0.36
0.25 0.16
4.65
3.31
2.18 2.06
27.99
0.97
0.95 1.09
0.47
3.10
2.49 2.25
13.38
1.99
1.66 1.70
20.76
4.16
3.94 4.29
8.58
4.79
3.87 3.78
10.98 100.00 100.00 100.00
-0.05
-3.80
-10.89
-10.89
5.68
0.59
-8.33
1.87
2.13 181.92
95.18
0.10
-5.97
7.94
2.41 -40.65 -36.68
0.11 -45.33
14.36
0.11
41.44
22.58
1.24
7.13
-6.06
0.02
21.94
85.63
0.16
2.48 -21.82
1.68
11.93
13.16
0.19
85.31
9.84
0.25
-6.56 -22.23
0.12 -33.58
18.05
0.12 -33.58
18.05
0.44
-7.05
5.48
2.34
-4.24
20.11
1.39
37.57
19.77
4.33
59.34
24.29
0.89
44.62
94.08
10.25
3.33
8.29
1.30
24.30 122.47
0.01
5.56
1.85
4.21
2.19
0.26
1.25
0.80
0.20
0.79
0.01
0.00
0.29
0.04
3.48
1.80
6.69
0.10
4.39
0.22
2014**
Intra-African Exports
2012*
0.21
0.25
1.85
0.25
1.78
1.11
2.17
0.93
78.10
1.33
0.04
0.02
0.03
12.03
0.54
0.19
0.14
1.44
0.26
0.07
2.86
0.01
0.10
1.15
0.33
1.06
1.77
0.22
0.61
2.28
2.10
5.35
0.37
8.00
0.55
0.04
1.93
3.09
0.53
5.61
3.27
0.27
0.66
0.02
0.04
0.02
0.00
1.39
3.89
3.29
0.12
2.49
0.05
2012*
0.22
0.26
1.43
0.27
2.02
0.97
2.29
0.96
82.97
1.17
0.08
0.02
0.03
12.63
0.34
0.20
0.11
1.12
0.19
0.08
3.01
0.01
0.10
1.16
0.34
1.26
1.84
0.22
0.57
2.37
3.57
5.19
0.41
8.91
0.48
0.04
2.11
3.66
0.57
5.58
4.37
0.23
0.69
0.01
0.02
0.02
0.00
1.47
4.33
4.37
0.18
1.43
0.05
2013*
0.19
0.27
1.35
0.36
2.92
0.91
2.95
0.96
92.87
1.25
0.11
0.03
0.03
12.65
0.52
0.20
0.12
1.13
0.18
0.09
3.24
0.01
0.07
1.27
0.34
1.41
1.95
0.25
0.57
2.39
4.65
5.19
0.46
9.45
0.45
0.06
2.33
5.37
0.63
5.91
5.88
0.19
0.72
0.02
0.01
0.02
0.00
1.46
4.39
6.16
0.28
1.36
0.05
2014**
Intra-African Imports
4.06
4.09
-22.61
10.24
13.45
-12.81
5.22
3.73
6.23
-12.03
69.38
22.34
10.92
5.04
-37.22
4.17
-20.52
-22.59
-25.44
10.68
4.96
4.89
1.23
0.66
4.42
18.46
4.19
-0.83
-5.82
4.15
70.06
-3.15
11.07
11.35
-13.89
18.07
2013
/2012
9.11
18.45
8.74
-0.56
33.44
-13.49
5.36
-7.57
-45.24
1.85
64.05
5.39
11.48
33.03
54.20
-42.77
2.90
-15.98
3.52
-5.34
31.45
44.87
-5.78
29.21
0.04
11.94
6.61
50.86
23.02
7.48
0.16
52.33
2.93
6.70
1.07
-5.02
9.01
7.88
4.76
-30.01
9.52
0.05
12.10
6.05
12.72
-0.77
0.46
30.32
0.11
12.40
6.12
-4.83
48.40
2014
/2013
10.69
46.59
10.40
6.02
34.69
-18.26
3.62
30.19
-26.75
-9.73
44.73
-0.57
1.30
40.95
53.72
-4.53
-3.56
Growth Rate, %
0.41
0.24
0.13
1.35
0.23
0.10
3.62
0.02
0.12
1.40
0.41
1.52
2.22
0.26
0.69
2.86
4.30
6.25
0.49
10.74
0.57
0.05
0.56
0.22
0.12
1.22
0.20
0.10
3.49
0.02
0.14
1.37
0.37
1.52
2.10
0.27
0.61
2.57
5.01
5.59
0.50
10.18
0.49
0.07
1.18
0.58
0.24
7.86
0.43
0.14
4.09
0.02
0.30
2.48
0.42
1.40
1.92
0.37
1.06
4.32
2.95
7.54
0.68
17.17
1.02
0.04
0.92
1.29
0.20
4.92
0.28
0.17
4.32
0.02
0.30
2.64
0.51
1.58
1.94
0.32
0.99
4.33
4.73
8.67
0.87
18.38
1.06
0.05
1.11 -21.69
2.33 123.99
0.22 -14.34
3.54 -37.33
0.29 -33.35
0.20
25.02
4.48
5.61
0.04
12.04
0.29
2.06
2.95
6.68
0.53
22.11
1.66
12.43
2.07
1.21
0.36 -14.13
1.01
-6.34
4.73
0.19
6.05
60.72
9.52
14.96
1.35
26.57
19.71
7.07
1.76
3.70
0.07
16.10
1.71
1.41
1.35
2.51
2.33
2.41
0.06
0.09
0.12
0.13
0.17
0.20
0.02
0.03
0.03
0.25
0.24
0.22
0.03
0.03
0.03
0.26
0.24
0.22
15.40
15.23
13.62
28.06
30.03
31.04
0.00
0.00
0.00
0.27
0.27
0.20
0.45
0.43
0.33
0.32
0.31
0.29
0.48
0.46
0.41
2.36
1.72
1.46
4.01
3.22
3.23
0.32
0.33
0.39
0.88
1.05
1.35
2.28
2.43
3.15
3.80
4.06
4.97
1.42
1.16
0.98
2.41
2.33
2.46
2.78
2.76
3.18
4.89
5.52
6.86
1.19
1.16
1.04
4.06
4.13
4.41
100.00 100.00 100.00 155.24 164.97 183.87
0.70
0.24
0.17
1.85
0.33
0.10
3.67
0.02
0.13
1.48
0.42
1.36
2.26
0.28
0.78
2.92
2.69
6.86
0.47
10.25
0.71
0.05
20.58
81.20
7.28
-28.11
1.31
16.17
3.64
41.67
-3.17
11.56
3.30
5.23
6.67
14.40
1.87
9.33
27.73
9.82
55.51
7.24
65.44
41.73
-4.71
-4.02
-19.76
19.52
6.69
-3.29
12.89
1.87
6.26
-7.31
23.80
-6.82
-7.00
7.03
1.88
0.10
0.19
0.20
20.98
0.88
0.43
0.18
5.87
0.32
0.10
3.06
0.02
0.22
1.85
0.31
1.05
1.43
0.28
0.79
3.23
2.20
5.64
0.51
12.83
0.76
0.03
3.62
3.59
0.55
5.00
2.69
0.20
1.06
0.01
0.04
0.18
0.03
3.22
3.94
5.28
0.14
5.27
0.19
1.41
0.10
0.14
0.15
18.20
0.56
0.78
0.12
2.98
0.17
0.11
2.62
0.02
0.18
1.60
0.31
0.95
1.18
0.19
0.60
2.62
2.87
5.25
0.53
11.14
0.64
0.03
3.39
3.28
0.49
4.11
3.00
0.17
0.83
0.01
0.01
0.17
0.02
2.75
3.75
5.85
0.16
3.51
0.16
1.31
0.11
0.12
0.12
16.88
0.60
1.27
0.12
1.92
0.16
0.11
2.44
0.02
0.16
1.60
0.29
0.90
1.13
0.20
0.55
2.57
3.29
5.18
0.73
10.72
0.95
0.04
3.56
4.11
0.49
3.90
3.63
0.21
0.82
0.01
0.01
0.17
0.02
2.69
3.37
6.99
0.21
3.13
0.14

