Market opportunity in africa.docx

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Market opportunity in Africa To tap into trade-growth opportunities, sub-Saharan Africa (SSA) needs to diversify in several ways: it needs to become less dependent on the stagnating markets of its traditional trading partners in the developed world. At the same time it needs to lower its dependence on the export of commodities vulnerable to price shocks. This analysis addresses how SSA can achieve sustainability in export revenues by integrating deeper into sector value-chains and thereby increasing the share of value-added products within its exports. The analysis also identifies strategic options and policies for sub-Saharan African countries to maximize their trade-related economic growth through 2025 by tapping into growth markets in Asia, Latin America and their own continent, and invest in trade-related infrastructure and trade facilitation. The reorientation of SSA exports away from stagnating OECD markets towards Asia, and China in particular, has already begun. Trade between Western Africa and Asia, for instance, is forecast to increase by 14% annually over the next decade, significantly outpacing the overall growth in world trade. But, since the large majority of SSA products destined for Asia are commodities, a reorientation to growth markets is by itself not sufficient to achieve future sustainability. Furthermore, the share of raw materials in Africa’s exports to Asia is still growing. Thus by simply turning towards Asia, this analysis shows that the SSA region runs the risk of leaving itself even more vulnerable to commodity price shocks than it is today. In addition to increasing their share of exports to Asia, SSA countries increasingly trade within their own region too. In this intraregional trade, though, it is the share of value-added products that contributes to rising exports. The share of value-added products in SSA’s exports to Europe is also growing. In this context ITC’s analysis finds that by improving trade-related infrastructure and reducing procedural bottlenecks through trade facilitation initiatives, SSA countries stand to increase their trade particularly within the region, which is likely to favour the production of value-added goods. Thus the mix recommended to optimize trade-related economic growth for

SSA is diversification towards emerging markets, including in products with higher added value, combined with investment in trade infrastructure and simplified customs procedures to reduce the time and cost required to get products to market. The expected benefit for SSA of investing in trade-related infrastructure alone is an increase in exports of up to 51% beyond the baseline growth forecast, along with a gross domestic product (GDP) gain of US$ 20 billion per year by 2025. In order to assess the magnitude of potential trade and the economic benefits to SSA from various trade related strategies and policies, this paper addresses the following questions:  What are the general trends in African trade with other emerging regions? What is the level of integration along the value chain? To which extent are individual sectors and countries already vertically integrated? In summary, in which sectors and regions have African exporters recently performed well?  What is the future level of trade between Africa and other emerging regions, like Asia and Latin America? Which sectors show the highest trade potential? What is the impact of Asian trade initiatives in Africa? And, how could improvements in African trade infrastructure affect trade? In summary, what should policymakers do to maximize future trade potential? Both SSA countries and Asia are forecast to grow rapidly in the coming decade, which will further fuel intraregional trade in SSA and trade between the two regions. Increased Asian demand is expected to particularly favour SSA’s exports of primary products, such as oil, coal and gas. Against this baseline of forecast trade growth, driven by economic growth alone, this ITC analysis simulates the potential effects of three types of policy changes: a) Reducing the time and cost of transporting goods on the African continent by improving trade infrastructure such as ports and roads; b) Simplifying customs procedures in sub-Saharan Africa; and c) Simplifying customs procedures with Asia.

The results of these simulations suggest that infrastructure improvements on the African continent will achieve the greatest welfare and trade gains, and since this policy favours intraregional trade, it is expected to be favourable to the export growth of value-added products. In which sectors and regions have African exporters recently performed well? SSA exports are already being reoriented to growing Asian markets and these exports are increasingly raw commodities. Efforts are needed to integrate sectors along the value chain. Success stories are emerging in intra-SSA trade e.g. in leather. Exports to Asia have grown rapidly in the past 15 years and Asia’s share of African exports continues to rise. Asia is now the third-biggest destination for sub-Saharan Africa’s non-oil exports after sub-Saharan Africa itself and Europe (the European Union and the countries of the European Free Trade Agreement). In 1995-2010, SSA’s exports of processed goods (such as bread, textiles and furniture) and semi processed goods (such as flour, yarns and industrial alcohol) have grown faster than exports of non-oil raw products. In the case of intraregional exports, processed and semi-processed goods comprise the largest share of non-oil exports, at 46% and 41%, respectively. The ratio of SSA exports of processed goods to Asia, however, stands at an abysmal 5%, leaving much room for improvement. Splitting trade by level of processing provides important information on the structure of exports, but doing so misses insights related to the import side of trade, where a country transforms imported goods in order to use the end-products domestically. ITC’s analysis assesses Africa’s ability to move up the value chain, both on the import and on the export side in the following two ways: a) By assuming that an increase in the share of intermediate goods in total SSA imports is a sign that transformative industries are being set up in the country, processing foreign inputs for domestic use or re-exportation;

