Financial services provider Standard Bank this week shared the results of the second edition of its Africa Trade Barometer, which showed that there have been improvements in, for example, business perceptions that the Tanzanian and Ugandan governments are doing more to support trade.

Standard Bank Trade and Africa-China head Philip Myburgh notes that the recent resumption of trade barrier reduction talks between the two countries has contributed to this positive shift.

The second edition of the barometer also highlights the strong link between effective governance and business confidence and growth.

Kenya’s recently successfully concluded elections, for example, has driven more positive sentiment across the whole East Africa region. Similarly, the report found that successful elections in Angola and Zambia, and the change of president in Tanzania, has driven more positive business sentiment in these markets.

“The second edition’s results, now enhanced with historical comparison, also reveal more nuanced and often entirely new or unexpected insights, especially at individual country and sector level,” says Myburgh.

Current data, meanwhile, reveals how interest rate hikes by the US Federal Reserve have increased borrowing across many African markets, negatively impacting business confidence.

This trend manifests most profoundly in Ghana where significant inflation and pronounced liquidity constraints have curtailed the country’s ability to import. Add to this Ghana’s heavy reliance on now interrupted Ukrainian wheat supply, coupled with inflated global grain prices, “and a clear picture emerges of the risks associated with an over-reliance on dollar-denominated imports”, observes Myburgh. 

The latest data also shows a retreat in business confidence in Mozambique as the impact of the insurgency in the north delays the progress of planned liquefied natural gas investments in the country.

In Angola, on the other hand, “data shows a strongly positive confidence correlation amongst businesses involved in the country’s booming petrochemicals sector, currently riding high on global supply constraints,” reports Myburgh.

The results also show African businesses seeking to import fewer goods directly from China, replacing direct Chinese imports with Chinese goods from third parties or finding new suppliers entirely.

This data shows, in near real time, how “African businesses are responding to ongoing supply chain constraints in a heavily locked down China”, says Myburgh.

Somewhat counterintuitively, the second edition of the Africa Trade Barometer found no correlation between trade-favourable legislative regimes and business confidence and activity.

This might reveal that “when outside observers assess African tradability, they generally only consider one or two data points, usually how closely a country’s trade regime approximates to global best practice," explains Myburgh.

However, current Africa Trade Barometer data points to a more nuanced view, he notes.

“Countries and sectors showing positive macro fundamentals, for example, tend to return higher tradability numbers, regardless of their trade regimes. Either way, what is clear from the data is that “the drivers of business and trade confidence in Africa involve far more data points driven by very specific local variables”.

A recurring theme across all markets is the centrality of agriculture in Africa.

Standard Bank has observed that higher fertiliser prices and dollar liquidity constraints have reduced the yield and margin of produce across the continent.

Since agriculture contributes a disproportionately large portion of African gross domestic product, shifts in the continent's agricultural fortunes impact almost every other sector.

These insights highlight “the importance of agricultural stability in Africa as well as the opportunity that investment in the sector presents to drive multi-sector growth across the continent", notes Myburgh.

Standard Bank intends to issue the Africa Trade Barometer twice a year going forward.