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Intra-African trade has been growing, especially with the push from the African Continental Free Trade Area (AfCFTA) which was operationalized in January 2021. Prior to the implementation of the AfCFTA, total formal trade within the continent totaled between 12-18 percent. Since its enactment, intracontinental trade has noticeably increased. This upswing in activity presents a unique opportunity to further leverage the potential of regional markets to drive sustainable development and economic prosperity.
In the evolving context of intra-African trade, significant progress has been made in creating a more integrated and sustainable economic environment across the continent. The 2030 Agenda for Sustainable Development recognizes international trade as “an engine for inclusive economic growth and poverty reduction, and contributes to the promotion of sustainable development.”
International trade promotes efficient resource allocation and sustainability by enhancing productivity and welfare. It is governed by various policies and instruments, including non-tariff measures, technical barriers to trade, and sanitary and phytosanitary measures. Moreover, Voluntary Sustainability Standards have emerged as effective market-based tools to address sustainability challenges, ensuring that trade growth aligns with environmental and social benchmarks.
Driven by the AfCFTA, intra-African trade offers considerable opportunities for continent-wide sustainable development. By promoting increased trade connectivity, Africa can foster sustained, inclusive economic growth (SDG 8), thereby creating job opportunities and building more resilient economic structures. This growth in trade connectivity naturally extends to fostering industrialization and innovation (SDG 9), which is pivotal for sustainable and inclusive industrial development. Moreover, such interconnected trade and industrial growth contribute to stabilizing food prices and improving food security (SDG 2), illustrating the broad benefits of enhanced intra-African trade.
This economic expansion not only spurs industrial and agricultural growth but also sets the stage for significant environmental gains. By fostering an interconnected market, the AfCFTA enhances economic resilience while also promoting ecological sustainability, matching economic activities with climate action (SDG 13). This integrated approach is crucial for constructing a sustainable future where economic growth and environmental health are mutually reinforcing.
To unlock these benefits, African countries must persist in reducing trade barriers, enhancing logistical and regulatory frameworks, and investing in infrastructural connectivity. Strengthening economic cooperation and integration will lead to a more prosperous Africa and ensure that the continent plays a significant role in the global economy as a competitive, innovative, and sustainable region.
The AfCFTA offers an outstanding opportunity to boost trade in Africa while also advancing sustainable economic practices. The AfCFTA, a flagship project of Agenda 2063, which emphasizes the development of “environmentally sustainable and climate resilient economies and communities,” can be leveraged to promote investment in green sectors and the development of green investment standards. In accordance with this goal, the African Trade Policy Centre, a unit of the Economic Commission for Africa, conducted the first ever Strategic Environmental Assessment of the AfCFTA to guide on how to incorporate environmental considerations into negotiations for phases two (investment, competition policy, and intellectual property rights) and three (e-commerce) of the agreement.
While the AfCFTA agreement currently lacks specific provisions on climate change and green energy, it offers the flexibility to incorporate such measures in the future, as outlined in Article 23, thereby providing a framework for the potential inclusion of environmental concerns as necessitated by the member states. Moreover, the AfCFTA already has provisions to facilitate the production of environmentally friendly goods, harmonize and strengthen environmental standards, incentivize green technologies, and promote sustainable investments.
Since its launch, the AfCFTA has demonstrated significant progress, characterized by successful trading stories and encouraging statistical evidence. The Guided Trade Initiative, initiated by the AfCFTA Secretariat in October 2022 with seven countries, has expanded as of October 2024 to include 37 of the 54 member countries, marking a new era of commercially-meaningful trading under AfCFTA rules.
One notable example is South Africa’s inaugural shipment to Kenya under the AfCFTA, which included refrigerators, machinery, and agricultural products, symbolizing a crucial step in regional trade dynamics. Similarly, Rwanda and Tanzania have shown how value addition can reshape trade patterns. Rwanda began trade with Ghana by exporting packaged coffee and has since diversified their shipments to include tea, avocado oil, and honey. Tanzania has successfully traded coffee with Algeria and sisal fiber to Nigeria, moving beyond raw commodity exports to more processed and market-ready products. Nigeria’s inaugural consignments under the AfCFTA regime also included high-technology content products such as cables and smart cards to Egypt, Algeria, Uganda, Cameroon, and Kenya.
The effectiveness of the AfCFTA is also reflected in robust trade figures. According to the Afrexim bank’s Africa Trade Report 2024, intra-African trade rose to USD 192.2 billion in 2023, a 3.2 percent increase from the previous year. This growth increased the share of formal intra-African trade from 13.6 percent in 2022 to 14.9 percent in 2023, despite global economic challenges. Further, the United Nations Economic Commission for Africa projects a 35 percent increase in intra-African trade by 2045, following the full implementation of the AfCFTA.
The AfCFTA is not only increasing trade volumes but also promoting structural economic diversification across Africa. The agreement was designed to steer economies away from reliance on commodity exports and towards a future focused on manufacturing and value-added industries. While there has been some success in this regard, the expected diversification has been slow to materialize. This shift is crucial to achieve sustainable economic development.
The initiative’s inclusivity is another critical aspect. Small and medium-sized enterprises, including those led by women, are finding new opportunities through the AfCFTA. Recent negotiations have led to a substantial draft of the Women and Youth Protocol of the AfCFTA designed to address challenges specific to these demographics, the first regional free trade agreement to embark on the creation of such protocols. However, at this time, provisions for non-compliance with these protocols have yet to be negotiated.
Moreover, the AfCFTA is poised to make a substantial impact on poverty reduction. The World Bank forecasts that the initiative will lift at least 50 million Africans out of extreme poverty by 2035, a significant milestone considering the continent’s broader challenges with poverty. This effort marks the beginning of a transformative journey towards greater economic resilience and prosperity.
As these developments unfold, the AfCFTA continues to affirm its crucial role in fostering a more integrated, prosperous, and sustainable economic landscape across Africa.
To enhance the effectiveness of the AfCFTA, member states should adopt a triple helix model, which integrates government, industry, and academia to foster innovation and economic development. This collaborative approach will align the objectives of all three sectors towards enhancing trade capabilities, developing sector-specific technologies, and addressing continental challenges.
Governments need to implement policies that promote cooperation across these spheres, such as offering tax incentives for R&D, providing grants for joint projects, and facilitating the commercialization of academic research. By implementing this model within the AfCFTA framework, a dynamic ecosystem for innovation can be created, supporting the agreement’s goals and propelling Africa toward greater economic integration.
Addressing current limitations and building on successes requires significantly more investment in cross-border infrastructure to ease trade. Achieving deeper integration also demands strong political commitment from all member states, which can be challenging due to diverse national interests and political environments. This holistic approach can effectively tackle complex, multi-sectoral challenges through coordinated efforts and innovative solutions, crucial for the continent’s economic progression.
With concerted efforts and sustained commitment to advancing the AfCFTA, Africa has the opportunity not only to accelerate its progress towards the SDGs by 2030 but to establish a sustainable economic foundation for future generations. Indeed, the integration of economic growth with sustainable practices underscores the transformative potential of the AfCFTA, setting a path for a sustainable and prosperous African continent.
Wamkele Mene is the Secretary-General – African Continental Free Trade Area Secretariat.
Contributed by WamkeleMene
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