Intra-African Trade, %
2012
2013
2014
-22.60
0.33
0.26
0.18
-11.06
0.36
0.28
0.22
0.21
3.00
1.95
1.75
28.89
0.66
0.64
0.74
22.54
2.84
2.46
2.70
5.44
1.80
1.41
1.34
24.26
3.66
3.35
3.73
6.59
3.03
2.51
2.40
11.46 100.00 100.00 100.00
3.31
21.03
-7.85
-8.74
3.36

Total Intra-African Trade Growth Rate, %
Intra-African Imports, %
2012*
2013* 2014**
2012*
2013* 2014**
2013
2014
/2012
/2013
2.47
2.54
2.51
4.85
5.60
6.54
15.50
16.89
3.96
4.42
5.78
4.81
5.41
7.56
12.53
39.77
0.68
0.69
0.68
0.74
0.80
0.90
8.93
12.04
7.18
6.72
6.37
6.69
6.78
7.17
1.30
5.71
4.19
5.26
6.33
3.60
4.96
6.68
37.59
34.74
0.34
0.28
0.20
0.27
0.28
0.39
1.08
39.34
0.84
0.83
0.77
1.42
1.38
1.51
-3.26
9.68
0.02
0.02
0.02
0.02
0.02
0.02
-6.51
58.88
0.05
0.02
0.02
0.05
0.02
0.02 -49.79 -31.59
0.02
0.02
0.02
0.24
0.29
0.31
17.77
8.07
0.00
0.00
0.00
0.03
0.04
0.04
3.57
11.09
1.79
1.77
1.57
4.31
4.54
4.94
5.41
8.84
4.98
5.22
4.73
5.27
6.18
6.19
17.28
0.08
4.21
5.27
6.63
7.07
9.65
12.85
36.50
33.17
0.15
0.22
0.31
0.18
0.27
0.39
46.47
43.29
3.19
1.72
1.47
7.05
5.79
5.76 -17.93
-0.57
0.06
0.06
0.05
0.25
0.27
0.27
6.50
-0.85
* Revised. ** Estimates.
n/a not available.
Sources: IMF (2014) Direction of Trade Statistics (Database); World Bank (2014) World Development Indicators (October); EIU, Country
Report (various issues); UNCTADSTAT, 2014; Afreximbank staff estimates.
Algeria
Angola
Benin
Botswana
Burkina Faso
Burundi
Cameroon
Cape Verde
Central African Rep.
Chad
Comoros
Congo, Dem. Rep. of
Congo, Rep. of
Cote D'Ivoire
Djibouti
Egypt
Equatorial Guinea
Eretria
Ethiopia
Gabon
Gambia, The
Ghana
Guinea
Guinea-Bissau
Kenya
Lesotho
Liberia
Libya
Madagascar
Malawi
Mali
Mauritania
Mauritius
Morocco
Mozambique
Namibia
Niger
Nigeria
Rwanda
Sao Tome and
Principe
Senegal
Seychelles
Sierra Leone
Somalia
South Africa
South Sudan
Sudan
Swaziland
Tanzania
Togo
Tunisia
Uganda
Zambia
Zimbabwe
Total
Country Name
Table 5.5. Intra-African Trade, 2012-14 (US$ billion unless otherwise indicated)
0.02
-0.02
0.32
0.38
0.25
0.19
0.54
2.20
-0.96
-0.16
0.05
0.22
0.21
4.01
0.09
0.20
-0.04
4.97
-0.09
-0.01
-1.63
0.00
0.10
0.17
-0.23
-0.73
-1.61
-0.07
-0.16
-0.24
-1.25
-3.17
-0.05
1.16
-0.08
-0.03
0.98
-1.38
-0.32
-4.52
-2.94
-0.26
0.11
-0.02
-0.03
0.21
0.03
1.52
-2.50
0.50
-0.06
2.07
0.16
-0.02
-0.06
0.36
0.51
0.02
0.40
0.95
2.21
-0.97
-0.02
0.02
0.19
0.19
4.77
0.24
0.90
-0.01
2.69
-0.10
0.01
-1.69
0.00
0.10
0.32
-0.17
-0.94
-1.74
-0.12
-0.15
-0.42
-2.41
-1.70
0.05
0.56
0.11
-0.04
1.38
-1.92
-0.35
-4.37
-3.77
-0.19
-0.01
-0.01
-0.02
0.25
0.03
1.60
-2.48
0.91
-0.10
2.93
0.17
-0.04
-0.13
0.52
0.64
-0.87
0.64
0.95
2.48
-1.86
-0.10
-0.03
0.17
0.16
5.74
0.07
1.93
-0.01
1.28
-0.08
0.02
-2.01
0.01
0.02
0.40
-0.15
-1.17
-1.83
-0.13
-0.13
-0.04
-3.26
-0.86
0.43
0.80
0.85
-0.06
1.88
-3.18
-0.37
-4.66
-5.08
0.01
0.08
-0.01
-0.01
0.27
0.03
2.02
-2.59
0.53
-0.18
3.03
0.17
Trade Balance Value

