The African Union (AU) is witnessing significant transformations in its market dynamics, driven by initiatives like the African Continental Free Trade Area (AfCFTA). This overview delves into the current state of the AU market, highlighting key trends, opportunities, and challenges in the context of intra-African trade and sustainable development.
The Africa Governance Report 2025 (AGR25) is the fourth report produced by the African Peer Review Mechanism (APRM) on behalf of the African Governance Architecture (AGA). The African Union Convention on Ending Violence Against Women and Girls (AUCEVAWG) is a comprehensive legal instrument for the prevention and elimination of all forms of violence against women and girls on the Continent. The Convention was adopted during the 38th Ordinary Session of the Assembly of Heads of State and Government in February 2025.
Operationalisation of the African Continental Free Trade Area (AfCFTA) ENGLISH
The Rise of Intra-African Trade
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. 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%. Since its enactment, intracontinental trade has noticeably increased.
Driven by the AfCFTA, intra-African trade offers considerable opportunities for continentwide 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. By fostering an interconnected market, the AfCFTA enhances economic resilience while also promoting ecological sustainability, matching economic activities with climate action (SDG 13).
To unlock these benefits, African countries must persist in reducing trade barriers, enhancing logistical and regulatory frameworks, and investing in infrastructural connectivity. The AfCFTA offers an outstanding opportunity to boost trade in Africa while also advancing sustainable economic practices. 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.
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Key Features and Implementation of AfCFTA
The AfCFTA is the world’s largest free trade area, bringing together 54 countries, a population of 1.3 billion, and a combined GDP of US$3.4 trillion. Before AfCFTA’s launch, intra-African trade was just 16% of total trade, compared to 59% in Asia and 68% in Europe. This was largely due to non-tariff barriers, poor logistics infrastructure, multiple currencies, and fragmented standards.
Since its adoption in 2018 and operational launch in 2021, the AfCFTA has been implemented in phases. Phase I covers trade in goods and services, and dispute settlement protocols. Phase II extends to investment, competition, intellectual property, digital trade, and women and youth protocols. A key feature of the agreement is tariff liberalisation: Ninety per cent of tariff lines are to be liberalised over 5 to 10 years, with a further 7% considered “sensitive” products and liberalised over 10 to 13 years, and a 3% cap on “excluded” tariff lines.
Impact and Growth Statistics
Since AfCFTA trading started in 2021, there has been more trade between countries, some new investments, and growth in sectors such as automotive manufacturing, pharmaceuticals, and digital services. Some jobs have been created, and a few countries expanded social protections. However, progress varies. Trade unions are raising crucial questions: Who benefits from this trade? Are the gains being fairly distributed? Are workers seeing the gains?
Intra-African trade grew from US$69 billion in 2019 to US$81 billion in 2023. After the pandemic-induced dip, the growth rate rebounded to 7.2% in 2022. Top traded goods in 2022 included minerals (21%), machinery (15%), and agri-food products (14%). Customs clearance times along key corridors, such as Tema-Abidjan, have dropped from 12 hours to 9.5 hours. More than half of the 220 non-tariff barrier complaints logged through AfCFTA’s platform were resolved, with an average resolution time of 39 days.
AfCFTA-linked trade added an estimated 0.5 percentage points to Africa’s Growth Domestic Product (GDP) growth in 2022. The United Nations Economic Commission for Africa projects a cumulative GDP gain of US$450 billion by 2035 due to the agreement. Foreign direct investment inflows into AfCFTA member states rose by 17% between 2021 and 2023.
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The agreement has been linked to the creation of 2.3 million net new formal and informal jobs across 25 African countries between 2021 and 2024, with youth employment shares rising by 1.8 percentage points in countries participating in the Guided Trade Initiative. Seven countries have introduced new wage-setting frameworks tied to productivity. Trade-linked fiscal space enabled Rwanda and Senegal to expand health insurance to 68 % and 62 % of the population, respectively. Still, worker rights remain precarious. The 2024 ITUC Rights Index found that 11 countries offered no guarantees of fundamental labour rights.
