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Business Reporter
Africa continues to trade at the periphery of the global economy, accounting for just 3 percent of world trade, as infrastructure deficits, currency volatility and weak governance structures undermine the continent’s ambition to boost intra-African commerce, according to a new report by the African Export-Import Bank (Afreximbank).
The Trade and Development Finance Brief, released by the Cairo-based institution, warns that manufacturing value added as a share of gross domestic product remains below 10 percent across the continent – the lowest among developing regions – while intra-African trade accounts for only 15 to 17 percent of total trade, far short of the African Union’s Agenda 2063 target of 50 percent.
Despite the launch of the African Continental Free Trade Area (AfCFTA), which is projected to expand intra-African exports by more than 20 percent within a decade, the report identifies persistent structural constraints that continue to hinder economic transformation.
Chief among these is inadequate infrastructure. Africa faces an annual infrastructure financing gap of approximately US$100 billion, with deficiencies in energy, transportation and communication networks hampering trade logistics and increasing the cost of doing business. According to the Africa Finance Corporation’s 2024 report cited in the brief, 13 sub-Saharan African countries lack operational rail networks, and roughly half of these are landlocked. Access to water also remains below 60 percent across the continent.
The report notes that inadequate port facilities, poor road networks and unreliable electricity supply remain major impediments to investment, while making it difficult for African countries to build specialisations in specific goods and services.
Currency volatility and limited convertibility of many African currencies present additional barriers to cross-border trade and investment. Exchange rate fluctuations discourage foreign investors by increasing uncertainty and reducing the value of returns on investments. The report specifically cites exchange controls in countries such as Angola as exacerbating the issue by restricting access to foreign currencies, making it difficult for firms to repatriate profits or settle international payments.
The fragility of the global trade environment, driven by escalating geopolitical tensions, trade and technology wars between the United States and China, and persistent supply chain disruptions, has further negatively affected African trade, the report states.
Climate change also poses a growing threat, with the continent disproportionately affected by climate-related risks despite contributing relatively little to global carbon emissions.
More frequent and severe droughts in countries such as Ethiopia and Kenya have reduced crop yields, affecting key exports such as coffee and tea, while the unpredictability of harvests has lowered investor confidence in the agricultural sector.
Access to financing, particularly for small and medium enterprises, remains a critical challenge. The report notes that underdeveloped financial markets, high interest rates and a lack of venture capital continue to stifle innovation and limit the ability of smaller firms to compete internationally.
The Afreximbank report acknowledges that regional development finance institutions have increased support for intra-African trade through initiatives including the Pan African Payment and Settlement System, the AfCFTA Adjustment Fund, the Border Markets Initiative and the Collaborative Transit Guarantee Scheme.
However, it concludes that significant gaps remain, and addressing these will be essential to unlocking the continent’s full trade and investment potential.