(Exports - Imports)
2012
2013
2014
Figure 5.8. Composition of IntraAfrican Exports, 2014 (percent)
In 2014, trade grew faster within some of the

RECs than at the continental level. Growth in
intra-UMA trade was particularly impressive;
members of that community increased their
exports to other members by 18 percent, from
US$5.5 billion in 2013 to US$6.5 billion in 2014
(Figure 5.7). Growth within SADC and within
CEN-SAD was rapid, too, at 15 percent and 12
percent, respectively, between 2013 and 2014.
45
40
35
30
25
20
The structure of intra-African trade has

changed significantly over the last decade,
with a sizeable proportion now composed of
manufactures (40 percent), followed by trade
in energy commodities and, to a lesser extent,
agricultural raw materials (Figure 5.8). IntraAfrican trade in food and beverages is relatively
small, with a combined share of 16 percent.
Intra-African trade in manufactures emanates
mostly from South Africa and some countries in
North Africa, particularly Egypt and Morocco.
15
10
5
ra Ag
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m ul
at tu
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ia l
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an
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ra
M
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an
s
uf
ac
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re
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M
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M
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s
END
CHAPTER
PROSPECTS
Over the near-term, sustaining even the

moderate ongoing improvements in the
global and African economies will be a major
challenge. Projected global growth in 2015,
at 3.1 percent, is lower than the estimated
3.31 percent in 2014. Recovery has not
fully taken hold in the group of advanced
economies, and Eurozone countries are still
dealing with lingering fiscal and sovereign
debt crises. Further growth deceleration is
expected in the group of emerging market
economies, especially China, which have
become the leading drivers of global growth
and trade. Positive factors that favour growth
are the increases that have started to be seen
in domestic consumption in industrialized
economies, on the back of lower oil prices
and monetary easing; the still-solid growth
in the U.K.; and the likely pick-up of the
Japanese economy.
Significant downside risks remain. The

further slowdown that is projected in
emerging-market and developing economies
reflects the dampening effects of weak
commodity markets in natural resourcedependent countries, tighter external
financial conditions, and capital outflows in
response to the expected strengthening of
the US dollar and the expected rise in U.S.
interest rates. Other risks to growth in these
countries stem from structural bottlenecks;
rebalancing in China; and economic distress
related to geopolitical tensions, especially in
East Europe, the Middle East, and some parts
of Africa. These factors could further weaken
African economies.
Global trade growth is forecast to pick up

slightly to 3.3 percent in 2015, from 3.1
percent in 2014, as a result of better market
access; promotion and implementation of
policies aimed at enhancing competiveness
and limiting trade distortions; and continued
efforts led by the WTO to reform global
trade rules. This growth is also supported
by a projected pick-up (albeit moderate) in
activity in advanced economies and in the
trade performance of the group of emerging
and developing economies.
The trade outlook, too, carries some

downside risks. These include the uneven
nature of the global economic recovery and
the likely tightening of monetary policy in
the United States, coupled with: protracted
weaknesses in oil prices, which could
potentially depress investment and growth
prospects in oil-producing countries; high
unemployment and lack of a definitive
resolution of the debt crisis in the Eurozone,
which would heighten uncertainty over
financial stability; and a further slowdown of
the Chinese economy, which would dampen
global demand and trade.
African economies are forecast to achieve

a growth rate of 3.75% in 2015 reflecting
difficult global conditions including the fall
in commodity prices and the slowdown
of Chinese economy. These same factors
are also projected to affect the continents
merchandise trade which is projected to
decline by about 5% in 2015. Intra-African
trade is projected to benefit from the
PROSPECTS83
economic integration, most notably the

Tripartite Free Trade Area to strengthen
and deepen economic integration of the
Southern and Eastern Africa region; the
ECOWAS Common External Tariff to promote
investment and industrialization and facilitate
the export of processed products; and the
Continental Free Trade Area.
continued efforts at the national and subregional levels to develop infrastructure

