Africa’s External Sector
By Alexander Ligai and Sebastian Krantz
2022-12-13
This datastory provides an overview of Africa’s external positions
and flows with the rest of the world, as recorded in the current account
and international investment position, including detailed analysis of
trade flows, international reserves, and external debt.
Current Accounts
Africa’s current account deficit had been widening since 2004,
primarily driven by South Africa, and by Algeria and Egypt from 2014.
The chart below shows country-level breakdowns of the current account
balance as a percentage to GDP, averaged since 2010. Many countries
current accounts are driven by the goods and services trade balance.
Trade in Goods
Africa maintained a positive trade balance with the rest of the world between 2000 and 2013, but the balance has turned negative since then - up to the recently.
This is particularly accounted for by Eastern and Northern Africa.
The deterioration of trade balances is mostly due to increased trade
with emerging markets and developing economies, particularly in Asia and
the Middle East.
In the middle of the 2010’s, Asia overtook the EU as Africa’s largest
trading partner region. Inner-African trade is also on the rise, and is
expected to rise further with the implementation of AfCFTA (See also a
recent IfW
study on the potential effects of AfCFTA).
African Trade with the EU
The figure below shows the composition of EU-Africa trade in 2020. The largest African trading partners for the EU are South Africa, Morocco, Nigeria, Algeria, Tunisia and Egypt.
Africa has a positive trade balance with Spain, Italy and The
Netherlands, and a negative one with France and Germany.
EU exports to Africa peaked in April 2013, and have been quite steady
in nominal terms since then, indicating a real decline in the volume.
North Africa accounts for more than 50% of EU exports to Africa.
France and Germany are the largest EU exporters to Africa.
African Imports from Selected Countries
Imports from China 30 years ago were much smaller than from other
countries in consideration, however, it has been growing rapidly since
the early 2000’s, and today African imports from China significantly
exceed the continents imports from developed economies like the USA,
France or Germany.
The tabs below give detailed overviews of African imports from the 4
largest trading partners: Germany, France, China and the Unites States.
Germany
Germany exports to North Africa, but also significant volumes to South Africa.
France
France mostly exports to North Africa.
China
United States
Product-Level Trade
African exports are dominated by commodities and raw materials.
Exports to the EU also include processed food, as well as vehicles,
aircraft, vessels and machinery, appliances, electrical equipment.
Vehicles, aircraft and vessels exports are dominated by trade with
Germany.
Product-Level Exports 
The distribution of African imports across sectors looks similar
compared to its exports, which suggests that most bilateral trade
between African countries and its partners occurs within the same
industry. However Africa imports greater amounts of machinery,
appliances and electrical equipment, and chemical products than it
exports.
Product-Level Imports 
Remittances
Remittances are an important source of Gross National Disposable
Income (GNDI) for many African economies, fuelled by large diasporas in
Europe, the Unites States, but also increasingly the Middle east and
Asia. Personal remittances received have been steadily growing,
especially in the Western and Northern Africa regions.
Per-capita remittances received are significantly higher in Northern
Africa compared to other parts of Africa.
For about 40% of the African countries, per capita remittances
received exceed 50 US dollars annually.
International Reserves
Data on international reserves is available only for some countries
and some periods. Charts in this section are based on the latest
available since 2010 (most data is from 2020 or 2021).
To give some perspective about “sufficiency” of the reserves, a few simple, but widely-used measures of the adequacy of the international reserves are presented.
More than two-thirds of the countries on the following chart possess
reserves sufficient to cover three months of imports.
Another indicator of reserves sufficiency is that its amount should
cover a countries short-term debt. The ratio of short-term debt to Total
International Reserves is less than 100% for most of the countries,
except Tunisia, Sudan and Zimbabwe.
The ratio of total reserves to broad money, which represents resident
capital flight risk, is higher than the typical benchmark of 20% for
most countries.
International Investment Position
The net international investment position (NIIP) is shown below.
Creditor nations are Mauritius, Botswana, South Africa, Eswatini and
Algeria, countries with relatively high GDP per capita. Except for a few
countries, the NIIP has deteriorated over the last years if compared to
its median values.
From the following chart it can be seen that for most of the
countries foreign direct investment contributes to a major part of their
external liabilities.
External Debt
External debt is a vital source of development finance for many
African countries, but also poses greater exchange rate and rollover
risk than domestic debt.
External Debt Stocks
Over the last decade countries in Africa have been mostly
accumulating external debt both in absolute value, and relative to gross
national income (GNI).
A majority of countries are exposed to long-term obligations, except
for such countries like Algeria, Somalia, Mauritius and Zimbabwe, whose
short-term debt share is larger than 30% of total external debt.
Below, information about long-term external debt is provided by its
debtors. Most external debt is public or publicly guaranteed debt to
private creditors, but in some countries like Mauritius, Zambia, and
Nigeria, more than 50% of external debt is nonguaranteed debt with
private creditors.
For some African countries, private sector external debt data is not
available, and therefore only public sector debt is reported. Public
debt includes debt created by national government, public enterprises
and private debtors guaranteed for repayment by a public entity.
External Debt Service
External debt service measures the annual external debt related
payments made by countries. Mauritius and Angola faced high external
debt burdens, with payments exceeding 10% of GNI annually. For most
other African countries, the average debt service since 2010 remained
well below 5% of GNI, but this must be closely monitored (e.g. with the
Africamonitor Dashboard) as external debt stocks continue to rise.
Debt service relative is also frequently expressed as a share of exports of goods, services and primary income. Also here the ratio, averaged from 2010, was high for certain countries such as Mauritius, Angola, and Zimbabwe, but remained moderate to low for other African economies.