b) By assuming that an increase in the share of transformed goods in total SSA exports is a sign that transformative industries are being set up in the country, processing domestic or foreign inputs for export. Overall, the share of transformed products in total exports from SSA has increased, but the share of intermediate inputs in total imports has remained stable. Individual success stories are notable. The leather sector is a good example of vertical integration, where a number of countries have established leather processing industries and increased their exports of finished leather articles. Less successful has been the cotton and textiles industry, where only three countries – Burkina Faso, Chad and Mali – increased the share of textiles in the sector’s total exports. Promising markets for these well-performing SSA countries and sectors are mostly found within Africa itself, as well as among traditional markets in Europe and other OECD countries. Although not growing rapidly overall, exports to these markets have gradually shifted towards transformed goods. A right policy mix needs to be identified, which allows SSA to fully exploit its trade and growth opportunities — to simultaneously reorient towards fast-growing markets and higher value-added exports.

Record year for South African wine exports The South African wine industry topped its previous export record in 2013, with volumes sold reaching 525.7-million litres, a 26% increase on the previous high achieved in 2012, Wines of South Africa (Wosa) said in a statement on Monday. Strong year-on-year growth occurred in established and newer markets. Wosa's new CEO, Siobhan Thompson, attributed the dramatic growth to a bumper harvest that allowed South Africa to fill the gap created by a poor European harvest as well as to penetrate new markets. Sales to the UK, still the country's biggest export destination, accounting for just over one-fifth of total export volumes last year, rose 21% to 111.2-million litres. Volumes to Germany, where South Africa is the biggest "New World" supplier, increased by 24% to 96.5-million litres, while exports to Russia were up 18% to 37.3-million litres. "It is encouraging that strong gains were achieved in the UK and Germany, our two biggest markets, where packaged wines in particular showed very healthy growth," Thompson said. "Packaged wines to the UK were up 31% and to Germany by 17%. At the same time, exports also grew across an increasingly broad range of other markets." She said the substantial growth in Russian sales was partly the result of the shortfall in the European harvest, where in some cases yields were the lowest in 40 years. "This was also the reason South African sales to wine-producing countries such as France, Italy and Spain increased so dramatically. However, we see as significant the impressive growth in high potential markets such as the US, where we are confident of achieving long-term growth." Thompson said exports to the US, a market of fast-growing importance to the country, increased by 37%, buoyed by improved distribution and ongoing positive media exposure. This included very favourable reviews in high-profile wine publications such as Wine Spectator and The Wine Advocate and among the very influential blogger fraternity. The US is currently the world's biggest market for wines. Strong gains were also achieved in Denmark, where packaged sales were up by 21%, and good inroads were made in many of Africa's major economies as well as in Japan, Thailand and the United Arab Emirates.

Overall, white wine sales rose by almost 18%, and reds by 22%. Sauvignon blanc, Cabernet Sauvignon, Shiraz, Pinotage and Merlot saw the biggest increase in volumes exported. "South Africa is increasingly perceived as the source of interesting, original and well-made wines, able to appeal to Americans eager to expand their repertoire," Thompson said. "This is a very good positioning from which to build our base, particularly as we target Millennials, who are especially eager to encounter new taste experiences." She noted that the increase in bulk volumes of wines exported, from 59% in 2012 to 65% in 2013, was largely because of opportunistic buying on world markets prompted by the poor European harvest.

Read more: http://www.southafrica.info/business/trade/export/wine-150114.htm#ixzz2vCteQN2S

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