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(Ecofin Agency) – The African Continental Free Trade Area (AfCFTA), launched in 2018, covers a market of 1.3 billion people with a combined GDP of $3.4 trillion. It could boost intra-African trade by 53%, lift 50 million people out of poverty, and create 14 million jobs. According to UNCTAD, it is a key tool for transforming the continent’s economy.
Africa has what it takes to become a major player in global trade and a driver of worldwide economic growth. That’s the key takeaway from the Economic Development in Africa Report 2024, released yesterday February 10 in Abidjan, Côte d’Ivoire, by Rebeca Grynspan, Secretary-General of the United Nations Conference on Trade and Development (UNCTAD), and Ivorian Minister of Trade Souleymane Diarrassouba. The report highlights the reforms and investments needed to boost the continent’s resilience against global crises and unlock its full economic potential.
“Reliance on foreign markets, volatile commodity exports, high debt and weak infrastructure have deepened the continent’s vulnerabilities,” said Grynspan. However, she emphasized that these obstacles could turn into opportunities if the African Continental Free Trade Area (AfCFTA) is fully implemented alongside bold policies aimed at enhancing competitiveness. Launched on March 21, 2018, in Kigali, Rwanda, AfCFTA aims to create a single continental market with 1.3 billion consumers and a combined GDP of $3.4 trillion.
Currently, nearly half of African nations rely on oil, gas, or minerals for at least 60% of their export revenues, making them highly vulnerable to global price fluctuations. AfCFTA is expected to boost intra-African trade by 53% and add $1 trillion in value to the continent’s industrial sector. By diversifying exports, it could stabilize revenues and mitigate risks. However, poor infrastructure in transport, energy, and digital connectivity raises trade costs by 50% compared to the global average, contributing to the continent’s low intra-African trade rate of just 16%.
UNCTAD believes that investing in logistics and digital connectivity is crucial to improving competitiveness, especially for landlocked countries. These investments could help AfCFTA achieve its goals, including lifting 50 million Africans out of poverty and creating 14 million jobs.
The report outlines concrete solutions such as tax incentives, low-interest loans to support industrialization, and regional funds to manage trade risks. With the right policies, Africa could reduce its dependence on external markets, strengthen economic resilience, and drive inclusive growth. Bold reforms, regional cooperation, and strategic investments will be key to transforming current vulnerabilities into long-term opportunities.
Small and medium-sized enterprises (SMEs) will play a critical role in this transformation. SMEs account for 80% of Africa’s workforce but struggle with financing issues and currency volatility. According to UNCTAD, expanding risk management tools and strengthening regional supply chains could significantly improve their resilience.
Interview with Paul Akinwumi, Director of UNCTAD’s Africa Division
Ecofin Agency: The report highlights Africa’s vulnerability to multiple shocks. What concrete strategies do you recommend to help African countries strengthen their resilience?
Paul Akinwumi: The most important step is the rapid implementation of AfCFTA. Countries need to develop and execute national strategies for its rollout. They must also adopt supportive policies at the national level. This is critical for managing economic shocks effectively.
EA: How can African governments balance economic growth with increasing budget constraints due to debt and weak domestic revenue mobilization?
PA: That’s always a challenge. The key is prioritization—ensuring that part of the budget is allocated to productive development rather than just consumption. It’s a delicate balance, especially with debt repayments. But if you’re not producing goods and services, how do you generate the revenue to pay off debts? Investing in productive capacities is essential.
EA: The report forecasts a 53% increase in intra-African trade through AfCFTA. In your view, what are the main political or institutional barriers that could slow this progress?
PA: I don’t think the process will slow down. It’s moving forward quickly. There is political will, and progress is being made. The challenge is that many people are unaware of what’s happening. The private sector across Africa needs to fully understand how AfCFTA works so they can take advantage of it. Clear communication with businesses is crucial.
EA: Infrastructure deficits are a major obstacle to intra-African trade. What innovative financing mechanisms does UNCTAD recommend to bridge this gap?
PA: As the Secretary-General mentioned, we need multilateral development banks, private sector investment, and government partnerships. Public-private partnerships (PPPs) are essential. Infrastructure projects are expensive, and there are many to be developed. However, infrastructure must be linked to economic activities—it shouldn’t be built just for the sake of it. That’s the key to making it work.
EA: Given the growing challenges of climate change, how should sustainability be integrated into economic development strategies?
PA: That’s a complex issue, but sustainability is crucial. Whatever strategies or development plans are adopted, sustainability must be built in from the start—it shouldn’t be an afterthought. In terms of energy, Africa is fortunate that much of its power comes from renewable sources like hydro and solar. While there’s some coal, hydro is dominant, which means lower pollution levels. But sustainability should never be seen as a burden—it must be an integral part of development.
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