African Continental Free Trade Area Agreement (AfCFTA):

Towards a Unified African Market and Promising Trade Opportunities

April 2025

Introduction

The African continent possesses immense natural and human resources that offer vast potential for advancing economic development across the region. Africa holds approximately 8% of the world’s natural gas reserves and 12% of global oil reserves—an asset base that positions the continent as a significant player in global energy markets. It is a source of about 30% of the world’s mineral reserves, including around 40% of global gold reserves, as well as approximately 90% of the world’s chromium and platinum reserves. Africa is also home to the largest global reserves of cobalt, diamonds, and uranium. Furthermore, the continent contains 65% of the world’s total arable land and holds 10% of the world’s renewable freshwater resources.¹ In addition to its abundant resources, the continent is distinguished by its large population of over 1.5 billion people—approximately 17% of the world’s population—representing a significant demographic force. The majority are youth, which provides a promising consumer market and a vast labor force that enhances prospects for growth and industrialization. ²

Despite the continent’s abundant natural wealth—which constitutes a critical foundation for the development of manufacturing industries and the expansion of export capacity—Africa’s participation in global trade remains marginal, accounting for merely 1.8% of total world trade. The export structure of most African countries continues to be dominated by raw materials, which comprise approximately 45% of the continent’s total exports. In contrast, capital goods and finished products represent only around 6% and 22%, respectively. This composition underscores the structural weaknesses in Africa’s industrial and value-added manufacturing capabilities.³

Moreover, intra-African trade remains limited, accounting for only 15%,⁴ reflecting structural challenges that hinder economic integration. Therefore, the African Continental Free Trade Area (AfCFTA) agreement was established with the goal of enhancing economic cooperation between African countries, stimulating regional value chains, and increasing the welfare of African people by removing both tariff and non-tariff trade barriers and promoting local manufacturing.

In this context, the blog provides a comprehensive overview of the AfCFTA, exploring its importance in achieving economic integration among African countries. It also addresses the challenges facing the implementation of the agreement and what policymakers must do to tackle these issues, as the effective execution of the agreement depends on these steps. Furthermore, the blog highlights Egypt’s prominent role in promoting the AfCFTA framework, while also mentioning the expected economic gains and promising export opportunities for Egypt within the continent.

A Future Outlook on the Economic Impacts of the AfCFTA on Africa

The AfCFTA represents one of the prominent political initiatives launched by the African Union within the framework of the 2063 Agenda, aimed at eliminating both tariff and non-tariff barriers between African countries. The agreement seeks to achieve social and economic transformation in Africa over

the next fifty years. This strategy is centered around enhancing intra-African trade, which will lead to prosperity, integration, and peace, leveraging the continent’s demographic strength to enhance its dynamic presence on the global arena. The Agreement also aims to enhance investment flows within the continent through the implementation of the Investment Protocol, which serves as the legal and regulatory framework for fostering a more transparent, equitable, and secure investment environment. Both trade and investment are considered fundamental drivers of economic growth, particularly in developing countries.

This agreement will cover a continental market of over 1 billion people, with a GDP exceeding 3 trillion dollars, making the AfCFTA the second-largest economic bloc in the world, after the World Trade Organization (WTO).⁵

The agreement aims to enhance economic integration among African countries by achieving a set of strategic objectives, the most prominent of which are: the gradual elimination of tariff and non- tariff barriers hindering trade in goods, the progressive liberalization of trade in services, cooperation on investment, intellectual property rights, and competition policy, cooperation on customs matters and the implementation of trade facilitation measures, the establishment of a mechanism for dispute resolution regarding rights and obligations, and the creation of an institutional framework for the implementation and management of the AfCFTA to ensure its sustainability.

the World Bank Group estimated that the AfCFTA has the potential to boost intra-African trade by 52.3%. Overall, exports between African countries are expected to increase by 81%, with industrial exports specifically rising by 110% by 2035.⁶

In addition to strengthening the flow of intra-African trade among countries and regional blocs, the liberalization of trade in goods and services will facilitate the establishment of joint and complementary investment projects across the continent. This trade liberalization is expected to contribute to an increase in foreign direct investment (FDI) into Africa, ranging between 111% and 159%. Furthermore, it will create market opportunities to promote manufacturing in Africa by improving regional value-added supply chains.^{7 8}

The agreement is also expected to lift 30 million people out of extreme poverty by 2035,⁹ and contribute to expanding the size of the African economy to as much as 29 trillion dollars by 2050, making it a key driver of economic growth and stability in Africa.¹⁰

Current Status for the Implementation of the AfCFTA

Despite the promising expectations regarding the ability of the AfCFTA to bring about a comprehensive economic transformation on the continent, achieving these gains depends on the success of its practical implementation. Although the agreement has officially entered into force, its real application still faces numerous challenges. Therefore, it is essential to review the current status of the agreement’s implementation and assess the progress made so far. The stages that the AfCFTA has gone through can be summarized as follows ^{11 12 13}:

Current Status for the Implementation of the AfCFTA

Despite the promising expectations regarding the ability of the AfCFTA to bring about a comprehensive economic transformation on the continent, achieving these gains depends on the success of its practical implementation. Although the agreement has officially entered into force, its real application still faces numerous challenges. Therefore, it is essential to review the current status of the agreement’s implementation and assess the progress made so far. The stages that the AfCFTA has gone through can be summarized as follows ^{11 12 13}:

The Importance of the AfCFTA for Egypt

Egypt was among the first countries to sign the agreement, along with 43 other African nations, in March 2018, and it deposited its ratification document in April 2019. Moreover, during President Abdel Fattah El-Sisi presidency of the African Union in 2019, Egypt played a key role in accelerating the agreement’s entry into force in May of the same year.

