The African marketplace is decentralized, with each nation having sole control of the market policies within their countries. While this is expected of sovereign nations, it presents an Africa without a unified front in the global marketplace. But what if that could be changed? To this end, the African Continental Free Trade Area (AfCFTA) was created. AfCFTA is designed as a unified African marketplace to boost intra-African trade and above all, present a unified Africa in the global market. But what has been the progress of this Agreement so far? This article will give you a breakdown of the progress and challenges of AfCFTA so far and provide possible ways out.
Table of Contents
Brief Background of the African Continental Free Trade Area (AfCFTA)
Before diving deep into the progress and challenges of AfCFTA, let’s have a brief overview of what the Agreement entails. The African Continental Free Trade Area (AfCFTA) is a free trade agreement that aims to create a single and unified market across Africa. Approved by the 18th Ordinary Session of Assembly of Heads of State and Government, held in Addis Ababa, Ethiopia in January 2012, AfCFTA was created as a medium to unify the African market, boost intra-African trade, and promote the socio-economic growth of African countries.
Created as part of the plans set in place to achieve the Pan African Vision of “An integrated, prosperous and peaceful Africa” enshrined in Agenda 2063, the Agreement aims to establish a single market for goods and services to strengthen economic integration in Africa, promoting a vision of a prosperous and peaceful continent. Its goals include creating a liberalized market through negotiations, facilitating capital movement and investments, setting the groundwork for a Continental Customs Union, and fostering sustainable development and gender equality. Additionally, it seeks to enhance economic competitiveness, promote industrialization, and address integration challenges across the region.
Progress and Challenges of AfCFTA
With the signing of the agreement establishing AfCFTA on 21st March 2018 in Kigali, Rwanda, the establishment of the Agreement was set in motion and finally entered into force on 30th May 2019. Subsequently, the launching of the Operational Instruments governing trade under the AfCFTA regime was followed in Niamey, Niger in July 2019. The final step was taken on 1st January 2021 with Trading under the AfCFTA regime. With the continuous operation of the programme since 2021, how many of the set goals has the programme been able to achieve, what are the challenges it has faced – is facing, and how can it progress forward in 2025?
Progress of the AfCFTA
Over the years, the African Continental Free Trade Area has made notable achievements, especially in increasing intra-African trade. This is evident in the increase in trade activities among African countries. But the progress of AfCFTA goes beyond a mere increase in the number of participating nations, the progress could also be seen in investment laws, sustainability, and a rise in foreign direct investments. Here are some key progresses of the AfCFTA:
The Guided Trade Initiative (GTI)
A notable progress is the establishment of The Guided Trade Initiative (GTI)in October 2022. This initiative was created to facilitate trade among interested State Parties that meet the minimum requirements for engaging in trade under the Agreement. Created by the AfCFTA Council of Ministers’ directive of February 2022, the GTI aims to assess readiness in the private sector and evaluate the operational, legal, and trade policy frameworks of the AfCFTA. This initiative has not just seen an increase in the number of participating countries from 7 to 39, it has also brought several small-scale businesses, including women, closer to benefiting from the opportunities opened in this new market. Statistically, Afrexim bank data noted a significant growth in intra-African trade by 3.2% in 2023, which is kudos to the initiative.
The Digital Trade Protocol (AfCFTA DTP)
Another important progress of the AfCFTA is the Digital Trade Protocol. Adopted in February 2024, the Digital Trade Protocol aims to facilitate digital trade across the continent by streamlining online transactions and regulations. In a nutshell, it could be regarded as the digital version of the AfCFTA Agreement. The AfCFTA DTP emphasizes the need for digital trade facilitation, highlighting the importance of digitalizing trade processes and documentation. It also caters for the African marketplaces that have become more digitalized in the wake of the COVID-19 pandemic and seeks to provide a proper regulatory framework for paperless trading.
The Protocol on Women and Youth in Trade
The Protocol on Women and Youth in Trade is another important milestone of the AfCFTA. Adopted in February 2024, the Protocol specifically focuses on promoting equal participation and opportunities for women and young people in trade activities within the AfCFTA framework, ensuring they can fully benefit from the digital trade opportunities available. It establishes key provisions aimed at promoting equality and inclusiveness through affirmative action. It also outlines responsibilities for State Parties in areas such as access to finance and digital trade. It also sets up structures for monitoring and cooperation, emphasizing the importance of capacity building and protection against harassment.
