The expansion of global trade over the last 50 years has created industries, jobs and value on an unprecedented scale, driving innovation and technological advances and in the process, benefitting most of the countries, most of the time.

“While this growth has not been even, much can be done to ensure that future growth continues to support economic development,” says Vinod Madhavan head of transactional products and services for Africa at Standard Bank.

Global and cross-border trade is the fastest contributor to growth, supports domestic trade, small and medium enterprise formation and job creation. This has been especially evident in emerging markets over the last 30 years.

However, the growing trend towards de-globalisation in some developed markets, driven through concerns around job-losses due to automation and de-industrialisation, is resulting in an increasingly negative reputation for trade.  In contrast though, the opportunity that trade presents for markets in Africa is potentially game-changing.

“Africa could increase its intra- Africa trade three fold and still not match Asia’s level of internal trade. In Asia, trade – and exports – have been central to the regions exponential growth, lifestyle improvements and stability of last 30 years,” explains Mr Madhavan.

Looking into the future, Africa is expected to grow as the second fastest growing region in the world over the next 4 years returning growth rates between 4 and 5 percent. As intra-African trade grows, this will drive even more growth and job creation on the continent. While the value of trade in Africa dipped in 2016 - tracking recent historically low commodity prices - the volume of trade trended upwards. This points to the depth, spread and longevity of trade and trade opportunity – beyond just commodities – in Africa. 

“As commodities rebound, 2017 is expected to set new records in the volume and value of African trade,” says Mr Madhavan, “however, the point is not to get side-tracked by some of the current headwinds.”

Africa’s current headwinds are certainly real. There has been debt default in Mozambique, local currencies are losing value, US dollar and other hard currencies remains scarce within key economies, legislators do not always adopt the most efficient policies, political risks are real, and there have been over 10 bank defaults in a number of countries, in the near past.

“Despite the defaults seen over the last year, we are seeing greater accountability and transparency in the banking system across markets which provide a level of comfort for investors,” says Mr Madhavan. Perception however, remains key in Africa.

While Africa exhibits many of the risks endemic to emerging markets generally, “the concerns around operating in Africa are often much higher,” says Mr Madhavan. This is where banks like Standard Bank have a critical role to play, to reduce the perception gap that can materially affect people’s lives by diminishing the continent’s ability to trade.

Negative perceptions of trade can reduce the funding available for trade finance, widening the gap between the need for trade finance and the funding available. This is a characteristic of many emerging markets and acts to retard the positive effects of trade-fuelled growth, reducing the number of jobs created along with the development revenue generated.

“As an African bank, we need to be clear on how we help our client manage risk, by helping clients understand the headwinds in the right context and then delivering the solutions that mitigate such headwinds,” says Mr Madhavan. “Beyond managing risk, we work across all our markets in Africa to create an environment that allows people in Africa to do business within and between countries - as well as for people across the world to do business with Africa.”

Something as simple as a letter of credit enables a trade where one was not possible before. Every trade generates at least two jobs – one on either side of the letter of credit. Most trades generate many more.

Mr Madhavan expects 2017 to be the year that Africa recognises the huge opportunity available to the continent in driving regional and global trade. 

While Standard Bank provides its clients with the tools and systems to conduct efficient trade on the continent, the bank also supports the evolution of new fintech applications aimed at improving the cost-effectiveness, speed and ease of trade in Africa.

Africa’s financial services industry is rich and varied. It is rich in the sense that in South Africa, for example, you have a financial services sector that leads even countries such as the United Kingdom, Germany and France in the Financial Market Development pillar of the Global Competitiveness Index (as mentioned in the World Economic Forum Global Competitiveness Report 2016-2017). It is varied since at the same time, in some African markets, legislators grant certain licences to corporates, that can only be used in a specific branch of a bank.

“This combination of world-leading expertise and capability, with untold opportunity for growth, defines the continent as a hot bed for innovation,” says Mr Madhavan. 

By 2019, Mr Madhavan expects to see an indigenous technology that will support intra-regional trade in Africa, “probably designed by a tech start up in Cape Town or Nairobi, transforming the way cross-border and global trade happens in Africa.”

This kind of original technology that helps reduce friction in cross-border trade, could ensure that Africa benefits practically from the World Trade Organisation’s recent global trade treaty that is expected to boost global exports by US$ 1 trillion, “as we develop the mind-set, clear policy commitment to multilateral trade, and the platforms, to drive African development through trade-led growth,” says Mr Madhavan.