Hello, business leaders, innovators, and Africa enthusiasts!
Welcome to the 13th edition of How to Trade with Africa. Over the past few issues, we’ve been diving into the African Continental Free Trade Area, or AfCFTA, and exploring what it means for businesses, investors, and communities across Africa. To get a pulse on how familiar people are with AfCFTA, we recently ran a poll on LinkedIn, and the results were interesting!
Here’s what we found:
- 33% of you are very familiar with AfCFTA.
- 29% know the basics but could learn more.
- 21% don’t know much yet.
- And 17% are ready to start learning.
If you’re in the “very familiar” group, fantastic—you already understand why AfCFTA is such a big deal. But if you’re in the other categories, don’t worry! That’s exactly what we’re here for. AfCFTA is a once-in-a-generation opportunity for Africa, and it’s geared to change the game for trade, business, and economic growth across the continent. Whether you’re an experienced professional, a young entrepreneur, a business leader, an innovator, Africa enthusiast or just curious about Africa’s future! this is a topic worth your attention.
In this edition, we’re breaking down what AfCFTA means in simple terms, how it’s connecting Africa to the global economy, and why the world is paying attention. So grab a coffee, get comfortable, and let’s explore how AfCFTA is helping Africa rise.
1. What is AfCFTA, and Why is It Such a Big Deal?
If you’re new to the concept, let’s recap and start with the basics. AfCFTA stands for the African Continental Free Trade Area. Launched in 2021, it’s an agreement that unites 54 African countries into one big, borderless market. Think of it like a massive economic “superhighway” that makes it easier for African countries to trade with each other.
Here’s why AfCFTA is such a game-changer:
- It’s the largest free trade area in the world by the number of participating countries.
- With 1.4 billion people and a combined GDP of $3.4 trillion, AfCFTA creates one of the largest economic zones on the planet.
- By 2025, intra-African trade (trade between African countries) is expected to increase by 50%.
What does this mean in practical terms? Imagine an African business owner in Ghana who wants to sell products in Nigeria, Kenya, or South Africa. Before AfCFTA, this could be complicated and expensive due to high tariffs, different regulations, and logistical challenges. But AfCFTA is working to make these borders feel almost invisible. AfCFTA intends to ensure that goods, services, and investments flow more freely and that African businesses can trade across the continent as if they were working within a single country.
2. Why AfCFTA is a Game-Changer for Africa’s Economy
To understand why AfCFTA is so important, it helps to look at how trade has worked in Africa until now. In 2019, only 15% of Africa’s trade was within Africa, meaning African countries have traditionally done more business with other continents than with each other. Compare that to 67% of trade within Europe and 58% within Asia.
Why is this a problem? Because when African countries trade more with each other, they can create stronger, more self-sufficient economies. Instead of relying on imports from far-off regions, African countries can support each other’s industries, build up local businesses, and keep more of their economic benefits within the continent.
Here’s how AfCFTA is addressing the barriers that have held African trade back:
- Lowering Tariffs: AfCFTA is reducing or eliminating tariffs on 90% of goods traded within Africa. This makes it cheaper for African businesses to sell products across borders and allows consumers to access more affordable goods.
- Standardizing Trade Rules: if a business in Kenya wants to sell products in Ethiopia, it might face a completely different set of regulations. AfCFTA is working to harmonize these rules so that African businesses don’t have to navigate a confusing maze of regulations just to reach customers across the continent.
- Improving Infrastructure: AfCFTA is also inspiring investment in infrastructure—roads, railways, ports, and digital networks. Better infrastructure makes it easier to move goods and services across borders, connecting businesses to customers and suppliers all over Africa.
The World Bank estimates that AfCFTA could add $450 billion to Africa’s income by 2035 and lift 30 million people out of extreme poverty. This is a huge opportunity for growth that can change lives and build a brighter future for millions of Africans.
3. Global Powers Are Paying Attention
AfCFTA isn’t just transforming Africa. It’s attracting a lot of attention from major global players, who see Africa as the world’s next big growth story. Here’s how some of the world’s biggest economies are responding:
- China has been heavily investing in African infrastructure through its Belt and Road Initiative. This massive project is helping to build roads, railways, and ports across the continent. China is also involved in more than 60 mining projects in Africa, which are crucial for supplying the minerals needed for green energy technologies. These investments don’t just benefit China; they’re also building the infrastructure Africa needs to become a bigger player in global supply chains.