Other progresses achieved by the Agreement over the years include the Protocols on Investment, Intellectual Property Rights (IPRs) and Competition Policy which was adopted earlier in 2023, initiatives focused on private sector engagement, supporting sectors such as agriculture, pharmaceuticals, and automotive production, and efforts to reduce transport and logistics costs and strengthen manufacturing capacity through strategic partnerships are gaining traction. In a nutshell, the Agreement has achieved a number of incredible feats over the years, but it is no gainsaying that there’s still a long way to go. With that in mind, let’s dive into some key challenges of the AfCFTA and how it can overcome them in 2025.
Challenges of the AfCFTA
Despite the efforts of the Agreement over the years, challenges persist. Some key challenges of the Agreement lie in finalizing negotiations on rules of origin in key sectors like automotive and textiles, harmonizing trade laws, and removal of barriers limiting cross-border movements within Africa, among others. However, to better understand these challenges, we’ll discuss them under three headings – legal, economic, and political challenges.
Legal Challenges of the African Continental Free Trade Area.
Although the AfCFTA presents incredible opportunities, legal battles could be a bane of its existence. International corporations face several legal challenges under the African Continental Free Trade Area (AfCFTA). Despite its goal to eliminate tariffs on most goods, non-tariff barriers like customs procedures and regulatory inconsistencies can hinder trade. Furthermore, protecting intellectual property is complicated due to varying laws across member states.
Additionally, the AfCFTA Dispute Settlement Mechanism’s effectiveness in resolving disputes is still uncertain. Regulatory compliance poses a challenge, as companies must adapt to different legal requirements, taxation, import/export regulations, and local content requirements in each state. Other critical aspects are the labour laws and competition regulations which equally vary in each country, necessitating a thorough understanding of local practices.
Economic Challenges of the AfCFTA
Some economic challenges the AfCFTA have to deal with include underdeveloped economies of the member states that are heavily reliant on primary commodities, protectionist policies, inadequate infrastructure, and security threats. The medieval nature of Africa’s private sector, especially the Micro, Small, and Medium Enterprises (MSMEs) is another major concern as it battles with the constant struggle of limited access to finance and a focus on survival rather than innovation. More so, there is an imminent need to regularize the differing rules of origin among regional economic communities (RECs) as it creates inconsistencies and hinders the proper integration process.
Political Challenges of The African Continental Free Trade Area
Hesitance from some countries to endorse the AfCFTA indicates skepticism about its benefits when weighed against national interests, with some perceiving this Agreement as reminiscent of the previously rejected Economic Partnership Agreement with the EU. More so, the deep historical exploitation of colonialism cum exploitation of African economies contributes to this distrust. The legacy of disrupted trade networks and imposed economic systems has led to a pervasive lack of trust amongst African nations, which hinders the adoption and full operation of the Agreement among many countries. Meanwhile, the porosity of borders, foreign interference, political instability and insecurity are some other political barriers that face the AfCFTA.
But beyond the aforementioned challenges, language barriers, multiple currencies, poor human development, poor state of infrastructure, and state-centric nature of integration initiatives are some other core challenges that hinder the effective execution of the AfCFTA agreement.
The Way Forward
The AfCFTA is working tirelessly to overcome these challenges, this could be seen in the adoption of the Protocols on Investment, Intellectual Property Rights (IPRs) and the Digital Trade Protocol, which are aimed at combating the legal problems of intellectual property rights and the make provision for the digitalized marketplace respectively. However, this is not enough.
In overcoming the legal challenges, there’s a need to engage in diligent research, seek legal counsel familiar with national regulations, and devise strategic market entry plans tailored to each country’s legal landscape. While policies like the IPRs are already in place to deal with intellectual property rights, there’s a need to engage in a more streamlined approach that caters for all member countries and promotes adoption by the remaining countries.
Furthermore, the African Union should focus on protecting the interests of the member states, intensify efforts to rebuild the broken trust among African nations and carry out further enlightenment on the objectives of AfCFTA. Additionally, establishing a single currency policy for Africa will help eliminate the currency diversity barrier and achieve the tariff reduction plan. Provision to address trans-border crimes and insecurity among the member states is also crucial to fully achieve the AfCFTA objectives.
Final Thoughts
Despite the intense efforts of the African Continental Free Trade Area (AfCFTA), there’s still a long way to go in order to fully achieve the Agreement’s objective. While the rise from 7 to 39 member states is an incredible feat that signifies the relentless efforts of the board, there’s a need to address the menacing challenges preventing the full realization of the Agreement. In addition to the aforementioned solutions, institutionalizing counterpart funding among AU member-states for infrastructural development would go a long way. The AU should also encourage the active participation of private and civil society in the integration Agreement, among others. Meanwhile, it will be a difficult ride in the realization of the AfCFTA Agreement if the challenges identified are not effectively addressed.