supporting cross-border trade; and from
ongoing initiatives to diversify exports and
to establish and/or strengthen regional blocs
and economic cooperation with the view to
expanding regional trade opportunities.
Looking forward, African trade will further
benefit from ongoing initiatives to deepen
END
RE F E RE NCES
African Development Bank (AfDB) (2010), Infrastructure Deficit and Opportunities in Africa,
Economic Brief Volume 1, September. Available at: http://www.afdb.org/fileadmin/uploads/
afdb/Documents/Publications/ECON%20Brief_Infrastructure%20Deficit%20and%20
Opportunities%20in%20Africa_Vol%201%20Issue%202.pdf
Balassa, B. (1965), Trade liberalization and revealed comparative advantage, The Manchester
School of Economics and Social Studies 33(2): 99-123.
Banga, R. (2013), Measuring Value in Global Value Chains. Paper no. Rvc-8, UNCTAD. http://
unctad.org/en/PublicationsLibrary/ecidc2013misc1_bp8.pdf
Banga, R., Kumar, D. and Cobbina, P. (2014), Trade-led Regional Value Chains in Sub-Saharan Africa:
Case Study on the Leather Sector. London: Commonwealth Secretariat, February. https://www.
researchgate.net/publication/272671395_Trade-led_Regional_Value_Chains_in_Sub-Saharan_
Africa_Case_Study_on_the_Leather_Sector
Brooks, H.D. (2008), Regional Cooperation, Infrastructure, and Trade Costs in Asia, ADB Institute
Working Paper No. 123, Asian Development Bank Institute, Tokyo, Japan.
Djankov, S., Freund, C.L., and Pham, C.S. (2010), Trading on Time,Review of Economics and
Statistics, 92(1):166-173 (February).
Pigato, M. (2001), Information and Communication Technology, Poverty, and Development in
Sub-Saharan Africa and South Asia. Africa Region Working Paper Series No. 210, World Bank,
Washington DC. Available at: http://www-wds.worldbank.org/servlet/WDSContentServer/
WDSP/IB/2001/09/28/000094946_01091404003925/Rendered/PDF/multi0page.pdf
World Bank (2006), Infrastructure at the Crossroads: Lessons from 20 Years of World Bank
Experience. Washington, DC: World Bank.
World Bank (2007), South Asia: Growth and Regional Integration. Washington, DC: World Bank.
REFERENCES85
A NNE X 1 B ACKGROUND
A N A LYSIS F OR CH A P T E R 2
ESTIMATING TRADE POTENTIAL IN LEATHER AND LEATHER PRODUCTS IN
AFRICA USING A GRAVITY MODEL
For member countries of COMESA, ECOWAS, and SACU, a gravity model was employed to assess the
extent of potential for intra-regional trade in leather and leather products in Africa. The analysis is
based on total bilateral trade in inputs as well as outputs of leather industry. Comparable bilateral
trade data for 26 countries for all inputs and outputs identified by BEC covering the period 2002-11
were used. Trade data were obtained from the UN COMTRADE database; size variables were extracted
from the World Development Indicators (WDI); and distance variables from CEPII. Banga and others
(2015), on which this Annex is based, give full details of the methodology used and of the results.
The estimable gravity model is:
ln Tijt = 0 + 1 ln Tijt 1 + 2 ln( POPit POPjt ) + 3 ln(GDPit GDPjt ) + 4 ln( Distancei j ) + eijt (1)
Where, Tijj is bilateral trade in LLP between countries i and j in period t. GDP it is GDP of country
i at point t, GDP jt is GDP of country j at point t, POP it is population of country i at point t, POPjt is
Pit POPjt ) + 3 ln(
GDPit GDP
Population
of country
j atDistance
point t and
jt ) + 4 ln(
i j ) + eijt is the error term.
The results show that the actual total trade in the region has been much lower than the potential
trade in the leather and leather products industry (Table A.1). For instance, during 2002-11, actual
intra-regional trade in this sector was on average around US$395 million a year while the potential
is estimated at US$544 million during the same period. This is almost double the actual average
trade under the existing tariff structure. For detailed country-level actual and potential estimates,
see Banga (2015).
Table A.1. Estimated and Potential Intra-Regional Trade in Leather and Leather Products
Actual Intra-Regional
Trade (000 US$)
(average 2002-2011)
Predicted Trade
(000 US$)
Trade can
rise by
544092
2.2 times
Gravity model estimates with

existing tariffs on leather products
and no tariff on leather
245,136
997082
4 times
245,136
1333495
5.4 times
Gravity model estimates with no

tariffs and non-tariff barriers on
leather and leather products
245,136
2517282
10 times

existing tariffs on leather and
leather products

existing tariffs on leather and no
tariff on leather products
245,136
Table A.2. Country-Wise Actual and Potential Average Trade in Leather and Leather
Products, 2002- 11
Country
Benin
Botswana
Burkina Faso
Burundi
Cape Verde
Cte dIvoire
Egypt, Arab Rep.
Ethiopia (excludes Eritrea)
Gambia, The
Predicted
Intra Regional
Exports Trade
($000)
182
Existing
Regional
Exports
Existing
Global
Exports
Exports to
COMESA
Exports to
ECOWAS
Exports to
SACU
2775
5333
1079
7450
436
4896
6931
1126
2958
($000)
119
834
9
11420
31275
18798
401
51184
20
($000)
147
4346
37946
744
30525
302
23
3442
149235
7682
32
187
75567
6786
7091
Kenya
35903
28795
71587
Madagascar
2779
107
10490
Mali
1670
973
3248
Libya
Malawi
Mauritius
114
442
9578
9548
14
292
1905
50
390
2
0
1470
396
30
75
6677
106
27856
461
478
14
93
892
228
15435
1736
13
63
972
1210
7382
165
10713
Nigeria
269440
129998
1027618
1017
20847
108134
Senegal
4192
3888
10007
15
3872
28
347
Rwanda
South Africa
Togo
Uganda
Zambia
Grand Total
550
5570
308
4493
25693
($000)
14
Namibia
Niger
8596
1071
834
8347
25
($000)
105
2088
Ghana
Guinea
($000)
0
1731
6870
4489
93474
49371
345853
41875
7135
3804
12709
3798
554027
295346
1831020
98571
186
8515
375
7005
560
10305
6198
305
0
7496
74222
2
4
808
122553
Removing existing tariffs on leather increases the existing average trade by about 2.5 times,
while removing tariffs on leather products can increase trade by 3 times. During the period,
the difference between actual and estimated trade has increased (Figure A.1). One of the major
reasons for this is that although rising per capita incomes have increased the potential to trade
in this sector in the region due to increase in demand for finished leather products, high tariffs
and non-tariff barriers have been a major hindrance to intra-regional trade. The empirical results
suggest that the scope for increasing intra-regional trade in leather and leather products is high for
almost all countries in Africa.
ANNEX 1 BACKGROUND ANALYSIS FOR CHAPTER 2 87
Figure A.1. Actual and Potential Trade in Leather and Leather Products, 2002-11
5000
4000
millions
3000
2000
Predicted Trade
Actual Trade
1000
0
2003
2004
2005
2006
2007
2008
2009
2010
2011
IDENTIFYING COUNTRY-LEVEL EXPORT POTENTIAL IN LEATHER AND LEATHER