- The United States is also stepping up its engagement with Africa. Through programs like Power Africa, the U.S. has invested billions of dollars to help African countries build energy infrastructure, with a focus on renewable energy. American companies are increasingly looking to Africa as a market for investment and partnership, not just as a source of raw materials.
- The BRICS countries (Brazil, Russia, India, China, and South Africa) have also taken notice. BRICS recently welcomed Egypt and Ethiopia as new members, creating stronger ties with Africa. This partnership allows BRICS countries easier access to Africa’s resources while offering Africa more opportunities for trade, investment, and knowledge-sharing.
- The European Union has been a long-standing partner of Africa, and the launch of AfCFTA has given the EU even more reason to strengthen its relationship with African countries. Through the EU-Africa Partnership, Europe is providing various financial and technical support to help AfCFTA succeed.
4. How AfCFTA is Connecting Africa to the Global Economy
AfCFTA’s main goal is to boost trade within Africa, but it’s also creating powerful connections with the rest of the world. Here’s how:
- A Unified Market for Global Investors: With AfCFTA, Africa is no longer fragmented into 54 individual markets. Now, global companies can think of Africa as one giant market with 1.4 billion potential customers. For example, European car manufacturers or American tech firms can set up operations in one African country and serve the entire continent. This doesn’t just bring in capital; it brings jobs, skills training, and technology, which can help build a more competitive workforce across Africa.
- Moving from Raw Materials to Finished Goods: Africa has traditionally exported raw materials, like oil, cocoa beans, minerals, etc. but has had to import finished goods at a higher price. AfCFTA aims to change that by encouraging African industries to produce finished goods within Africa. Imagine African countries exporting high-quality chocolate products instead of raw cocoa beans. This shift not only creates more jobs but also increases trade earnings, helping African countries keep more of the economic value within the continent.
- Stronger Bargaining Power in Global Trade: When African countries negotiate trade deals as one bloc, they have a much stronger voice. AfCFTA enables Africa to speak as a single market, giving it more leverage to secure better trade terms with other regions like the EU, the US, and Asia. This united approach means African countries can negotiate deals that better serve African businesses and communities.
5. How AfCFTA Could Change Daily Life Across Africa
AfCFTA isn’t just about businesses and trade—it’s about people. For millions of Africans, this agreement could lead to better jobs, stronger communities, and new opportunities for education and entrepreneurship. Here’s how:
- Job Creation and Poverty Reduction: As African businesses expand, they’ll need more workers. According to the World Bank Press Article, AfCFTA could create 18 million new jobs by 2035. These jobs can help lift families out of poverty, support local communities, and create a more stable, prosperous continent.
- Empowering Small Businesses and Innovation: Small and medium-sized businesses (SMEs) make up around 80% of Africa’s employment. By reducing trade barriers, AfCFTA gives these businesses a chance to reach more customers and find new funding. This encourages competition and innovation, from tech startups in Kenya to fashion brands in Nigeria.
- A More Self-Sufficient Africa: By boosting trade within the continent, AfCFTA is helping Africa become more self-reliant. Instead of relying on imports from outside, African countries can support each other’s industries and build resilience against global economic shocks, such as a supply chain crisis or a drop in foreign demand.
The Road Ahead: How You Can Be Part of Africa’s Growth Story
AfCFTA is still in its early stages, but the momentum is real. If you’re a business leader, investor, or even a student interested in Africa’s future, here’s how you can engage with AfCFTA and be part of this transformation:
- Invest in African Markets: Now is a great time to explore opportunities in African countries and consider cross-border expansion. AfCFTA is creating new paths for investors who want to support Africa’s growth story.
- Partner with Local Businesses: African entrepreneurs and businesses offer local knowledge and unique solutions. Partnering with them can help you tap into Africa’s vibrant startup scene and discover new markets.
- Support Sustainable Growth: Invest in projects that build infrastructure, digital connectivity, and renewable energy. These projects not only support African communities but also make good business sense in the long term.
AfCFTA isn’t just a trade agreement – it’s a vision for a united, prosperous Africa that’s ready to make its mark on the global stage. This is a once-in-a-generation opportunity to be part of Africa’s rise.
Thank you for joining us for this special issue of How to Trade with Africa. We hope this gives you a picture of AfCFTA’s transformative potential. Africa is rising – are you ready to rise with it?