RMB Indo-Africa Trade Boom

Media Release

28 May 2024

This Article was first published in Business Report (The Star) on 28 May 2024

Indo-Africa trade corridor booms to $95 Billion, expected to hit $100bn by 2025

The Indo-Africa trade corridor had surged to a staggering $95 billion R1.76 trillion in size, showcasing a dynamic and growing economic partnership between the regions.

Ritesh Sharma, head of financial institutions and trade for RMB's India team, said: “This marks a significant increase from only $5 billion in 2002, highlighting the corridor's impressive trajectory. By our estimation, we expect the value of trade in the corridor to hit $100 billion next year.”

Sharma noted that while the initial trade focus was on energy products, the corridor had witnessed remarkable diversification in recent years.

"India's exports to Africa now encompass a wider range of products, including agriproducts like rice, wheat and meat ($8bn), pharmaceuticals ($4.5bn) and automobiles ($4.2bn). Projects, machines, iron and steel, electronics and yarn clothes are other significant and growing categories.

Africa's exports to India had also grown significantly, having reached $45bn.

The key contributors were the energy basket comprising crude, gasRMB  and coal ($21bn), metals ($16bn), soft commodities such as cashew nuts, pulses ($8bn), and diamonds ($2bn).

"We anticipate continued growth in the Indo-Africa trade corridor, fueled by factors like rising populations, increasing consumer spending, and growing income levels across both regions," Sharma noted.

Despite the promising outlook, navigating the complexities of African markets came with inherent risks.

"We see three main challenges: political, economic, and operational risks. The continent's vastness, with 54 countries and varying credit ratings, presents a diverse risk environment. Businesses need to understand the importance of mitigating these risks.”

Commercial Banks and Export Credit Agencies (ECAs) who understand the African market well are able to facilitate various risk mitigation solutions which buyers and sellers on both side of the Indo Africa trade corridor can capitalize on.

“ECA’s like ECIC, India Exim, Exim bank Nigeria, ECGC, Coface, Sace to name but a few, are active across the world in supporting exporters and importers.

“In addition, commercial banks like RMB underwrite the trades and provide structured trade solutions which enable the corporates to sell more into Africa,” Sharma said.

Commercial banks typically also bank the buyers and offer a broader spectrum of financial solutions to the exporters and importers by offering local banking, trade finance and foreign currency solutions apart from risk mitigation.

With its deep understanding of the African market and a comprehensive suite of risk mitigation solutions, RMB is well-positioned to support businesses looking to thrive within the dynamic Indo-Africa trade corridor.

ENDS