A NEW report by South Africa’s Standard Bank reveals that unstable and weakening local currencies, foreign currency shortages, and poor infrastructure are squeezing trade in Africa. The 2023 Standard Bank Trade Barometer report provides insights into the difficulties encountered by African businesses in ten countries as they strive to boost trade at domestic, regional, and international levels.
Compiled by Standard Bank, the largest bank on the continent in terms of assets, the Trade Barometer report offers data on economic conditions in South Africa, Nigeria, Kenya, Angola, Ghana, Mozambique, Namibia, Tanzania, Uganda, and Zambia.
The report underscores that seven out of ten countries experienced currency depreciation against the US dollar between 2021 and 2022, and it anticipates further depreciation in 2023. This depreciation is largely attributed to interest rate hikes in the United States, which bolster the strength of the dollar.
Furthermore, many of these nations are grappling with exchange rate volatility and capital flight, driven by higher interest rates in advanced economies.
The devaluation of local currencies is also contributing to escalating sovereign debt levels and worsening foreign currency shortages.
Despite several of the countries in the report achieving robust economic growth in the wake of the Covid-19 pandemic, they have been impacted by tightening global financial conditions, the consequences of Russia’s invasion of Ukraine, and ongoing climate-related challenges, according to the survey’s findings.
Philip Myburgh, Head of Trade & Africa-China at Standard Bank, commented in the report, saying, ‘Collectively, these headwinds are significantly impeding business growth and cross-border trade as enterprises struggle to acquire foreign currency to cover imports.’
He added, ‘Overall, the ease of intra-African trade sentiment remains constrained by negative perceptions of infrastructure, complex policies, and high import and export duties.’
The report reveals that the state of power supply, particularly in South Africa, Tanzania, and Nigeria, and the condition of road and rail infrastructure, particularly in Zambia, are significant obstacles to business operations in these countries.
While business confidence is improving in many of the surveyed nations, South Africa has experienced a contrasting trend due to an ongoing power crisis.
The findings of the Standard Bank Trade Barometer report highlight the pressing challenges facing African businesses as they navigate currency instability and infrastructure deficiencies, emphasising the need for strategic solutions to promote sustainable trade growth across the continent.