PRODUCTS
To address the export potential of Africa in leather and leather products, the UN/COMTRADE data
for 2008-2010 were used and analysis carried out within the framework of revealed comparative
advantage (RCA) proposed by Balassa (1965). To overcome the limitation of the RCA, CEPII
suggests an indicator of comparative advantage which is based on both exports and imports of
a commodity by a country. This indicator depends on the spread between the trade balance of
product i (relative to GDP) and the global trade balance, weighted by the share of product i in world
trade. Defined in this way, the indicator reveals a comparative advantage pattern, as any deviation
of the specific product from the overall balance corresponds to an advantage (disadvantage) if the
contribution to the overall balance is positive (negative).
This measure of relative competitiveness is expressed in equation (2):
CTB
ij
W
= yij i * y j ... (2)
W
(X
( X
ij
Where, Wi is world trade of product i =
W is world trade of all products =

products of i in world trade;
+ Mi)
W
+ M ij ) and the ratio of i provides the share
W
Yj is total trade balance of county j in relation to GDP = 1000 *
Xj Mj
GDPj
Alternatively, CTB can be defined as:
CTBij =1000 *
( X ij M ij ) ( X j M j )
Wi
*
. (3)
GDPj
Wi
W
If the sign of CTB is positive, country j would have comparative advantage and if the sign is
negative, there would be a disadvantage.
The first part in equations 2 and 3 measures the market position (POS) or international
competitiveness of country j in product i. It is possible that the value of CTB is positive even if the
value of POS is negative indicating that the country does not enjoy international competitiveness
in product i. To correct this, we used a stricter criterion, whereby comparative advantage is
considered in only those products where POS and CTB are both positive.
IDENTIFYING POTENTIAL GLOBAL AND REGIONAL EXPORT BASKETS

For leather and leather products, 120 unique inputs and outputs were identified at HS six-digit
tariff lines.1 Using three-year moving averages (2008-10), we estimated the CTB and POS indices
for each of the 120 tariff lines in 37 (out of 40) countries in COMESA, ECOWAS and SACU, for which
trade data were available from this large set. 25 of the countries were found to be competitive in
either outputs or inputs in the leather industry.
If a product qualifies as competitive according to both indices, we select the product for the
potential export basket of the country. After identifying products with export potential, we further
identify only those products where regional demand exists (i.e. where a regions global imports
are greater than the countrys global exports). Further, all exports greater than US$100,000 for a
country are considered. If the regions global imports are lower than countrys global exports, the
products are selected for countrys potential global export basket. Using these strict criteria we
arrive at potential regional and global export baskets for each country.
Table A.3. reports the inputs and outputs of leather industry for each country where the country is
found to be competitive after applying the above criteria.
1 The Broad Economic Classification (BEC) has been used to identify tariff lines for primary, processed and final leather
products. Further, GTAP category was used with concordance available for HS 2002 to identify relevant tariff lines.
ANNEX 1 BACKGROUND ANALYSIS FOR CHAPTER 2 89
Country
COMESA
Burundi
Egypt, Arab Rep.
Ethiopia
Kenya
Madagascar
Malawi
Mauritius
Rwanda
Sudan
Uganda
Zambia
Zimbabwe
COMESA
ECOWAS
Burkina Faso
Cape Verde
Cte dIvoire
Ghana
Mali
Niger
Nigeria
Senegal
ECOWAS
SACU
Botswana
Namibia
South Africa
SACU
Total of Three
Regions
Number of Final
Leather Outputs
identified
3
5
8
6
6
1
2
1
4
36
1
5
1
2
1
10
6
6
52
Number of Leather
Inputs identified
3
21
17
12
3
2
0
4
5
8
7
7
89
2
0
3
0
4
2
9
7
27
4
13
19
36
152
Total Number of
Leather and Leather
Products identified
3
24
22
20
9
2
6
5
5
10
8
11
125
2
1
8
1
4
2
11
8
37
4
13
25
42
204
Countrys Average
Global Exports, 200810 (US$000)
2,044
124,872
73,641
86,912
14,365
506
15,295
3,794
15,719
14,900
7,082
19,761
378,893
5,605
2,606
33,110
391
3,285
276
1,563,319
4,564
1,613,156
2,755
25,114
253,249
281,118
2,273,167
Countrys Average
Regional Exports
2008-10 (US$000)
775
10,816
1,077
29,330
11
146
41
1,969
58
4,144
3,617
4,562
56,546
2,094
0
29,549
202
296
78
245,469
1,293
278,982
1,376
9,043
16,467
26,886
362,415
Table A.3. Number of Products Identified in Potential Regional and Global Export Baskets
Regions share in
Countrys Exports (%)
38
9
1
34
0
29
0
52
0
28
51
23
15
37
0
89
52
9
28
16
28
17
50
36
7
10
16
Regions Average Global

