Africa: A Potential Destination for Spanish Products

Africa: A Potential Destination for Spanish Products

This article aims to provide a general insight of the commercial exchanges’ background between Spain and Africa. On this purpose, we will display figures and charts which may enable us to understand the reasons behind the current context, we will also compare Africa with the rest of the world economic areas, as well as Spain with its neighboring countries, and we will try to forecast hypothetical trends for the long term.

To start with, in the recent years, Spain has experienced one of the most dramatic economic crisis in his history. On account of this context, Spanish products have seen themselves forced to explore new markets, apart from the existing ones.

If we analyze the historic background, Spain, due to its privileged geographical position, has always been regarded as the main bridge between Europe and Africa. Since the Arab occupation in 711 a.c., the Iberian Peninsula has been a key strategic location for commercial and cultural exchanges between both continents.

However, after the colonization and decolonization of Africa, due to the fact that Spain did not receive as much territory as other European countries, such as France, UK, Portugal, or Belgium, the Iberian Country lost several influence in the relationships with the continent, both political and commercial.

Nowadays, Spain has overturned this situation, as it has increasingly been gaining influence in the continent. Following with this, the Spanish export figures to Africa are remarkable in their growth rate and they are on their way of turning the continent into an engine of foreign trade, given its shown potential. So much so that, Spain is currently the 4th commercial partner in Africa, as well as the main partner of some African countries, highlighting Morocco and Algeria, and is addressing other important markets in the continent, such as Nigeria, South Africa, Angola, and so on.

Figures speak by themselves: in the last 15 years, exports from Spain to Africa have more than tripled. Except for the 2008-2010 period, coinciding with the hardest episode of economic recession in Spain, the growth rates have been impressive.

Chart1

Source: Eurostat; figures in USD million

Moreover, in 2014, among the top 10 destinations of Spanish Exports in the continent, there were five countries located in the Maghreb Region. What´s more, Algeria has recently surpassed South Africa, which, until last year, had been leading this ranking:

Chart2

Source: Eurostat; figures in USD million

Analyzing the ranking, it seems obvious that the Maghreb Region countries, due to their proximity, occupy the leading positions. On the other hand, if we break down each of the countries´ recent record, we can appreciate different tendencies, as each of them are involved in different contexts. For example, Libya has recently suffered from a civil war, which has paralyzed his economic development. Yet, all the top 10 countries have increased their purchases to Spain in the last 15 years, though at different levels.

Chart3

Source: Eurostat; figures in USD million

In the second place, if we check the origins of the sales, France was the principal exporter to the continent, recording 20% of the EU exports to Africa in 2014, whereas Spain, occupied the 4th position of the ranking with 12% of the exports.

Chart4

Source: Eurostat; figures in USD million

Once again, if we break down each of the countries´ recent record, we can notice how remarkably Spanish exports in the continent have grown compared to other countries, surpassing the United Kingdom and Netherlands. Also, France has been leading this ranking during this period, getting higher export figures than the rest of the EU members.

But, what is the magic force pushing this new trend? Experts agree that, it derives from the fact of the unstoppable growing medium class in Africa, matching the needs of internationalization of the Spanish Economy, what is actually allocating the Spanish goods in the respective African Markets.

There are other reasons upon the table: the improvement of the legal and political frameworks, allowing most of the African countries to benefit from more transparent, economically safer and less state-owned economies, is undoubtedly playing a positive role in their development.

However, despite what figures indicate, the relevance of Africa, among the different geographical areas, still remains low. Although, on the other hand, the share of Spanish exports in Africa has experienced a slight increase, compared to other economic regions worlwide. Besides, in 2014 the share of exports constituted 3.3%, whereas in 2000 they did not surpass 2.5%. In addition, this difference is more noticeable when looking at non-European exports, being an 11.5% in 2014 compared to a 9.4% in 2000.

Double

Source: Eurostat; figures in USD million

Africa has become the world’s third largest region by growing purchases from Spain, after the Middle East and Asia. Sub-Saharan Africa received more than a quarter of Spanish sales to the continent in 2012 and the first semester of 2013 received almost 23% more than in the same period of 2012.

As a matter of fact, Africa has recently surpassed Latin America (including Brazil) in total volume of exports. This is quite astonishing if we bear in mind the historic and cultural ties which have linked both locations for centuries.

Chart8

Source: Eurostat; figures in USD million

Regarding the composition of the Exports, Capital Goods are the main traded items. In contrast, during the last ten years, we have seen how other items have been increasingly wining more relevance, giving special emphasis on manufactured goods and energy products, which have seen their sales duplicated within this gap of time. This scenario implies a dynamic transformation of the African Economies.

last_graph

Source: Eurostat; figures in USD million

To conclude, this scenario is likely to continue in the short run, as a result of a combination of certain positive facts, which we will herewith break down:

• The positive macroeconomic perspectives forecasted in most of the African Countries, as a consequence of a progressive transformation to more industrialized and service oriented economies.
• The Spanish Economy, weighed down by the economic crisis, is giving signals of recovery.
• The previously mentioned growing class in Africa, accounting 400 million people in the recent years.
• The unstoppable progress of most of the African Countries towards more transparent and democratic societies.
• The willingness of Spanish companies to address unexplored markets.
• Economic Liberalization of certain African Countries, removing critical barriers such as import taxes.

Javier Solar Irazabal, Analyst @Infomineo. Know more about Javier