Africa’s share of global trade stuck at 2.9% despite AfCFTA  

Onome Amuge

Despite the immense potential of the African market, the continent’s share of global trade has remained below three percent, with most of this activity centred on merchandise trade. This is in sharp contrast to the significant increase in global trade in services and highlights the need for African countries to deepen regional integration and build stronger intra-regional trade relations, according to a new report by the Economic Commission for Africa (ECA).

The report, presented by Stephen Karingi, ECA director, regional integration and trade division, to experts ahead of the 4-5 March ministerial segment of the Conference of Ministers of Finance, Planning and Economic Development (COM2024), showed that while Africa has made progress in certain aspects of regional integration, such as monetary and financial integration, the pace of change has been slow and uneven. The report also highlighted that although member states have made progress in adopting protocols and establishing institutions, they have not met the criteria for macroeconomic convergence. This has been a major obstacle to full implementation of monetary integration.

The report also highlighted the slow progress made in advancing infrastructure development under the Programme for Infrastructure Development in Africa (PIDA). It noted that while the programme has achieved some success in areas such as roads and ICT, progress in rail transport and energy infrastructure has been limited. 

While the report acknowledged the challenges faced in implementing Agenda 2063, it mentioned some notable achievements, including the signing of the African Continental Free Trade Area (AfCFTA) Agreement and the Single African Air Transport Market (SAATM). These initiatives are expected to create an integrated continental market, support economic transformation and lead to increased industrialisation, job creation and shared prosperity.

While there has been significant progress in the implementation of the AfCFTA, the report highlighted some areas where progress has been less encouraging. One of these areas is the ratification of the protocol to the treaty establishing the African Economic Community relating to free movement of persons, right of residence and right of establishment.

In light of the findings of the report, Karingi stressed the need for the second 10-year implementation plan of Agenda 2063 to address the challenges of weak governance, persistent poverty and limited employment opportunities head-on.

“States should continue to take the necessary measures to ensure that the regulatory environment is conducive to the mobilisation of sustainable financing of infrastructure by the private sector,” he added.

Regional integration, he said, remains critical in African efforts to achieve productive and sustainable development.

Karingi further pointed out that the effective implementation of the agreement will determine the extent to which the continent can derive the benefits of free markets and trade integration for the overall benefit of the people on the African continent.

Some of the key areas highlighted in the report on regional integration include:

Trade integration

Despite the fact that trade under the AfCFTA officially began on January 1, 2021, the anticipated changes in intra-African trade have yet to materialise. In fact, the share of intra-African trade in global trade has actually decreased, from 14.5 percent in 2021 to 13.7 percent in 2022.

The decline in intra-African trade is further evident in the statistics on exports and imports. In terms of exports, the share of African exports destined for other African countries fell from 18.22 percent in 2021 to 17.89 percent in 2022. Similarly, the share of African imports coming from other African countries declined from 12.81 percent  in 2021 to 12.09 percent in 2022. 

Monetary and financial integration

The report also examined the progress of African countries in meeting key macroeconomic targets, such as inflation and general government gross debt levels. In terms of inflation, the African average in 2023 was 18.5 percent, and in 19 countries inflation was above 10 percent. This is well above the set target of 10 percent or less. In terms of government gross debt, the average for Africa in 2023 was 65.2 percent of GDP, compared to the previous year’s average of 64.6 percent.

Single African Air Transport Market

The African Union’s Single African Air Transport Market (SAATM) has been making significant progress, with 36 member states representing 89 percent of the intra-African air transport market having joined the Market. The SAATM is expected to have a positive impact on the African aviation sector, increasing the frequency of flights by 27 percent and bringing about savings of $500 million from passenger fares, free competition, opening new commercial routes, environmental protection and the development of the private sector in civil aviation.

Information and communications technology

Africa has been falling behind in terms of bridging the gender digital divide, with only 32 percent of the female population having access to the Internet compared to 42 percent of the male population in 2023. This is far below the global average of 65 percent for females and 70 percent for males. 

Energy

The COVID-19 pandemic has had a negative impact on access to electricity in Africa, with the proportion of the world’s population without access to electricity rising from 74 percent before the pandemic to 77 percent in 2020. This is partly due to disruptions to supply chains and other economic activity caused by the pandemic. However, the report highlighted that 39 African countries have the potential to provide cheap and reliable energy to their populations through the use of renewable sources, including green hydrogen production.

Infrastructure financing

Despite the potential of green hydrogen and other renewable sources to transform Africa’s energy sector, the continent faces a massive annual infrastructure financing gap estimated at between $130 billion and $170 billion. Other innovative financing instruments are needed to bridge this gap, including blended finance, green, social and sustainability-linked bonds, and debt-for-nature swaps.

The report’s recommendations include addressing the challenges that Africa faces in achieving sustainable development goals, such as gender inequality, infrastructure deficits and climate change. The report specifically underscored the need for the second 10-year implementation plan of Agenda 2063 to directly address these issues.