Imports
2008-10 (US$000)
6,746
168,443
422,279
308,399
100,688
10,300
70,667
125,697
18,295
68,664
101,191
420,254
1,821,622
7,559
19,512
254,382
24,573
17,918
576
598,660
65,396
988,576
12,427
73,165
74,203
159,795
2,969,992
A NNE X 2. IDEN T IF IE D OU T P U T S
A ND INP U T S OF T HE L E AT HE R INDUS T R Y
6-digit
code
Input or
output
Description of
6-digit classification
420100
Output
420211
Output
Saddlery and harness for any animal (including traces, leads,

knee pads, muzzles, saddle cloths, saddle bags, dog coats and
the like), of any material
420212
Output
420219
Output
420221
Output
420222
Output
Trunks, suit-cases, vanity-cases, executive-cases, brief-cases,

school satchels, spectacle cases, binocular cases, camera
cases, musical instrument cases, gun cases, holsters and
similar containers; travelling-bags, insulated food or beverages
bags, toilet bags and cases-with outer surface of leather, of
composition leather or of patent leather

school satchels, spectacle cases, binocular cases, camera cases,
musical instrument cases, gun cases, holsters and similar
containers; travelling-bags, insulated food or beverages bags,
toilet
bags and cases-with outer surface of plastics or of textile
materials

bags, toilet bags and cases-other


bags, toilet bags and cases-with outer surface of plastic
sheeting or of textile materials
ANNEX 2. IDENTIFIED OUTPUTS AND INPUTS OF THE LEATHER INDUSTRY 91
6-digit
code
Input or
output
Description of
420229
Output
420231
Output

420232
Output
10
420239
Output
11
420291
Output
12
420292
Output





6-digit
code
Input or
output
Description of
13
420299
Output
14
420310
Output

15
420321
Output
16
420329
Output
17
420330
Output
18
420340
Output
19
420500
Output
20
430310
Output
21
430390
Output
22
640110
Output
23
640192
Output
Articles of apparel and clothing accessories, of leather or of

composition leather- Articles of apparel

composition leather. Specially designed for use in sports

composition leather. Other

composition leather. Belts and bandoliers

composition leather. Other clothing accessories
Other articles of leather or of composition leather
Articles of apparel, clothing accessories and other articles of

furskin. Articles of apparel and clothing accessories
Articles of apparel, clothing accessories and other articles of

furskin. Other
Waterproof footwear with outer soles and uppers of rubber or

of plastics, the uppers of which are neither fixed to the sole nor
assembled by stitching, riveting, nailing, screwing, plugging or
similar processes. Footwear incorporating a protective metal
toecap

similar processes. Covering the ankle but not covering the knee
6-digit
code
Input or
output
Description of
24
640199
Output
25
640212
Output

similar processes. Other
26
640219
Output
27
640220
Output
28
640291
Output
29
640299
Output
30
640312
Output
31
640319
Output
32
640320
Output
33
640340
Output
34
640351
Output
35
640359
Output
Other footwear with outer soles and uppers of rubber or

plastics. Ski boots, cross-country ski footwear and snowboard
boots

plastics. Other

plastics. Footwear with upper straps or thongs assembled to
the sole by means of plugs

plastics. Covering the ankle

plastics. Other
Footwear with outer soles of rubber, plastics, leather or

composition leather and uppers of leather. Ski boots, crosscountry ski footwear and snowboard boots

composition leather and uppers of leather. Other

composition leather and uppers of leather. Footwear with outer
soles of leather, and uppers which consist of leather straps
across the instep and around the big toe

composition leather and uppers of leather. Other footwear,
incorporating a protective metal toecap

composition leather and uppers of leather. Covering the ankle

6-digit
code
Input or
output
Description of
36
640391
Output
37
640399
Output

composition leather and uppers of leather. Covering the ankle
38
640411
Output
39
640419
Output
40
640420
Output
41
640510
Output
42
43
640520
640590
Output
Output
44
640610
Output
45
640620
Output
46
650699
Output
47
940140
Output


composition leather and uppers of textile materials. Sports
footwear; tennis shoes, basketball shoes, gym shoes, training
shoes and the like

composition leather and uppers of textile materials. Other

composition leather and uppers of textile materials. Footwear
with outer soles of leather or composition leather
Other footwear. With uppers of leather or composition leather
Other footwear. With uppers of textile materials
Other footwear. Other
Parts of footwear (including uppers whether or not attached to

soles other than outer soles); removable in-soles, heel
cushions and similar articles; gaiters, leggings and similar
articles, and parts thereof. Uppers and parts thereof, other than
stiffeners
Parts of footwear (including uppers whether or not attached to

soles other than outer soles); removable in-soles, heel
cushions and similar articles; gaiters, leggings and similar
articles, and parts thereof. Outer soles and heels, of rubber or
plastics
Other headgear, whether or not lined or trimmed. Of other

materials
Seats (other than those of heading 94.02), whether or not

convertible into beds, and parts thereof. Seats other than
garden seats or camping equipment, convertible into beds
6-digit
code
Input or
output
Description of
48
940161
Output
49
940171
Output

convertible into beds, and parts thereof. Upholstered
50
950662
Output
51
410411
Processed
52
410419
Processed
53
410441
Processed
54
410449
Processed
55
410510
Processed
56
410530
Processed
57
410621
Processed
58
410622
Processed

convertible into beds, and parts thereof. Upholstered
Articles and equipment for general physical exercise,

gymnastics, athletics, other sports (including table-tennis) or
outdoor games, not specified or included elsewhere in this
chapter; swimming pools and paddling pools. Inflatable
Tanned or crust hides and skins of bovine (including buffalo) or

equine animals, without hair on, whether or not split, but not
further prepared. Full grains, unsplit; grain splits

further prepared. Other

further prepared. Full grains, unsplit; grain splits

further prepared. Other
Tanned or crust skins of sheep or lambs, without wool on,

whether or not split, but not further prepared. In the wet state
(including wetblue)
Tanned or crust skins of sheep or lambs, without wool on,

whether
or not split, but not further prepared. In the dry state (crust)
Tanned or crust hides and skins of other animals, without wool

or hair on, whether or not split, but not further prepared. In the
wet state (including wetblue)

dry state (crust)
6-digit
code
Input or
output
Description of
59
410631
Processed
60
410632
Processed

