Boosting intraAfrica trade: A pathway to economic transformation

Sub-Saharan Africa’s economic growth has been underperforming, with exports amounting to just 2,3% of world trade. However, the region’s intra-African trade, which comprises an unusually large share of manufactures, offers a promising avenue for sustainable economic transformation.

Intra-African trade, currently accounting for only 18% of Africa’s total trade, has the potential to be boosted through initiatives like the African Continental Free Trade Area (AfCFTA). This trade agreement, which aims to create a market of around 1,3 billion people with a combined GDP of around US$3 trillion, has the potential to attract investors and promote industrial value in Africa.

The AfCFTA has succeeded in crafting a strong and communicable narrative, emphasising the size of the marketplace and the importance of industrial value in Africa. This narrative has been consistently conveyed by heads of state, ministers, negotiators, and representatives of the African Union whenever they speak on the subject.

Africa’s regional economic communities (RECs) play a pivotal role in establishing and utilising common arrangements for cross-border trade and overcoming mutual supply-side constraints. These RECs are the unsung heroes of Africa’s integration efforts, encompassing energy, infrastructure, transport corridors, and sectoral value chains.

The AfCFTA and RECs are crucial for Africa’s trade policy, serving as the primary vehicle for improving the role of trade as a driver for African development. Trade policy is the principal means through which the role of trade can be enhanced, and the AfCFTA is expected to contribute to sustainable economic transformation in the continent.

Intra-African trade has been growing, with Africa’s share of intraAfrican trade increasing to account for more than 44% of total intra-African trade in 2022. South Africa, the largest intra-African trading nation, has been the leading driver of intra-regional trade growth dynamics. Southern Africa’s share of intraAfrican trade increased to account for more than 44% of total intra-African trade in 2021, consolidating its position as the top intra-African trading subregion.

The AfCFTA could emerge as a major growth springboard for Africa’s creative industries, especially after the completion of negotiations on investment, intellectual property rights, competition policy, and ecommerce scheduled for 2022. Intra-African trade in creative industries is growing faster than that of other sectors and could boost the aggregate value of intra-African trade to further reduce the region’s exposure to global volatility.