AfCFTA offers massive investment opportunities to the transport sector

The 2030 Agenda for Sustainable Development has mainstreamed sustainable transport across many SDGs and targets, particularly those related to food security, health, energy, economic growth, infrastructure, and cities and human settlements.

Experts agree that Africa needs a seamless and efficient transport sector to deliver on the trade boom envisaged with the operationalisation of the African Continental Free Trade Area (AfCFTA); in other words, transport drives trade.

Estimates show that the African Continental Free Trade Area (AfCFTA) will increase the demand for road, rail, maritime and air transport by 50%. This is a huge undertaking, calling for a similar roll-out in requisite infrastructure for Africa to be able to transport massive amounts of cargo and support the intra-African exchange of services and movement of people.

The AfCFTA is a free trade area launched in 2019 by African countries to create a single continental market with a population of about 1.3bn people and a combined GDP of approximately $3.4trn. At its full realisation, the AfCFTA, with the mandate of eliminating trade barriers, will be the largest free trade area in the world, bringing together the continent’s 55 countries as member states.

In absolute terms, over 25% of intra-African trade gains in services would go to transport alone; and nearly 40% of the increase in Africa’s services production would be in transport.

Big increase in freight demand

The effect of the full implementation of the AfCFTA on transport in the movement of goods and services is provided in a report by the UN Economic Commission for Africa (ECA): Implications of the African Continental Free Trade Area for Demand for Transport Infrastructure and Services. The report says that integrated planning of trade and transport will bring more benefits to AfCFTA signatories as a result of growing demand for different modes of transport.

“We assessed investment opportunities that the AfCFTA offers to the transport sector and the infrastructure investments required for different modes of transport,” writes the ECA’s infrastructure expert and lead author, Robert Lisinge.

“[The study] also forecast the demand for equipment for different modes of transport – trucks for roads, rolling stock for railways, aircraft for air transport and ships for maritime transport – as a result of the AfCFTA, which came into force in 2021,” he adds.

Lisinge says the introduction of the AfCFTA will lead to a general increase in intra-African freight demand of around 28%, compared with a scenario without the AfCFTA.

“Our analysis also highlights an increase in demand for all modes of transport and the vehicles that serve them.

“Currently, intra-African freight transport demand is heavily skewed towards road transport, with a nearly zero share for rail transport. We know that this distribution on the transport terrain can improve, with efforts to improve African transport policies to expand the rail network, combined with trade policies to implement the AfCFTA,” says Lisinge.

By 2030, once the AfCFTA is fully implemented and the continent’s plans for freight infrastructure and service improvements are realised, the share of rail would increase from 0.3% to about 7%, says the report, noting a projected decrease in the share of freight transport by road.

Transport infrastructure and equipment boom

The AfCFTA offers massive investment opportunities to the transport sector. According to Lisinge, the AfCFTA envisages a need for 1,844,000 trucks for bulk cargo and 248,000 trucks for container cargo by 2030. This increases to 1,945,000 and 268,000 trucks respectively if planned infrastructure projects are also implemented.

The rail wagon fleet should increase to 132,857 units for bulk cargo and 36,482 units for container cargo, from a low starting point in 2019; while the vessel fleet should increase by 188% for bulk vessels and 180% for container vessels, compared with the fleet in 2019; and the aircraft fleet should increase by 141% compared with the fleet in 2019.

The largest demand for trucks to support the AfCFTA is within West Africa, followed by demand from West to Southern Africa, and from Southern Africa to Western Africa, projected at 9.9%.

The increase in inter-African demand due to the implementation of the AfCFTA also requires expanding the domestic fleets of vehicles in order to accommodate the rise in domestic business.