Practical strategies for overcoming challenges such as regulatory complexities, currency volatility, and logistics hurdles are key to ensure businesses can expand internationally. Bolaji Sofoluwe, Managing Director of ETK Group joins CNBC Africa for more on the evolving landscape of global trade, key trends and opportunities shaping cross-border commerce this year.
Practical strategies for overcoming challenges such as regulatory complexities, currency volatility, and logistics hurdles are key to ensure businesses can expand internationally. Bolaji Sofoluwe, Managing Director of ETK Group joins me now for more on the evolving landscape of global trade, key trends and opportunities shaping cross-border commerce this year. Thank you so much, Bolaji. Great to have you on the show with us. Lovely to be here. Let's get right to it. Let's start with, just quickly wrap up 2024, how would you describe the global trade landscape, perhaps even in one word? Just volatile. Volatile. Well, I think, obviously, I know a lot of businesses will agree with that. And it would appear that, I mean, from analyses that we've spoken to, we can expect a lot of that, some of that volatility to continue this year. But let's talk about the key trends to expect, you know, from the global trade landscape that you've seen. So several people have been speculating about this, what this year will be, particularly with the change in administration in the US. As you know, last year was the biggest election year in history, for a really long time anyway. And we saw several changes in government across the world. And so this means there have been several changes in economic policy, particularly monetary and fiscal policy. And you've started to see quite a change in government's attitude towards trade, cross-border trade, and economic development. So I'm expecting that this year, what we will see is quite a bit more protectionist attitude from certain markets. But I think that that would ease as the year goes on, and we start to actually see what all of these governments are beginning to put in place. Right. And for African SMEs, we have the African continental free trade area here, still in motion. I mean, we would have loved to see more progress, but, you know, progress is happening all the same. But talk to us about what businesses or what opportunities SMEs can or should can take advantage of this year, and also how they should be positioning themselves for growth. Well, what was interesting was that last year we saw cross-border trade in Africa, specifically, expand by 3.2%. So you're starting to see an enthusiasm around trading across borders with African businesses. As we start to see those protocols aligned and confirmed and ratified for the Africa free continental free trade area, you're starting to see some confidence in even smaller businesses. Normally, what happens when you see trade blocks come together is that you have the larger businesses that have the risk mitigation and capabilities put in place strategies to expand. But what you're actually seeing that it's the mid and small and micro businesses that are starting to expand. So I expect to see a lot more of that. 192 billion last year, might be more this year. Right. Well, that's interesting. But for challenges, the headwinds for some of these businesses, while they're trying to take advantage and expand and grow, regulatory uncertainties, there's currency volatilities. I know that the African payment, the, what was it? The Pan-African payment system, PAPS, that is ongoing. And that has been a huge advantage for many of these companies. But talk to us about how this, we can also ensure that this gives the businesses benefit even more this year. And would you say that there is broad buy-in? I think there is. And I think, you know, more and more businesses are beginning to see the advantages of systems like PAPS. Obviously, there's a reliance on, you know, dollar-based transactions because of the reliability and the value of the dollar. But as we're starting to see an exchange of local currencies across the continent, I think people are beginning to see that there's an added advantage of trading with each other. And I think businesses need to strategically position themselves to consolidate, to partner, to joint venture with companies in other markets. We're already seeing it with companies like AFRICEL, you know, penetrating new markets, or even our own Axis Bank here in Nigeria, sort of acquiring standard charters, assets across the continent. We're starting to see that sort of, you know, audacity. And I think, you know, I hope that it would increase over the year because South Africa was responsible for 41.4% of cross-border trade last year. And the whole of West Africa, only 25%. So hopefully these countries can catch up and we start to see that those numbers balance a little bit more. What would it take to catch up? Because these numbers have been, yes, you're growing, you know, on an annual basis, but the pace could be faster. So, but what else can these businesses do? What needs to happen for the pace to pick up? I think a lot of these businesses are facing wicked problems. And these wicked problems have come from, you know, the endemic corruption and all the infrastructure challenges, whether that's soft or hard infrastructure over the years. And so there's a lack of trust and buy-in to the, you know, the rhetoric that's going out there around intercontinental trade. So I think that's the first thing that needs to happen. There