HOW CAN AFCFTA

REACH ITS USD 3T TRADE

INTEGRATION POTENTIAL?
The African Continental Free Trade Agreement (AfCFTA) is a landmark deal that aims to
bring together 54 African countries with a combined population of more than 1 billion
people and a combined GDP of over USD 3 trillion. AfCFTA is focused on stimulating
growth, employment creation and economic diversification across the African continent
through a single African market for goods and services, accompanied by the free
movement of people and capital. The agreement is expected to boost intraregional trade,
which is very low by the standards of other regions, by reducing tariffs and allowing
companies to expand and enter new markets.
How Can AfCFTA Reach Its USD
3T Trade Integration Potential?
Projected Milestones Current trade in Africa is outward focused
for AfCFTA Africa is currently focused on outbound trade with the rest of the world rather The difference between African
The agreement has an than with its continental neighbors, as emphasized in Figure 2. Also, compared and European intracontinental
ambitious timeline, as to other successful trade agreements, such as that of the EU, AfCFTA has a trade in 2019
emphasized in Figure 1. long way to go (Figure 3). The intracontinental trade shortcoming represents
Yet, reaching the set immediate lost trade opportunities for African countries. But most importantly,
milestones will depend the main objective of the countries entering the agreement is to accelerate
on the success of ongoing industrialization and establish strong cross-border supply chains. This would
negotiations, starting with provide a solid foundation for a long-term shift towards intraregional trade, and
this is dependent on increased infrastructure development across Africa.
the ambitious goal of having
all 54 countries ratify the
17%
$90B
agreement by 2020.
Intraregional share of total merchandise exports
Zimbabwe
AfCFTA Envisaged Timeline RoW
Uganda
Figure 1
Senegal Africa
DRC
Present Kenya Middle East
China
Tanzania
Ethiopia
India
South Africa Europe
July 2020: Côte d'Ivoire
Rest Asia
Commencement of trade Zambia
Sudan USA
USA
Ghana
Cameroon
Nigeria Europe
Rest Asia
July 2025:
90% of tariff lines reduced to
Tunisia
Middle East
64%
Libya
zero for developing countries India
$4T
Morocco
Egypt RoW
Algeria
Angola China
July 2030: 0% 20% 40% 60% 80% 100%
90% of tariff lines reduced
to zero for LDCs Figure 2, Oxford Economics/IMF Direction of Trade Statistics Africa Figure 3, Source: Oxford Economics
 How Can AfCFTA Reach Its USD
3T Trade Integration Potential?
AfCFTA’s progress will be slower than expected
As the cost and benefits of the AfCFTA deal will not be distributed evenly
amongst member countries, tangible trade benefits will only be felt widely
across the continent post-2030. Currently, heterogeneous African countries
find themselves on an uneven maturity curve, at the intersection of their
ability to benefit from tariff reductions and the favorable conditions that
they have (or do not have) for trade (Figure 4).
100
90
Tunisia
Trade integration enablers
Top 3 barriers to realizing AfCFTA’s potential fast
Trade integration has long been a goal for African countries, at least at a
regional level, as exemplified by the existing regional economic communities
(RECs) that have so far co-existed with some success. AfCFTA’s success faces
serious obstacles, such as opposition from existing RECs; resistance from
countries with high tariffs; a lack of cohesive and reliable infrastructure;
unreliable sources for water or electricity; uneven financial resources (such as
access to credit) or liquidity shortages and the inability to repatriate profits;
South Africa corruption, as well as political instability - which poses security threats to
Morocco P
business. Below, we focus on the top three barriers.

80 Côte d'Ivoire
Egypt Kenya Ghana
70
60 Tanzania 1 Pre-AfCFTA regional trade agreements
Algeria Cameroon
50 AfCFTA succeeds a patchwork of pre-existing, overlapping regional economic
Ethiopia
40 Nigeria communities (RECs), each with its own structure and rules for regional trade
30 Sudan agreements, and with mixed integration success. In the immediate future, these
20 Angola RECs could either benefit the agreement or work to its detriment.
10
0
0 20 40 60 80 100 Performance of Existing REC’s
Tariff reduction propensity

Good Performance
20%
Trade integration enablers Tariff reduction propensity Mixed • WAEMU
Performance • SACU
Favorable conditions: Determining factors:
• Regulatory environment • Trade impact of removing tariffs • COMESA
• Stable, business-friendly environment • Attractiveness to foreign investments • ECOWAS 50%
• WAMZ Poor Performance
• Competitiveness of labor and • External trade propensity
production markets • Recent trade performance • CEMAC • UMA
• Increased quality of infrastructure • Bilateral trade • EAC 30% • CEN-SAD
• Logistical performance • Manufacturing capacity to increase • SADC • ECCAS
• International trade environment production • IGAD

Figure 4, Source: Oxford Economics calculations Source: REC webpages

How Can AfCFTA Reach Its USD
3T Trade Integration Potential?
2 Tariff revenue differences 3 Lack of consistent, advanced infrastructure
Some countries might not be ready to renounce tariff revenues, due to profits from current high tariff rates. Most African countries, except for a few outliers, lag behind
Below, is an at-a-glance view of the areas most likely to benefit from AfCFTA. Trade outside any agreements is the rest of the world in terms of transport infrastructure. In
generally subject to most-favored nation (MFN) tariffs. addition, existing infrastructure in African countries is not
connected to a continent-wide network. This creates difficulties
for implementing and expanding cross-border supply chains.
MFN average Tariff by Country
Tunisia
Morocco
11.6 African transport infrastructure breakdown
11.4
60
Algeria Se
18.9 Egypt
19.1
50
A

Mauritania Mali
Cabo Verde 12.1 Niger 40
12.1 Sudan
Ra
10 12.2
Senegal Chad 21.5
12.2 17.9
Guinea-Bissau 30 Ro
12.2 Nigeria Ethiopia
12.1 CAF 17.4
Guinea 18 20
12.1
Liberia Ghana Uganda Kenya
9.7 Côte 11.9 13 10
13.5
d'Ivoire Gabon DCR Rwanda
12.2 17.7 10.9 11.3
Tanzania
13 Seychelles 0
3.2

South Africa

Morocco

Egypt

Kenya

Tunisia

Algeria

Côte d'Ivoire

Tanzania

Ghana

Nigeria

Cameroon
MFN AVERAGE
TARIFF (%) Angola
9.2 Malawi
Zambia 12.4
Mozambique
<5.9 13.5
10.3
Madagascar Road Railroad Africa Average
6-10.9 Zimbabwe 11.6
17.5
11-15.9 Namibia Botswana
7.7
Mauritius
0.8
Air Sea World Average
7.7
16-20.9
Source: WEF GCI Score (100 = best)
21<
South Africa
7.7

Figure 5, Source: WTO Based on research developed in partnership with