AfCFTA: A historic step toward African economic unity

BY VICTOR LIMAN AND ADE ADEFEKO

The African Continental Free Trade Agreement (AfCFTA) stands as one of the most ambitious economic projects in modern history. Signed in March 2018 in Kigali, Rwanda, and launched in January 2021, AfCFTA seeks to create a single African market for goods, services, and labor by eliminating trade barriers and fostering deeper economic integration among the continent’s 55 nations. If fully realized, this agreement could transform Africa’s economic landscape, unleashing the potential of its 1.4 billion people and $3.4 trillion combined GDP. However, while the vision of a borderless, economically unified Africa is inspiring, the challenges are as immense as the opportunities. To fully appreciate the stakes, it is essential to understand the historical context, baseline realities, and the transformative potential of AfCFTA. 

A Historical Quest for Pan-African Unity:
The AfCFTA is the culmination of decades of efforts to achieve Pan-African economic and political integration. Its roots can be traced back to the formation of the Organization of African Unity (OAU) in 1963, where newly independent African nations sought to forge solidarity in the face of colonial legacies. While the OAU primarily focused on political liberation, the establishment of its successor, the African Union (AU) in 2001, signaled a broader ambition to address the continent’s economic marginalization in the global order. Africa’s first substantive steps toward economic integration came through the creation of regional economic communities (RECs) such as the Economic Community of West African States (ECOWAS), the Southern African Development Community (SADC), and the East African Community (EAC). These RECs served as laboratories for cooperation, but their impact remained limited due to overlapping memberships, weak institutional capacity, and the dominance of national over regional interests. The idea of a continent- wide free trade area emerged as a logical next step. In 2012, the AU adopted the decision to establish AfCFTA, marking a bold departure from fragmented regionalism to a unified framework. It was a recognition that Africa’s fragmentation into 55 individual economies, with a patchwork of borders, tariffs, and trade regulations, hindered its development and limited its competitiveness in global markets.
Baseline Realities: Challenges and Opportunities

While AfCFTA offers immense promise, its implementation faces significant hurdles. These challenges arise from Africa’s structural economic weaknesses, the diversity of its economies, and the practical difficulties of harmonizing trade policies across such a vast and varied continent. Africa’s economy is characterized by fragmentation and dependence on external trade. Intra-African trade accounts for only about 17% of total trade, compared to 68% in Europe and 59% in Asia. This low level of intra-regional trade reflects Africa’s colonial history, where borders were designed to facilitate the export of raw materials to Europe rather than foster trade within the continent. Furthermore, Africa’s infrastructure deficits— particularly in transportation, energy, and digital connectivity—severely constrain trade. Poor road networks, inadequate ports, and limited access to electricity make it difficult for businesses to scale and compete. According to the African Development Bank, Africa’s annual infrastructure financing gap is estimated at $68–$108 billion, underscoring the scale of the challenge.

Diverse Economies and Trade Barriers:
Africa’s economies are highly diverse, ranging from resource-rich giants like Nigeria and South Africa to small island nations like Seychelles. These economies also differ significantly in terms of industrial capacity, export profiles, and levels of development. Harmonizing trade policies across such disparate contexts is a monumental task. Tariff barriers, non-tariff barriers (such as bureaucratic red tape and regulatory inconsistencies), and weak enforcement of existing trade agreements further complicate matters. While AfCFTA aims to reduce tariffs on 90% of goods over five years, the real challenge lies in addressing non-tariff barriers that undermine cross-border trade. Successful implementation of AfCFTA depends on the political will of member states to cede a degree of sovereignty for the greater good. Historically, African governments have been reluctant to prioritize regional commitments over national interests. Moreover, the institutions tasked with implementing AfCFTA, such as the AfCFTA Secretariat, will require significant resources, expertise, and authority to enforce compliance.

The Transformative Potential of AfCFTA :
Despite these challenges, AfCFTA has the potential to be a game-changer for Africa. By creating the largest free trade area in the world, encompassing 55 nations, the agreement could significantly boost economic growth, job creation, and poverty reduction. AfCFTA is expected to increase intra-African trade by more than 50% by 2030, according to the United Nations Economic Commission for Africa (UNECA). This increase in trade could spur industrialization by creating larger markets for African manufacturers. For example, a Nigerian garment producer could find new customers in Ethiopia, while a South African tech firm could expand its services to Kenya. Additionally, AfCFTA could help African countries move up the value chain by encouraging the production of finished goods rather than exporting raw materials. This would enable countries to capture a greater share of global trade and reduce their dependence on volatile commodity markets.

Investment and Innovation:

A unified African market would make the continent more attractive to investors, who often shy away from fragmented markets. With streamlined trade policies and reduced barriers, AfCFTA could unlock new investments in sectors such as manufacturing, technology, and agriculture. Furthermore, the agreement could drive innovation by fostering competition and encouraging collaboration among African businesses. A more integrated market would also enable startups and small businesses to scale, creating new opportunities for Africa’s burgeoning youth population.

Geopolitical Implications:
AfCFTA positions Africa as a more cohesive player in the global economy. By negotiating as a bloc, Africa could wield greater influence in international trade negotiations and push for fairer terms in areas such as agriculture, intellectual property, and climate finance. Moreover, AfCFTA strengthens Africa’s economic ties with itself, reducing its dependence on external powers and mitigating the risks of economic neocolonialism. To succeed, African nations must adopt a long-term perspective that prioritizes collective prosperity over short-term national gains. This requires significant investments in infrastructure, capacity building, and institutional strengthening. Governments must also address corruption and inefficiency, which remain major impediments to trade. Additionally, engaging the private sector and civil society is crucial.

Businesses must be equipped to take advantage of the opportunities offered by AfCFTA, while civil society organizations can play a role in ensuring transparency and accountability. AfCFTA is not merely a trade agreement—it is a bold vision for Africa’s future. It reflects a continent ready to reclaim its narrative and chart its destiny in the global economy. While the road ahead is fraught with challenges, the rewards of a unified, prosperous Africa are well worth the effort. If African leaders rise to the occasion, AfCFTA could become the cornerstone of a new era of economic self-reliance and global influence for the continent.

Liman was the former Chief Trade Negotiator of Nigeria, Acting Director General, Nigerian Office for Trade Negotiations; the Head and Commissioner, Nigeria Regional Investment and Trade Office, Shanghai-China. [email protected]

Adefeko is director of corporate and regulatory affairs at Olam Agri, chairman of the Industrial Group, Lagos Chamber of Commerce and Industry (LCCI), and honorary consul of Botswana in Lagos. [email protected]