Africa’s GDP is set to grow by 3.7% in 2025 according to the UN WESP report, and this is good news for the continent. In comparison South Africa’s economy grew by less than 0,5% in 2024, putting Africa’s second largest economy at the bottom end of the growth spectrum on the African Continent.
For Africa to escape the poverty and increasing national debt levels there needs to be rapid development towards achieving in excess of 6% growth.
Africa currently has 1.3 billion people and a combined GDP of approximately US$ 3.4 trillion. In comparison, South America has a combined GDP of over $4 trillion and a total population of only 434 million people.
Economic Growth must exceed Population Growth
The key requirement to see Africa flourish is to see GDP growth exceed population growth. Africa has the fastest growing population by continent, that is growing at a greater rate than the economy, resulting in growing poverty and jobless levels.
Changes and vast improvements in financial disciplines and management and the growth of ethical leadership is a must to create and environment conducive to economic investment and development. These requirements are a massive challenge currently.
So where do opportunities Lie?
Some African Countries are looking to limiting exports of natural resources and transforming them in special economic zones and developing downstream industries to beneficiate these resources.
The other big move by some African States was the creation of AfCFTA – the African Continental Free Trade Area that is one of the flagship projects of Agenda 2063.
AfCFA is a high ambition trade agreement, with a comprehensive scope that includes critical areas of Africa’s economy, such as digital trade and investment protection, amongst other areas.
The plan is to address the elimination of barriers to trade in Africa, and to significantly boost intra-Africa trade, particularly trade in value-added production and trade across all sectors of Africa’s economy.
AfCFTA Conceived in 2012 – Where is it 13-years Later?
The AfCFTA was conceived in 2012 at an AU general meeting and took six-years to finally see adoption when in 2018, 44 of the 54 African Union members signed an agreement to form AfCFTA and it was officially established in 2019, after 24 Member States deposited their Instruments of Ratification.
However, after five years of existence, there has been little development to show for it. Africa’s intra-continental trade “could” rise to $261.6 billion, constituting 36% of the continent’s total trade volume if there were to be a full implementation of the agreement. This would see a broad range of goods, from machinery and motor vehicle parts to food products and minerals being traded between African States.
There is a definite potential for the Free Trade Area, and for that to become a reality, African states have to raise their game.
At this stage China, the US and Europe dominate trade with African states and the actual growth of inter-African states is simply pedestrian at this stage.
Challenges to implementation
Despite its potential, AfCFTA faces several obstacles that require coordinated solutions. Meluleki Nzimande, a Partner at Webber Wentzel provides the scope of challenges facing its implementation.
These include:
- Illicit trade and corruption at border posts which inflate costs particularly for small traders and undermine the integrity of the trade ecosystem. More importantly, it creates a challenge to the national security of member states as unlawful movement of goods (including arms) and persons (criminals and terrorists) is facilitated by corruption and poor governance. Strengthening governance, ethics and accountability will be essential to build trust in the AfCFTA as an instrument for Africa’s economic development.
- The emergence of the Alliance of Sahel States (an alliance of military led Burkina Faso, Mali and Niger) which not only raises questions about stability and security in West Africa but also throws into question the status of these countries in the AfCFTA following their reported withdrawal from ECOWAS.
- The lack of the infrastructure and technical expertise to implement AfCFTA protocols effectively in many member states, from outdated customs systems to inadequate technical skills for border personnel.
- Inadequate transport networks, ie roads, railways, and shipping, hinder the efficient movement of goods. Addressing these gaps requires significant investment and collaboration between the public and private sector.
- The loss of government revenues will follow the removal of tariffs on goods traded among member states. This is a serious challenge particularly for those countries which are heavily reliant on customs revenues to meet fiscal commitments. To mitigate this threat, the AfCFTA Adjustment Fund will play a vital role in providing fiscal support.
Technology is one of the key enablers in implementing the AfCFTA
One of the most effective means of addressing challenges to the successful implementation of the AfCFTA is technology. The use of tools such as electronic pre-clearance systems, digital trade platforms, and X-ray scanners is already reducing delays and increasing transparency, efficiency and design at borders in various parts of the world, including the People’s Republic of China. Closer to home, a notable success story is Zimbabwe’s Beitbridge border, where recent upgrades (including technological upgrades) have significantly reduced waiting times for trucks, enhancing trade efficiency.
With all the talk around Technology being a catalyst for growth in Africa, it is time for African Leaders to start taking a more active role in driving these changes and implementing systems that will finally open up the full potential of the AfCtFTA agreement and grow the African economy and development.
