Analysing AfCFTA : Progress and Hurdles Ahead

Addis Ababa, March 5, 2025 (POA) --- The African Continental Free Trade Area (AfCFTA) was created to promote economic unity among African nations. Officially introduced on March 21, 2018, in Kigali, Rwanda, its objective is to establish a unified market for goods and services, enable the free flow of capital and individuals, and ultimately lay the groundwork for a continent-wide customs union. AfCFTA encourages industrialization, economic diversification, and sustainable growth, boosting competitiveness by removing tariffs on most products and minimizing non-tariff obstacles.

Initially, 44 African Union member states joined the AfCFTA, marking a crucial move towards regional integration. Currently, 54 out of 55 African countries have endorsed the agreement, demonstrating widespread support for the initiative despite the continent's varied economic landscapes and development levels. This extensive participation highlights the shared recognition of the potential advantages that unified trade policies can offer.

The establishment of AfCFTA came with high economic hopes, with the continent anticipating a boost in intra-African trade by over 50% within a few years. Forecasts indicated that the agreement could add an extra 450 billion USD to Africa's GDP by 2035, significantly enhancing economic prosperity.

The underlying expectation was that eliminating trade barriers and standardizing trade regulations would draw investments, drive industrialization, and generate employment opportunities. Since becoming operational in January 2021, AfCFTA has already exhibited positive trends in increasing trade volume among member countries. The lowering of tariffs and easing of trade restrictions have facilitated smoother trade flows, resulting in a reported rise in intra-African trade. This growing trade volume serves as an early indicator of the potential that coordinated trade policies hold for the continent.

One of AfCFTA's notable accomplishments has been the progress in aligning trade-related policies across member states. Efforts to standardize customs procedures and regulations have set the stage for more efficient cross-border trade. This harmonization is expected to reduce administrative hurdles and improve the ease of conducting business across African borders. The drive for AfCFTA has prompted investment in infrastructure development crucial for facilitating trade. Projects aimed at enhancing transportation networks, including roads, railways, and ports, have been initiated to link key trade routes across the continent. These infrastructural improvements are vital for ensuring the efficient movement of goods and services.

Nations actively participating in the AfCFTA have begun to experience concrete economic benefits. Increased trade activities have contributed to GDP growth in several African countries, demonstrating the direct link between trade liberalization and economic expansion. For example, countries previously limited by restricted market access are now leveraging the broader market to stimulate their economies. AfCFTA's trade expansion has significantly contributed to employment generation.

By stimulating industrial growth and increasing labor demand, the agreement has created job opportunities across various industries, especially in manufacturing and services. This job creation is vital for tackling the high unemployment rates common in numerous African nations. The agreement has drawn substantial investment from both local and international sources. The prospect of a vast, integrated market has enhanced the appeal of African countries to investors.

This capital influx has stimulated economic activities, encouraging innovation and business development. Despite these advancements, AfCFTA continues to face considerable obstacles, particularly regarding tariff and non-tariff barriers. While many tariffs have been lowered, some nations have been reluctant to eliminate them, either waiting for reciprocal action or managing domestic industry pressures. Moreover, non-tariff obstacles such as complex customs procedures, licensing requirements, and other trade restrictions continue to hinder smooth trade flows.

Stability is crucial for the effective operation of integrated markets, and inconsistent political environments can discourage investments and trade cooperation. Although progress has been made, infrastructure inadequacies remain a substantial hurdle. Poor road networks, inefficient ports, and unreliable energy supplies impede the efficient movement of goods and services. Addressing these deficiencies is essential to fully realize AfCFTA's benefits.

To surmount existing challenges, comprehensive policy reforms are necessary. These reforms should aim to fully eliminate tariffs, streamline customs procedures, and remove non-tariff barriers. Member countries should collaborate to ensure trade policies are aligned and effectively implemented. Improving the capacity and efficiency of institutions responsible for trade governance is crucial. Strengthening these organizations ensures they can effectively manage and oversee the implementation of AfCFTA provisions. This includes staff training, technology investment, and promoting a culture of compliance and efficiency.

Promoting greater regional cooperation is vital for AfCFTA's success. Member countries should engage in ongoing dialogue and collaboration to address shared challenges. Regional cooperation mechanisms can help resolve disputes, exchange best practices, and coordinate infrastructure projects that benefit all participants. AfCFTA represents a transformative initiative with the potential to drive significant economic growth and development across Africa. While there have been notable achievements, addressing the challenges is critical to ensuring its long-term success. Through supportive policies, stronger institutions, and enhanced regional cooperation, AfCFTA can pave the way for a prosperous and integrated African market.