almost needs to be a campaign, if you like, of education and trust building by governments across the continent in order for these businesses to actually start to strategize intentionally. Because a lot of the trade that goes on at the moment is almost accidental. And as a result of having people that they know in other markets that are requesting their products, and not necessarily because they've intentionally sat down to plan it. Well, that is interesting. But let's talk about, I mean, the ETK group. Talk to us about the deals and deals on the table, transactions, kind of volumes you're looking to do this year. Well, you know, we get more and more ambitious every year. I'm sure you do. Last year, we were involved in projects to the tune of 250 million. We're hoping that we can up that a little bit by maybe 20% this year, because we're ambitious that way. And I think we can say that because we're looking at some infrastructure projects, you know. I was going to ask about the sales. Are you targeting specific sectors? Well, healthcare and agriculture are huge for us at the moment, particularly agriculture. Because obviously, there's a demand for agricultural commodities around the world, obviously, with everything happening with the Ukraine war and what's happened in the Middle East. There's been certain shocks in that sector. But now is the time for African companies to take advantage of that. And so I think that there will be some enthusiasm and optimism in some boardrooms around, you know, how they can potentially make the best use of what's gone on last year to expand their businesses this year. Well, we've talked about risks, shocks. For you, what would be the biggest risk, what would be the biggest shock to the landscape global trade? I think if the tariff that would be promised by the new administration in the US actually kick in, particularly 60% tariffs on China, you're going to see a trans-Pacific trade issue. You're going to see a nosedive in that. And I think that's going to affect prices universally because that's their cash cow. And you're going to see the shipping industry, shipping and logistics industry, you know, terribly affected, which will also drive prices up. So that might actually cause some shocks around the world when it comes to moving goods and services across borders. So I think that's the biggest risk that needs mitigating. But like I was saying earlier, one of the things that you need to be prepared for is the unexpected. So if you're prepared for the tumultuous and volatile nature of what can be US policy, then you can plan in advance. Right. Thank you so much, Balaji. I appreciate your time on the show today. Thank you for talking to us. Thank you for having me. Balaji Shifoli, we're managing director, ETK Group, looking at, of course, the global trade and cross-border trade landscape in 2025.
Theme: Navigating challenges and opportunities in the evolving global trade landscape in 2025
The year 2024 was described as volatile in the global trade landscape, with businesses facing challenges such as regulatory complexities, currency volatility, and logistics hurdles. Bolaji Sofoluwe, the Managing Director of ETK Group, shared insights on the key trends and opportunities shaping cross-border commerce this year. With changes in government policies and attitudes towards trade, Sofoluwe mentioned an expected shift towards protectionism in some markets, followed by an easing as governments implement new strategies. African SMEs have seen a 3.2% increase in cross-border trade, showing a growing enthusiasm for trading across borders. The African Continental Free Trade Area (AfCFTA) has provided opportunities for businesses to expand, with mid, small, and micro businesses leading the way. Regulatory uncertainties and currency volatilities present challenges for businesses, but systems like the Pan-African Payment System (PAPS) offer advantages for trading with local currencies. Strategic partnerships and joint ventures with companies in other markets are becoming more common to foster growth. However, businesses in some regions face wicked problems such as corruption and infrastructure challenges, requiring campaigns for education and trust-building to promote intentional trade strategies. The ETK Group is ambitious about their projects this year, with a focus on infrastructure, healthcare, and agriculture sectors. Sofoluwe highlighted the importance of African companies seizing the opportunity in the agriculture sector due to global demand for agricultural commodities. The biggest risk to the global trade landscape, according to Sofoluwe, would be the implementation of high tariffs by the new US administration, particularly on China. This could lead to disruptions in trans-Pacific trade, impacting prices and the shipping industry. Despite potential shocks, being prepared for volatility and planning in advance can help mitigate risks in the evolving global trade landscape.
"If the tariff that would be promised by the new administration in the US actually kick in, particularly 60% tariffs on China, you're going to see a trans-Pacific trade issue. You're going to see a nosedive in that. And I think that's going to affect prices universally because that's their cash cow."
global trade, cross-border trade, 2025, regulatory complexities, currency volatility, logistics hurdles, African SMEs, AfCFTA, Pan-African Payment System, strategic partnerships, infrastructure projects, healthcare, agriculture, US tariffs, shipping industry, risk mitigation