Editorial | Africa beckons

As Prime Minister Andrew Holness said last week as Jamaica became the latest Caribbean Community (CARICOM) member to accede to the community’s 2022 partnership agreement with the Africa Export Import Bank (Afreximbank), this oughtn’t to be mere symbolism. The next step for the parties – Africa and the Caribbean, must be robust action to translate potential for trade and investment into tangible deals.

Three factors should be catalysts for making headway on this idea. First, Africa, through the Afrieximbank, has already done a significant amount of the initial and necessary heavy lifting to start the process.

Further, while the Caribbean is a close neighbour to the United States, with which it has had long-standing good relations, America, under Donald Trump, isn’t a reliable economic or political partner. Mr Trump, as he has been doing globally since assuming office, could impulsively, and unilaterally, increase tariffs or impose other transaction costs on the region’s economies. And third, in an increasingly volatile global environment, where muscular, 19th century-style great power approaches are reasserting themselves in international relations, it is sensible for countries of the Global South to make common cause in responding to these developments.

Moreover, Africa and the Caribbean, where the majority of the populations are people of African descent, seem a natural fit.

CARICOM signatories to the partnership agreement are not shareholders in Afreximbank – which last year had assets of US$35.26 billion and approved over US$20 billion in loans and lines of credit – although the agreement opens the door for them to become shareholders. However, it allows for the bank to finance arrangements for the export and import of non-traditional goods and services between Africa and CARICOM members “through extending direct or indirect credit to eligible businesses in participating states” and other institutions.

REGIONAL OFFICE

Indeed, Afreximbank has opened a regional office in Barbados, which over two years, up to 2024, disbursed over US$60 million in financing for regional infrastructure projects, as well as established a US$1-billion oil services financing facility for Guyana to help finance domestic participation in the country’s burgeoning oil sector.

The bank has also signed a US$200-million infrastructure loan with the Bahamas and committed US$250 from the reconstruction and development of Haiti. Afreximbank has also held annual trade and investments forums in the Caribbean.

But while there is much enthusiasm for the expansion of trade and investment between the continent and the Caribbean, at least on the part of Afreximbank, as Prime Minister Holness and the bank have noted, several constraints stand in the way – including lack of information about opportunities, as well as logistical weaknesses. These are not exclusively transatlantic shortcomings.

Indeed, intra-Africa trade, which last year was just shy of US$209 billion, represented only around 15 per cent of total African trade. Intra-CARICOM trade is perhaps 10 per cent of the group’s global trade.

But even compared to those ratios, trade between Africa and the Caribbean is minuscule. A 2020 analysis by the Bank and the United Nations International Trade Centre (ITC) showed that less than one per cent of the Caribbean’s exports went to Africa, which sold 0.08 per cent of its goods to this region. Africa has since lifted its merchandise exports to the region closer to one per cent of its exports of goods, while the Caribbean has doubled its sales to the continent to 2.3 per cent.

“Nonetheless, bilateral trade remains concentrated in a few products, compared with each region’s trade with other regional parties,” Afrieximbank said in its 2024 annual report.

It noted, too, that most Caribbean exports to Africa were “largely unprocessed, highlighting missed opportunities in value-added manufacturing and regional supply chain integration”.

MARKET POTENTIAL

By the bank’s estimate, the Caribbean holds for Africa an unrealised market potential of US$546 million, while the reverse, in favour of Caribbean exports, was US$496 million.

They estimated that around 57 per cent of this unrealised potential was the result of “trade frictions linked to logistical, procedural and infrastructure challenges”, which, if addressed quickly, lift Africa-Caribbean trade – to US$1.8 billion by 2028, from the current US$728 million.

Whether these projections are realisable within the suggested timeframe, is perhaps debatable. But clearly, there are opportunities to be exploited. However, potential won’t materialise in the absence of robust, strategic engagement on both frontiers.

As this newspaper has argued with respect to Jamaica, domestic policymakers and other stakeholders have to reach a consensus for lifting the island’s economy from mere macroeconomic stability, with low wages, low-productivity, low value-added and low growth, to one with substantial advance in GDP, delivering equitable development. This has to centre around an industrial policy that covers improved and expanded education and training, enhanced infrastructure and incentives that encourage investment in innovation and research and development.

Second, the CARICOM, domestic and regional private sectors must be fully on board in this process, allowing for greater inputs across the regional value chain in manufacturing of competitive products. CARICOM, therefore, has to accelerate its development into a genuine single market and look to enter trade agreements with Africa, whether via the Africa Continental Free Trade Area or sub-regional trading groups.