Economic resilience through AfCFTA: Inside Africa's new path to self-sufficiency

Kenya and other African countries are increasingly looking to intra-continental trade through the African Continental Free Trade Area (AfCFTA) as a vital bulwark against a surging tide of global protectionism.

The swift implementation and deepening of the pan-African trade pact, encompassing 54 of the 55 African Union (AU) member states, is seen by many proponents as the continent's essential path forward for economic resilience and future growth.

This is being seen as a crucial panacea against escalating tariffs and disrupted global supply chains.

The AfCFTA first agreed in July 2019 and with official trading kicking off in January 2021, aims to eliminate tariffs on products traded among African countries.

It covers policy areas such as trade facilitation and services, as well as regulatory measures like sanitary standards.

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The AU estimates the agreement will boost revenue and lift 30 million of Africa’s extremely poor from poverty once it is fully implemented.

While progress has been made, including a pilot programme where countries like Kenya and Rwanda have shipped goods under the AfCFTA Rules of Origin certificate—a mechanism that certifies products made with African-sourced materials are eligible for lower customs fees—full implementation faces hurdles.

Wamkele Mene, Secretary General of the AfCFTA,

now says the recent three events have created what he termed a "perfect storm" for African states to leverage the pact.

They include the supply chain collapse during the COVID-19 pandemic, the Russia-Ukraine war which halted grain shipments to Africa (a net food importer), and increased global trade and investment protectionism.

“The weaponization of trade policy is compelling us to reflect very deeply about how we can accelerate the self-sufficiency as a continent," Mene says.

He emphasizes the urgent need for continental self-sufficiency in critical areas like pharmaceuticals and food security.

The urgency to tap leverage the trade pact has gained consensus among prominent African leaders and business figures.

Tony Elumelu, a prominent advocate for pan-African economic integration, emphasizes the critical importance of swiftly implementing the African Continental Free Trade Area (AfCFTA). He believes that the pact's aspirations must translate into "tangible progress" for Africa’s economic growth.

Mr Elumelu believes for Africa to truly develop, the continent must look inward and begin producing what it needs while tapping into its vast internal market.

“Africa is the future. Our continent has immense potential from our growing young population to the vast natural resources and untapped markets. If we can harness this potential, we will not only transform Africa but also redefine the global economic landscape,” he says.

This vision, he says, is a cornerstone of UBA's long-standing commitment to pan-African economic integration, evidenced by its expanding support for small and medium-sized enterprises (SMEs) across the continent.

Such initiatives, he reckons, aim to foster economic growth and address persistent development challenges through increased intra-African trade, a crucial step towards reducing reliance on external value chains, according to him.

The African Export-Import Bank (Afreximbank) President Professor Benedict Oramah agrees saying the trade pact offers Africa a path out of the challenges it faces today. 

“Globalisation, as we know it, is regrettably under life support," Oramah stated adding that the AfCFTA offers Africa a vital pathway to foster self-reliance and unlock its substantial internal market potential, effectively creating its own "internal globalization." 

With a combined Gross Domestic Product (GDP) exceeding $3.1 trillion and a market of 1.4 billion people, intra-African trade currently accounts for a mere 15 per cent of the continent's total trade, indicating significant untapped potential. "The time to act is now," Oramah says.

Kenya itself is moving to take advantage of the regional trade bloc by diversifying its trade relations to cushion the economy from challenges such as the recent 10 per cent US baseline tariff on her exports.

Kenya’s manufacturing sector has been betting big on the Africa-wide trade pact that will provide access to what has been described as the biggest market in the world.

According to the Oxford Business Group, Kenya’s exports are projected to increase by over Sh10.2 billion ($100 million) following the full implementation of the free trade pact.

The group notes that with 41.2 per cent of Kenya’s exports destined for free trade pact member states in 2011, compared with the 13.4 per cent share of imports from the same zone, Kenya enters the bloc from a position of relative strength.

Only 12 per cent of Africa’s trade is between countries, signifying the huge promise for participating countries.

Kenyan manufacturers are banking on the agreement to take the lead in producing competitive products in terms of quality and prices.  Kenya is a gateway to Africa due to its strategic location, strong regional influence, and significant infrastructure.

The World Bank's analysis further highlights the transformative potential of the AfCFTA, estimating it could boost Africa’s income by $450 billion by 2035 and increase Africa’s exports by $560 billion, mostly in manufacturing.

The pact is projected to spur larger wage gains for women (10.5 per cent) than for men (9.9 per cent) and benefit both skilled (9.8 per cent) and unskilled (10.3 per cent) workers, leading to a significant decline in extreme poverty across the continent.

West Africa would see the biggest decline in extreme poverty (12 million people), followed by Central Africa (9.3 million), Eastern Africa (4.8 million), and Southern Africa (3.9 million).

The World Bank underscores that while tariff liberalization is important, contributing a modest 0.2 per cent to the continent's income, the bulk of the income gains ($292 billion) would come from stronger trade facilitation measures that cut red tape and simplify customs procedures.

"Creating a single, continent-wide market for goods and services, business and investment would reshape African economies," said Caroline Freund, Global Director of Trade, Investment and Competitiveness at the World Bank.

Albert Zeufack added that the AfCFTA has the potential to "increase employment opportunities and incomes, helping to expand opportunities for all Africans."

Intra-continental trade tariffs that make it 6.1 percent more expensive to import goods from within Africa than from outside the continent studies show.

This has led to a mere 14 per cent of total African trade occurring internally, compared to over 50 per cent in Asia, North America, and the European Union.

Factors like a lack of manufacturing capacity, over-reliance on exporting raw materials, and poor intra-African connectivity (including high flight costs and complicated routes).