61
410640
Processed
62
410691
Processed
63
410692
Processed
64
410711
Processed
65
410712
Processed
66
410719
Processed
67
410791
Processed
68
410792
Processed

dry state (crust)

or hair on, whether or not split, but not further prepared. Of
reptiles


dry state (crust)
Leather further prepared after tanning or crusting, including

parchment-dressed leather, of bovine (including buffalo) or
equine animals, without hair on, whether or not split, other than
leather of heading 41.14. Full grains, unsplit

leather of heading 41.14. Grain splits

leather of heading 41.14. Other

leather of heading 41.14. Full grains, unsplit

leather of heading 41.14. Grain splits
6-digit
code
Input or
output
Description of
69
410799
Processed
70
411200
Processed

leather of heading 41.14. Other
71
411310
Processed
72
411320
Processed
73
411330
Processed
74
411390
Processed
75
411410
Processed
76
411420
Processed
77
411510
Processed

parchment-dressed leather, of sheep or lamb, without wool on,
whether or not split, other than leather of heading 41.14.

parchment-dressed leather, of other animals, without wool or
hair on, whether or not split, other than leather of heading
41.14. Of goats or kids

41.14. Of swine

41.14. Of reptiles

41.14. Other
Chamois (including combination chamois) leather; patent

leather and patent laminated leather; metallised leather.
Chamois (including combination chamois) leather
Chamois (including combination chamois) leather; patent

leather and patent laminated leather; metallised leather. Patent
leather and patent laminated leather; metallised leather
Composition leather with a basis of leather or leather fibre, in

slabs, sheets or strip, whether or not in rolls; parings and other
waste of leather or of composition leather, not suitable for the
manufacture of leather articles; leather dust, powder.
6-digit
code
Input or
output
Description of
78
430211
Processed
79
430219
Processed
Tanned or dressed furskins (including heads, tails, paws and

other pieces or cuttings), unassembled, or assembled (without
the addition of other materials) other than those of heading
43.03. Of mink
80
430220
Processed
81
430230
Processed
82
410120
Primary
83
410150
Primary
84
410190
Primary

43.03. Other

43.03. Heads, tails, paws and other pieces or cuttings, not
assembled

43.03. Whole skins and pieces or cuttings thereof, assembled
Raw hides and skins of bovine (including buffalo) or equine

animals (fresh, or salted, dried, limed, pickled or otherwise
preserved, but not tanned, parchment-dressed or further
prepared), whether or not dehaired or split. Whole hides and
skins, of a weight per skin not exceeding 8 kg when simply dried,
10 kg when drysalted, or 16 kg when fresh, wetsalted or
otherwise preserved

prepared), whether or not dehaired or split. Whole hides and
skins, of a weight exceeding 16 kg

prepared), whether or not dehaired or split. Other, including
butts, bends and bellies
6-digit
code
Input or
output
Description of
85
410210
Primary
86
410221
Primary
Raw skins of sheep or lambs (fresh, or salted, dried, limed,

pickled or otherwise preserved, but not tanned, parchmentdressed or further prepared), whether or not with wool on or
split, other than those excluded by Note 1 (c) to this chapter.
With wool on
87
410229
Primary
88
410320
Primary
89
410330
Primary
90
410390
Primary
91
411520
Primary

Pickled

Other
Other raw hides and skins (fresh, or salted, dried, limed, pickled
or otherwise preserved, but not tanned, parchment-dressed or
further prepared), whether or not dehaired or split, other than
those excluded by Note 1 (b) or 1 (c) to this chapter. Of reptiles
those excluded by Note 1 (b) or 1 (c) to this chapter. Of swine
those excluded by Note 1 (b) or 1 (c) to this chapter. Other
Composition leather with a basis of leather or leather fibre, in

slabs, sheets or strip, whether or not in rolls; parings and other
waste of leather or of composition leather, not suitable for the
manufacture of leather articles; leather dust, powder and
parings and other waste of leather or of composition leather,
not suitable for the manufacture of leather articles; leather
dust, powder and flour
6-digit
code
Input or
output
Description of
92
430110
Primary
93
430130
Primary
Raw furskins (including heads, tails, paws and other pieces or

cuttings, suitable for furriers use), other than raw hides and
skins of heading 41.01, 41.02 or 41.03. Of mink, whole, with or
without head, tail or paws
94
430160
Primary
95
430180
Primary
96
430190
Primary
97
283010
Chemical
98
284130
Chemical
99
291611
Chemical
100 292910
Chemical
101 320110
Chemical

skins of heading 41.01, 41.02 or 41.03. Of lamb, the following:
Astrakhan, Broadtail, Caracul, Persian and similar lamb, Indian,
Chinese, Mongolian or Tibetan lamb, whole, with or without
head, tail or paws

skins of heading 41.01, 41.02 or 41.03. Of fox, whole, with or
without head, tail or paws

skins of heading 41.01, 41.02 or 41.03. Other furskins, whole,
with or without head, tail or paws

skins of heading 41.01, 41.02 or 41.03. Heads, tails, paws and
other pieces or cuttings, suitable for furriers use
Sulphides; polysulphides, whether or not chemically defined.

Sodium sulphides
Salts of oxometallic or peroxometallic acids. Sodium

dichromate
Unsaturated acyclic monocarboxylic acids, cyclic

monocarboxylic acids, their anhydrides, halides, peroxides and
peroxyacids; their halogenated, sulphonated, nitrated or
nitrosated derivatives. Acrylic acid and its salts
Compounds with other nitrogen function. Isocyanates
Tanning extracts of vegetable origin; tannins and their salts,

ethers, esters and other derivatives. Quebracho extract
6-digit
code
Input or
output
Description of
102 320120
Chemical
103 320190
Chemical

ethers, esters and other derivatives. Wattle extract
104 320210
Chemical
105 320411
Chemical
106 320412
Chemical
107 320413
Chemical
108 320414
Chemical
109 320416
Chemical

ethers, esters and other derivatives. Other
Synthetic organic tanning substances; inorganic tanning

substances; tanning preparations, whether or not containing
natural tanning substances; enzymatic preparations for
pre-tanning. Synthetic organic tanning substances
Synthetic organic colouring matter, whether or not chemically

