African Continental Free Trade Area
The African Continental Free Trade Area (AfCFTA) has the potential to transform trade in Africa by removing barriers and creating a unified market. However, significant challenges remain that hinder its realization.
One of the primary impediments to increasing intra-African trade is poor infrastructure. The infrastructure gaps—whether in roads, ports, or logistics—create bottlenecks that thwart efficiency and drive up costs.
During a recent ZimTrade Buyers seminar in Bulawayo, Stephen Ncube, president of the Confederation of Zimbabwe Industries Matabeleland chapter, shed light on this pressing issue. He emphasized that the cost of shipping containers between African ports is exorbitantly high, often three times the cost of shipping to Europe.
“For instance,” Ncube noted, “the shipping cost of a container from Durban to Luanda is three times higher than from Durban to Rotterdam.” This stark statistic highlights the economic inefficiencies that inhibit trade within the continent.
Furthermore, the air freight sector is similarly hindered. Ncube pointed out that air freight costs in Africa range between US$3 and US$7 per kilogram, significantly above the international average of US$1.50 to US$4.50. This price disparity poses another obstacle for African businesses looking to engage in global trade.
Currently, only 15% of Africa’s total trade is intra-African, a figure that pales in comparison to other global regions. For example, trade within Europe accounts for 68% of their total trade, while Asian countries enjoy 45% of trade among themselves, as per the United Nations Conference on Trade and Development (UNCTAD).
Ncube offered insights into potential solutions, highlighting the importance of policy changes and digital innovation to overcome these challenges. “The AfCFTA provides the regulatory framework, while the Africa Trade Gateway supplies the digital infrastructure necessary for trade facilitation,” he explained.
The Africa Trade Gateway (ATG) has emerged as a promising solution. Ncube described it as a “digital ecosystem” that can streamline trade activities for millions of importers, exporters, and service providers across the continent and beyond. By adopting ATG, African businesses can improve efficiencies and reduce costs associated with trade.
Looking to the future, the AfCFTA projects a significant increase in intra-African trade, predicting growth from 15% to 25% by 2040. This growth could potentially unlock an impressive US$4 trillion in investment and consumer spending, signaling a bright economic horizon for Africa.
Ncube emphasized the crucial role of intra-African trade in enhancing the competitiveness and productivity of goods and services produced across the continent. By fostering a more interconnected market, African nations can leverage their resources more effectively and contribute to sustainable development.
