A new joint report by the World Bank and France’s development bank, Agence Française de Développement (AFD), has identified critical systemic frictions that continue to hinder the scale of intra-continental trade across Africa.
The report reveals a significant paradox in African commerce: the continent trades a higher proportion of processed and manufactured goods with itself than it does with the rest of the world. However, these volumes remain far too low to trigger the widespread industrialisation required for sustainable economic growth.
While Africa’s internal trade in value-added goods is a positive indicator of regional capability, the overall share of intra-African trade in total continental trade remains stagnant at approximately 15% to 18%.
This figure stands in stark contrast to other major economic regions. In Europe, intra-regional trade typically exceeds 60%, while Asia maintains levels around 50%. The disparity suggests that African businesses are still heavily reliant on external markets for raw material exports while struggling to scale regional supply chains.
The World Bank and AFD attribute this lag to a variety of “frictions” that increase the cost and risk of doing business across borders. These include inefficient customs procedures, inconsistent regulatory frameworks, and prohibitive logistics costs.
Infrastructure and Regulatory Gaps Hinder Scaling
The findings highlight that non-tariff barriers (NTBs) often pose a greater challenge to traders than actual tariffs. Border delays, excessive documentation requirements, and arbitrary regulatory changes frequently render regional trade uncompetitive compared to imports from outside the continent.
Logistics costs in Africa remain among the highest globally. Poor road and rail connectivity, combined with inefficient port operations, inflate the final price of goods, making it cheaper for a manufacturer in West Africa to import components from Asia than from a neighbouring African state.
These frictions disproportionately affect small and medium-sized enterprises (SMEs). Unlike large conglomerates, SMEs lack the capital and administrative capacity to navigate the complex and often opaque requirements of multiple national jurisdictions.
The report suggests that the implementation of the African Continental Free Trade Area (AfCFTA) is the primary mechanism to resolve these issues. By creating a single market for goods and services, the AfCFTA aims to eliminate tariffs and harmonise trade rules across 54 member states.
However, the World Bank notes that signing treaties is insufficient. The actual economic impact depends on the operationalisation of specific protocols, particularly those regarding the movement of people and the simplification of customs regimes.
Financial frictions also persist. The lack of integrated payment systems has historically forced African traders to use third-party currencies, such as the US Dollar or Euro, to settle trades between two African nations, adding exchange rate risks and increasing transaction costs.
To address this, the Pan-African Payment and Settlement System (PAPSS) was launched to allow traders to transact in local currencies. The report indicates that wider adoption of such systems is essential to reducing the dependency on hard currencies for regional trade.
The long-term consequence of these trade barriers is a persistent reliance on primary commodity exports. Without a robust internal market, African nations struggle to develop the manufacturing depth needed to move up the global value chain.
The next critical phase for member states involves the full implementation of the AfCFTA Guided Trade Initiative, which allows selected countries to begin trading under the agreement’s preferential terms to test and refine the system.
Further progress will depend on whether national governments can align their domestic policies with the Agence Française de Développement and World Bank recommendations to prioritise the removal of non-tariff barriers and invest in cross-border infrastructure.
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