defined; preparations as specified in Note 3 to this chapter
based on synthetic organic colouring matter; synthetic organic
products of a kind used as fluorescent brightening agents or as
lumin-disperse dyes and preparations based thereon

lumin-acid dyes, whether or not premetallised, and
preparations based thereon; mordant dyes and preparations
based thereon

lumin-basic dyes and preparations based thereon

lumin-direct dyes and preparations based thereon

based on synthetic organic colouring matter; synthetic
organic products of a kind used as fluorescent brightening
agents or as lumin-reactive dyes and preparations based
thereon
6-digit
code
Input or
output
Description of
110 320417
Chemical
111 320611
Chemical

lumin-pigments and preparations based thereon
112 321000
Chemical
113 340211
Chemical
114 340212
Chemical
115 340213
Chemical
116 340311
Chemical
Other colouring matter; preparations as specified in Note 3 to

this chapter, other than those of heading 32.03, 32.04 or 32.05;
inorganic products of a kind used as luminophores, whether or
not chemically defined. Containing 80 percent or more by
weight of titanium dioxide calculated on the dry matter
Other paints and varnishes (including enamels, lacquers and

distempers); prepared water pigments of a kind used for
finishing leather. Other paints and varnishes (including enamels,
lacquers and distempers); prepared water pigments of a kind
used for finishing leather
Organic surface-active agents (other than soap); surfaceactive preparations, washing preparations (including auxiliary
washing preparations) and cleaning preparations, whether or
not containing soap, other than those of heading 34.01.
Anionic
Cationic
Non-ionic
Lubricating preparations (including cutting-oil preparations,

bolt or nut release preparations, anti-rust or anti-corrosion
preparations and mould release preparations, based on
lubricants) and preparations of a kind used for the oil or grease
treatment: preparations for the treatment of textile materials,
leather, furskins or other materials
6-digit
code
Input or
output
Description of
117 340391
Chemical
118 340510
Chemical
Lubricating preparations (including cutting-oil preparations,

bolt or nut release preparations, anti-rust or anti-corrosion
preparations and mould release preparations, based on
lubricants) and preparations of a kind used for the oil or grease
treatment o-Preparations for the treatment of textile
materials, leather, furskins or other materials
119 350790
Chemical
120 380993
Chemical
Polishes and creams, for footwear, furniture, floors, coachwork,

glass or metal, scouring pastes and powders and similar
preparations (whether or not in the form of paper, wadding, felt,
nonwovens, cellular plastics or cellular rubber, impregnated,
coated. Polishes, creams and similar preparations for footwear
or leather
Enzymes; prepared enzymes not elsewhere specified or

included. Other
Finishing agents, dye carriers to accelerate the dyeing or fixing

of dyestuffs and other products and preparations (for example,
dressings and mordants), of a kind used in the textile, paper,
leather or like industries, not elsewhere specified or included.
Of a kind used in the leather or like industries
Source: Banga et al., 2014, using UN COMTRADE database, http://comtrade.un.org
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HEADQUARTERS
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2014 African Trade Report Single

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AFRICAN TRADE REPORT

REGIONAL VALUE CHAINS:

AFRICAN EXPORT-IMPORT BANK

REGIONAL VALUE CHAINS:

Dr. Benedict O. Oramah

ABBREVIATIONS AND ACRONYMS

Asian Development Bank

6 AFRICAN TRADE REPORT 2014

1 INTRODUCTION AND EXECUTIVE SUMMARY

The World Economy And African Trade In 2014

2IDENTIFYING AND PROMOTING REGIONAL VALUE CHAINS IN

3 GLOBAL ECONOMIC AND FINANCIAL DEVELOPMENTS

Global Output And Price Developments

AFRICAN TRADE REPORT 20147

4 ECONOMIC AND FINANCIAL DEVELOPMENTS IN AFRICA

5 TRADE DEVELOPMENTS IN AFRICA

Output And Price Developments

The Environment For African Trade

8 AFRICAN TRADE REPORT 2014

AFRICAN TRADE REPORT 20149

10 AFRICAN TRADE REPORT 2014

Against this background, the thematic

in tradition but with tremendous potential

THE WORLD ECONOMY AND AFRICAN

The growth of global merchandise trade

African economies themselves faced an array

economies dampened global demand for

In 2014, Africas merchandise trade

sluggish growth in global output and import

Despite Africas relatively weak economic

Most of the intra-African trade occurred

followed by trade in energy commodities and

THE OUTLOOK FOR TRADE

and lack of a definitive resolution of the debt

African economies are forecast to achieve

cooperation with the view to expanding

CASE STUDY: DEVELOPING REGIONAL

and trade need to be boosted along with

to regional and global markets; (ii) a list of

STRUCTURE OF THE REPORT

The study finds that Africa has the potential

Chapter 2 reports the research on identifying

INTRODUCTION AND EXECUTIVE SUMMARY 15

16 AFRICAN TRADE REPORT 2014

IDENTIFYING AND PROMOTING

The leather industry is one of Africas

Current global conditions have created both

2.2 REGIONAL VALUE CHAINS IN THE

transformation is to increase countries

Global value chains (GVCs) have provided

To climb up the value chain in GVCs, and

Over the years, the global leather industry

2.3 DISTRIBUTION OF VALUE-ADDED

To illustrate the relative returns to countries

and marketing (shown in red) contributes

Figure 2.1. Contribution of

Figure 2.2. Participation in Global Value

FVA by foreign services

Domestic Value Added by

Foreign Value Added by

Domestic Value Added by

These relationships imply that if developing

added in traded LLP products.2 Among

Source: Banga et al., 2014, based on OECD-WTO TiVA, May

The World Economy And African Trade In 2014

2IDENTIFYING AND PROMOTING REGIONAL VALUE CHAINS IN

Global Output And Price Developments

Output And Price Developments

The Environment For African Trade

3Source: COMTRADE, World Integrated Trade