President Abdel Fattah El-Sisi officially announced the launch of the agreement after four years of negotiations at the African Union Summit in Niger in July 2019. Additionally, he introduced five operational instruments to support its implementation: (Rules of Origin Mechanism, Online Negotiation Forum, Monitoring and Elimination of Non-Tariff Barriers Mechanism, Pan-African Payment and Settlement System, African Trade Observatory).

I am text block. Click edit button to change this text. Lorem ipsum dolor sit amet, consectetur adipiscing elit. Ut elit tellus, luctus nec ullamcorper mattis, pulvinar dapibus leo.

Source: United Nations Development Programme (UNDP)

At the implementation level, Egypt was among the first countries to engage in actual trade under the agreement through the Guided Trade Initiative (GTI) in October 2022. Egypt’s significant role in executing the agreement has been widely recognized.

Egypt plays a pivotal role in African economic integration, particularly as it possesses strong capabilities for exporting products and investment projects to Africa. The country is home to leading construction and infrastructure companies, making it a key player in large-scale projects across the continent. Additionally, Egypt is one of the largest producers and exporters of pharmaceutical products, a crucial industry for meeting Africa’s healthcare needs.

It is worth noting that Egypt was the initiator of the first edition of the Intra-African Trade Fair (IATF), hosting the inaugural event in December 2018, ¹⁴ followed by the third edition in November 2023.¹⁵ Egypt successfully organized these events in an outstanding manner, showcasing its leadership in promoting intra-African trade and economic integration.

I am text block. Click edit button to change this text. Lorem ipsum dolor sit amet, consectetur adipiscing elit. Ut elit tellus, luctus nec ullamcorper mattis, pulvinar dapibus leo.

I am text block. Click edit button to change this text. Lorem ipsum dolor sit amet, consectetur adipiscing elit. Ut elit tellus, luctus nec ullamcorper mattis, pulvinar dapibus leo.

Key Benefits of the AfCFTA for Egypt

Africa represents a key strategic dimension in Egypt’s economic and trade policies. The AfCFTA is set to bring numerous economic benefits to Egypt, aligning with the country’s broader goal of achieving integration and cooperation with African countries. This will strengthen Egypt’s presence across the continent at economic, trade, and investment levels.

The agreement builds on Egypt’s existing successes under the COMESA framework and enhances opportunities for Egyptian exports to reach African markets. Additionally, it facilitates access to new and diverse markets, particularly in West Africa, where no preferential trade framework currently exists between Egypt and those countries. As a result, Egyptian products will gain a competitive edge in these markets due to the customs exemptions provided under the AfCFTA.

The Agreement also represents a promising opportunity to attract foreign investments to Egypt by positioning the country as a strategic platform for accessing African markets. Foreign investors, particularly from Europe and Asia, can benefit from the advantages offered by the Agreement by establishing factories and distribution centers in Egypt to manufacture and export their products to 54 African countries without customs duties. This contributes to opening new avenues for investment cooperation and strengthens Egypt’s position as a regional industrial and commercial hub serving the integrated continental market, enhancing its capacity to attract investments linked to regional value chains.

Additionally, the agreement is expected to boost Egypt’s trade surplus with African nations while reducing production costs for Egyptian products. This is made possible by duty-free or reduced-tariff access to African raw materials, enhancing the competitiveness of Egyptian industries in regional and global markets.

1. Egypt’s Export Opportunities in Africa

Egypt has significant export opportunities in African markets, estimated at approximately USD 6.7 billion, with USD 4 billion in untapped potential. These figures highlight the immense possibilities for expanding Egyptian exports across the continent, which is experiencing economic transformation and rising demand for various products.

As the AfCFTA continues to develop, these opportunities are expected to grow, particularly with the agreement’s commitment to reducing tariff barriers and facilitating trade flows between African countries. This provides Egypt with a strategic advantage to increase its market share and strengthen economic ties across Africa.

Egypt’s Promising Sectors and Products with Untapped Export Potential in Africa

Egypt has significant untapped export opportunities in key African market sub-sectors, including plastics and rubber (USD 528 million), fertilizers (USD 378 million), chemicals (USD 326 million), food products (USD 282 million), and apparel (USD 229 million).

I am text block. Click edit button to change this text. Lorem ipsum dolor sit amet, consectetur adipiscing elit. Ut elit tellus, luctus nec ullamcorper mattis, pulvinar dapibus leo.

