How vital are commodity exchanges to Africa's regional trade pact?

The operational phase of the African Continental Free Trade Area (AfCFTA) agreement was launched on the 7th of July 2019, marking a significant milestone for the continent. With trade under the regional pact now underway for over six months, the focus shifts to unlocking the gains in regional trade. Afex Commodities Exchange CEO, Ayodeji Balogun, emphasizes the importance of building a digital economy to drive the production of higher quality goods and services at reduced costs. Balogun also points out the pivotal role that commodity exchanges will play in boosting regional trade. The journey of the AfCFTA has not been without its challenges, particularly as the COVID-19 pandemic disrupted global trade dynamics. Various African countries resorted to protectionist measures, impacting the essence of the trade agreement. The suspension of the initialization further underscored the need for better coordination among member states. However, recent developments such as the establishment of the AfCFTA office in Ghana indicate progress towards alignment and cooperation. As the CEO of a commodity exchange, Balogun highlights the shift towards a digital economy as crucial for enhancing the value of commodities. While traditional exchanges like the Chicago Mercantile Exchange focus on physical commodities, the future lies in trading financial assets and derivatives. By embracing digital transformation, commodity exchanges can facilitate the transition to higher-value products, ultimately benefiting regional trade. One of the key opportunities that the AfCFTA presents is the trade of agricultural goods within the continent. Balogun points out that despite the proximity between certain regions, border tariffs, currency conversion issues, and economic policies have hindered intra-African trade. The removal of tariff and non-tariff barriers under the trade agreement opens up a market worth trillions of dollars, allowing companies to become continental powerhouses. The harmonization of policies and regulations will enable seamless cross-border trade in sectors such as banking, services, and commodities. In essence, the AfCFTA holds the promise of transforming Africa's economic landscape by fostering intra-continental trade and creating a unified market. By leveraging commodity exchanges and embracing digital innovation, African economies can tap into their full potential and chart a path towards sustainable growth and prosperity. As the region continues to navigate the complexities of global trade, collaboration and strategic partnerships will be key in realizing the vision of a thriving African trade ecosystem.