Africa is home to the world’s largest free trade agreement by number of countries, territory, and population – the African Continental Free Trade Area (AfCFTA). Fifty-four of the 55 African Union member countries have signed the agreement, which covers a market of 1.3 billion people and a combined GDP of $3.4 trillion. Despite its vast potential, the implementation of AfCFTA has been slower than anticipated since its establishment in February 2020.
The agreement is aimed at boosting economic growth, intra-African trade, and investment, but the continent continues to trade more with the rest of the world than within itself. According to the Economic Commission for Africa, factors such as inadequate infrastructure, lack of finance, and weak governance are hindering progress.
This week, leaders from both the public and private sectors will convene in Kigali, Rwanda, for Biashara Afrika, the second edition of the AfCFTA Business Forum, to address the challenges and opportunities within the free trade area. Ahead of the event, Wamkele Mene, Secretary General of AfCFTA, discussed the current state of the trade area and the efforts needed to overcome these barriers.
Reflecting on his tenure as Secretary General, Mene described the task of harmonising standards across Africa’s 47 state parties as daunting. The continent’s market is highly fragmented, with 42 different currencies, diverse GDP levels ranging from $110 to $25,000 per capita, and varying macroeconomic policies across the member states. Integrating such a market to create a single trading bloc, he says, presents “incredibly difficult” challenges.
AfCFTA, which was launched in the midst of the COVID-19 pandemic in February 2020, encountered immediate obstacles. Lockdowns across Africa resulted in the closure of borders and airports, effectively paralysing trade for much of 2020. However, Mene emphasised that significant progress has been made. All legal protocols have now been concluded, including complex areas such as digital trade, rules of origin for key sectors like textiles and automotive, and the creation of a dispute settlement mechanism for the 47 trading nations.
While progress on the ground has been slow, Mene noted that the implementation is underway. In 2022, seven countries were the first to adopt AfCFTA’s customs systems and integrate the agreement into national law. This October, 37 countries will have reached similar levels of readiness, demonstrating their ability to trade under AfCFTA rules and preferences. Despite scepticism, Mene is optimistic about the future.
Private sector leaders have voiced concerns about the tangible impact of AfCFTA. Many believe the trade area has yet to deliver meaningful benefits, and some argue it is not working as intended. Mene acknowledges their frustration but cautions that overcoming decades of market fragmentation will not happen overnight. He compares Africa’s efforts to the European Union, which remains a work in progress 31 years after its establishment.
One persistent obstacle to intra-African trade is the difficulty of movement across borders. Aliko Dangote, Africa’s richest man, famously stated that he needs 35 visas to travel across the continent, underscoring the challenges of cross-border business. Mene conceded that only four countries have ratified the African Union’s protocol on the movement of persons, a key component in facilitating trade. While some countries have legitimate national security concerns, Mene stressed the need for progress on this front.
Infrastructure is another critical issue. Africa’s vast distances and inadequate transport networks severely hamper trade. Mene highlighted the importance of world-class infrastructure, such as the Lobito Corridor, a railway project connecting Angola, Zambia, and the Democratic Republic of Congo. Improved infrastructure, alongside trade-supporting corridors, will be essential for boosting intra-African trade.
Looking ahead, Mene is cautiously optimistic. He believes that within five years, intra-African trade could double, increasing from 15% to as much as 30%. This growth, however, hinges on several factors, including the introduction of tools to facilitate intra-Africa payments and significant improvements in trade infrastructure. Political will and continued commitment to the rules and agreements that underpin the free trade area will also be crucial.
AfCFTA has already defied sceptics at several stages. Critics initially doubted whether the agreement would ever be signed, ratified, or implemented. Yet, it was signed in 2018, ratified in 2019, and this year, 37 countries will showcase their readiness to trade under its terms. Mene is confident that AfCFTA will continue to meet each challenge, moving the continent closer to the dream of a fully integrated market.
