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This article was produced with the support of United Nations Economic Commission for Africa (ECA)
Speaking at the recent 57th Conference of African Ministers of Finance, Planning and Economic Development in Addis Ababa, which had the African Continental Free Trade Area (AfCFTA) as its key focus, he said building resilience had become more critical than ever. Africans need to turn inward to build self-sufficiency, “particularly against the backdrop of a precarious global economic terrain characterised by heightened geopolitical tensions, shifting alliances, unjust trade tariffs and mounting debt crises,” he said.
By 2045, the AfCFTA is projected to increase intra-African trade by 45% and enhance Africa’s GDP by 1.2%. It will also boost production in sectors such as agri-food by 60%, industry by 48%, services by 34%, and energy and mining by 28%. Landlocked countries, currently disadvantaged by high trade costs and limited access to global markets, “have a unique opportunity to break free from these geographical disadvantages and boost their economic growth.
Gatete also called for a strengthening of regional value chains and special economic zones.
Africa at a crossroad
His comments were echoed by Hanan Morsy, chief economist and deputy executive secretary of the United Nations Economic Commission for Africa (ECA), who said Africa was at a crossroad facing both a period of historic opportunity but also significant structural challenges, such as low levels of intra-African trade, persistent infrastructure gaps, and limited industrialisation.
“The AfCFTA is our chance to redefine Africa’s economic standing, to amplify our voice on global issues, and to shape the rules of global trade and economic governance.”
Intra-African trade relative to total trade has been limited at about 15.8%, substantially less than in other regions. But on the upside, the profile of trade within the continent is more positive than global trade, with a higher level of manufactured exports at 46% compared to 24% of value-added goods (2019-2023) as a percentage of trade with the rest of the world,” she said.
Morsy also highlighted the need for reforms in the global financial system to create a more equitable system that would allow African multilateral banks to access financing on more favourable terms.
Discussions also focused on the rescheduling of the IMF’s Special Drawing Rights (SDRs) reallocation as a means of strengthening the capital base of multilateral development banks (MDBs) and expanding concessional lending to African countries.
A framework put forward to the IMF to channel these resources as hybrid capital had been approved in 2024 by the organisation’s Executive Board, but it had not yet been operationalised, said Morsy.
Driving diversification
Wamkele Mene, Secretary General of the AfCFTA Secretariat, told the ministers’ meeting that the AfCFTA is not just about increasing trade volumes but also driving structural economic diversification.
In the light of the need to move forward, and to pull investors and business along, the Secretariat is implementing its private sector engagement strategy, focusing on four high-potential industry segments: agriculture and agro-processing, automotive, pharmaceuticals, and transport and logistics, he said.
“These sectors were selected based on their strong potential to meet local demand with local production, he said.
In the automotive industry, the Secretariat is collaborating with Afreximbank, the African Association of Automotive Manufacturers, and the African Organisation for Standardisation to strengthen local vehicle and components manufacturing.
“In the pharmaceutical sector, we are advancing a pooled procurement mechanism, coordinated by African Union agencies, to support affordable access to medicines.”
This is supported by the Intellectual Property Rights Protocol.
He outlined the operational tools for implementation already put in place. The E-Tariff Book, a digitalised database providing importers and exporters with precise tariff information for each product and country is one.
Another is the Rules of Origin Manual, a comprehensive guide to assist businesses to comply with trade regulations. The AfCFTA Adjustment Fund, which has already mobilised $1bn, was established to address economic disparities.
The Pan-African Payment and Settlement System (PAPSS) platform allows businesses to transact in local African currencies. Although uptake to date had been slower than expected, efforts are ongoing to accelerate adoption by commercial and central banks.
He said the Guided Trade Initiative (GTI), which aims to test the operational, institutional, legal and trade policy environment under the AfCFTA, has been a success, citing South Africa’s trade with Kenya, which included manufactured goods like refrigerators, demonstrating a move toward higher-value exports.
Rwanda exported packaged coffee to Ghana, while Tanzania exported coffee to Algeria, showcasing how traditional exports are transitioning to value-added products.
Free movement
Complex issues came to fore at the high-level event, including why African countries appear to have little appetite for the Protocol on the Free Movement of Persons and the Right of Residence and Establishment.
Antonio Pedro, Deputy Executive Secretary (Programme Support) at the ECA, said that since the African Union adopted the revised protocol in 2018, only four African countries had ratified the agreement – Rwanda, Mali, São Tomé and Principe and Niger.
The most recent had been Niger, which ratified it in 2019. In the six years since, nothing further had happened. “This is not acceptable,” he said.
It does not technically form part of the AfCFTA but the spirit of it is aligned directly to the free movement of goods and services. “With compelling evidence-based analysis, we must dispel the fears that are impeding us from acting.” There were calls for countries to air their reasons for not ratifying the agreement and pushback from South Africa, which said it was not fear holding countries back, as officials had suggested, but genuine concerns about the implications of implementing it.
The high costs of travel were also discussed. Adefunke Adeyemi, Executive Secretary of the African Civil Aviation Commission, said only 10% of Africans travel by air.
Delegates heard that as much as 30% of ticket costs are accounted for by taxes, with governments seeing this as an easy way to raise revenue, despite the role of aviation as a catalyst for broader economic growth.
The Single African Air Transport Market, which seeks to unify African skies, is seen as a solution to the low levels of intra-African air travel, with the potential to reduce airfares by 26%. It came into force in 2018 and by 2025, 38 countries had signed up.
Adeyemi said to date, 21 member states, representing 85% of the African market, had gradually opened their skies and in the past two years, 97 new routes had been opened up. “That is a big deal.”
Raising revenue
The issue of the link between taxes and digital penetration came under the spotlight, with ECA research showing the strong link between information and communication technology (ICT) and economic growth even where taxes had been raised.
This was attributed to the ability of technology to enhance productivity and increase jobs, resulting in a widening of the tax base. Research shows that a 10% increase in broadband penetration can produce additional GDP growth of between 0.8% and 2.46%.
However, speakers highlighted the fact that despite some progress, Africa remains the least-connected continent. This was attributed to the impact of high ICT and internet costs on digital access.
