In theory, Africa is creating the world’s largest free trade area. In practice, progress has been slow and it will be a long time before even limited benefits are realised.
This assessment comes from FairPlay founder Francois Baird, in an article published by Geopolitical Intelligence Services (GIS). Baird is an Africa expert for GIS, which provides insights to help companies identify risks and opportunities in the global landscape.
The Africa Continental Free Trade Agreement (AfCFTA) officially entered into force in 2019. It seeks to facilitate intra-African trade and enhance the continent’s global economic position. Its 55 member states have a cumulative gross domestic product of about $3.4billion and some 1.3 billion people.
Full implementation of the agreement, including reducing tariffs and eliminating red tape, will take years, Baird writes. Successful implementation is predicated on member states overcoming numerous obstacles beyond mere political differences, economic vested interests and bureaucratic red tape.
Baird highlights Africa’s geographical barriers that complicate trade logistics and hinder the seamless movement of goods both across land borders and from inland to Atlantic and Indian Ocean ports.
Africa’s rivers are often unsuitable for year-round navigation or only partially navigable. Rail is the next cheapest mode for transporting goods, but African cargo is still transported on poorly maintained roads due to inadequate rail networks.
“Transportation poses a greater challenge for African trade than tariffs and duties,” Baird says.
“Cross-border road transport in Africa is not only inherently more expensive than river transport but also susceptible to border delays and bribery, effectively creating an unofficial toll on transported goods.”
Despite these difficulties, progress is being made, and there is a growing focus on institutional development in Africa, largely driven by AfCFTA.
“International development finance institutions are addressing Africa’s trade finance gap by increasing lending and offering alternative financial products. Afreximbank plans to double its funding for intra-African trade to $40 billion by 2026.”
Baird says the biggest advantage of AfCFTA is that it shines a light on the most formidable hurdles to African trade and competitiveness.
“Its real benefit lies in addressing these problems rather than merely reducing duties.”
In his view, it is unlikely that all African governments will enthusiastically embrace free trade in the next 15 years, or implement the necessary reforms.
A more likely scenario is that smaller countries will drive a broader shift towards trade-driven growth.
“Smaller African nations are increasingly positioning themselves for increased trade by implementing regulatory reforms, investing in education and enhancing both rail and digital infrastructure. They are also strengthening institutions to combat corruption, improve safety and security while protecting property and intellectual rights,” Baird says.