Intra-African trade could double to represent one-third of the continent’s total trade. Africa’s middle class is projected to grow to 390 million people. Digital trade is expected to surpass US$180 billion, with fintech and e-logistics as major drivers.
Success Stories and Examples
Since its launch, the AfCFTA has demonstrated significant progress, characterized by successful trading stories and encouraging statistical evidence. 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.
The effectiveness of the AfCFTA is also reflected in robust trade figures. 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. 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. Moreover, the AfCFTA is poised to make a substantial impact on poverty reduction.
Challenges and the Way Forward
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. 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.
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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. 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.
South Africa: A Key Player in the African Market
South Africa is the most advanced, diversified, and productive economy in Africa. The country has a population of over 60 million, covers 1.22 million square kilometers, and is the world’s largest producer of platinum, vanadium, chromium, and manganese. South Africa has enjoyed relative macroeconomic stability but is struggling to recover from the COVID-19 pandemic, July 2021 riots, floods in three provinces and a precarious electricity supply situation.
The Covid-19 pandemic led to a 7 percent contraction to $302 billion in 2020, a 13.1 percent decline from 2019. The Gross Domestic Product (GDP) amounted to $ 405.87 billion in 2022, with the economy expanding by 2%, (GDP US $ values are not purchase power parity adjusted). Nigeria has overtaken South Africa as the largest economy in Africa.
The largest sector of the economy is services which accounts for around 73 percent of GDP. Within services, the most important are finance, real estate and business services (21.6 percent); government services (17 percent); wholesale, retail and motor trade, catering and accommodation (15 percent); and transport, storage and communication (9.3 percent). Manufacturing accounts for 13.9 percent; mining and quarrying for around 8.3 percent and agriculture for 2.6 percent.
Parts of the country’s urban areas boast well-developed infrastructure, comparable to OECD standards, but rapid urbanization has led to glaring contrasts. The growing services sector is a major employer, and the corporate side of the economy has been traditionally well-managed, although it faces low productivity gains. The banking and financial services sector is stable. The Johannesburg Stock Exchange (JSE) ranks among the top emerging market exchanges in the world. Many critical State-owned enterprises (SOEs) utilities are of growing concern due to rapid service contraction and declining revenues.
Trade Relationships and Opportunities
South Africa is well integrated into the regional economic infrastructure as formalized by membership in the Southern African Development Community (SADC). In addition, the Southern African Customs Union (SACU) agreement with Botswana, Namibia, Lesotho, and eSwatini (Swaziland) facilitates commercial exchanges. South Africa is a member of the World Trade Organization (WTO), the G20, and the informal BRICS (Brazil, Russia, India, China, and South Africa) association of emerging economies.
The United States is a critical trading and technology partner for South Africa and ranks as South Africa’s third-largest bilateral partner in two-way trade by value. The United States and South Africa signed a Trade and Investment Framework Agreement (TIFA) in 2012. The United States and SACU concluded a Trade, Investment, and Development Cooperation Agreement (TIDCA) in 2008.
New-to-market (NTM) companies should consider South Africa’s geographic advantages, infrastructure, widespread use of the English language, and relatively transparent legal processes, which make it a low-entry threshold country.
Key Findings from World Bank Report
The African Continental Free Trade Agreement represents a major opportunity for countries to boost growth, reduce poverty, and broaden economic inclusion. Full implementation of AfCFTA would reshape markets and economies across the region and boost output in the services, manufacturing and natural resources sectors. As the global economy is in turmoil due to the COVID-19 pandemic, creation of the vast AfCFTA regional market is a major opportunity to help African countries diversify their exports, accelerate growth, and attract foreign direct investment. Creating a continent-wide market will require a determined effort to reduce all trade costs.
| Indicator | Value |
|---|---|
| Intra-African Trade (pre-AfCFTA) | 12-18% of total trade |
| Combined GDP of AfCFTA Countries | US$3.4 trillion |
| Projected GDP Gain by 2035 | US$450 billion |
| New Jobs Created (2021-2024) | 2.3 million |