Egypt’s Export Opportunities in Countries Ready to Implement the Guided Trade Initiative (GTI)

As more African countries commit to implementing the AfCFTA, significant opportunities arise for expanding Egyptian exports to 16 African markets that are ready for the agreement’s full enforcement. This development provides Egyptian products with enhanced access to these markets, allowing them to leverage tariff exemptions and trade facilitation mechanisms, thereby improving their competitiveness.

This economic integration represents a strategic opportunity for Egypt’s growth, facilitating entry into new markets, particularly in sectors where Egypt possesses a competitive advantage. Moreover, it contributes to strengthening economic cooperation and regional trade integration within the African continent.

The table below illustrates the key export opportunities under this framework:

I am text block. Click edit button to change this text. Lorem ipsum dolor sit amet, consectetur adipiscing elit. Ut elit tellus, luctus nec ullamcorper mattis, pulvinar dapibus leo.

Source: Export Potential Map

Egyptian companies can immediately implement the AfCFTA with these countries and benefit from tariff reductions on products with untapped export opportunities by using the agreement’s certificate of origin, which is issued by the General Organization for Export and Import Control (GOEIC). Additionally, the Central Bank’s 2024 agreement to participate in the Pan-African Payment and

Settlement System (PAPSS) is a significant step in boosting trade exchange by facilitating payments and commercial transactions among African countries while reducing costs and processing time.

The Regional Efforts Required to Ensure the Effective Implementation of the AfCFTA

Despite the great importance of the AfCFTA in achieving economic integration among the continent’s countries, ensuring the agreement’s success in meeting its objectives and maximizing its benefits requires member states to take several effective steps, including:

·         Balancing National Interests with Regional Integration Goals

African regional integration is essential for addressing global challenges and serves as a catalyst for economic and social development across the continent. Achieving economic integration without compromising national interests requires enhanced dialogue among member states and the development of appropriate compensation mechanisms for countries facing challenges in trade liberalization.

Several initiatives have been introduced to strengthen this balance, including the AfCFTA Adjustment Fund, which operates as a financial mechanism aims to mitigate the negative impacts on vulnerable sectors and communities that may be affected by increased competition or market shifts. Key Support Mechanisms of the Fund:

1. Providing financial assistance to enhance local production
2. Supporting small and medium-sized enterprises (SMEs) to ensure their
3. Offering training programs to improve workforce skills and

Through these initiatives, the fund helps strike a balance between advancing economic integration and safeguarding national interests, ultimately contributing to sustainable development across the continent.¹⁶

·         Harmonizing Regulatory Standards

Standardizing regulatory frameworks across African countries, including customs procedures, visa requirements, and tariff structures, will enhance the efficiency and speed of trade process while reducing shipping costs.

In this context, African countries are working towards the implementation of the Pan-African Payment and Settlement System (PAPSS). This system aims to facilitate intra-African trade by enabling cross- border financial transactions using local currencies, thereby reducing reliance on foreign currencies such as the US dollar or Euro.¹⁷¹⁸

·         Expanding Private Sector Participation in Collaboration with Export Credit Agencies

The private sector plays a crucial role in driving industrial growth and trade expansion across Africa. Notably, 90% of private sector companies in Africa are small and medium-sized enterprises (SMEs), contributing to approximately 60% of employment on the continent. However, these businesses often

face barriers to exporting, such as limited access to finance, high trade costs, and regulatory challenges.

To address these obstacles, it is essential for African governments to implement supportive financial and economic policies, strengthen business environments, and collaborate with export credit agencies to provide trade finance solutions, risk mitigation tools, and market access support.

In this context, collaboration between the private sector and export credit agencies serves as an effective tool to boost exports by providing trade insurance and improved access to financing.

A notable example is Morocco’s successful model, where the government has strengthened cooperation with the Moroccan Export Insurance Agency (SMAEX). This initiative provided credit insurance to protect exporters against the risk of non-payment by importers and partnered with Moroccan banks to offer affordable financing solutions to exporters, facilitating their expansion into new markets. Such initiatives demonstrate the importance of integrated financial mechanisms in supporting private sector growth and enhancing Africa’s export potential.^{19 20}

·         Strengthening Regional Enforcement Mechanisms

Regional enforcement mechanisms are fundamental to ensuring compliance with trade agreements among African countries. They play a key role in reducing trade disputes and fostering a stable trade and investment environment. However, African countries face challenges due to the absence of a central supervisory authority to ensure that member states adhere to treaties and implementation regulations. This lack of oversight can lead to unregulated trade violations, undermining the effectiveness of agreements.

To address these challenges, strengthening regional enforcement mechanisms is essential for sustaining economic integration across the continent. A key example is the AfCFTA Dispute Settlement Protocol, which provides a clear legal framework for resolving disputes between member states. ²¹By ensuring predictability and fairness, this mechanism builds trust in the trade system and encourages greater compliance with signed agreements.²²

·         Developing Infrastructure Enhancing Transport Networks

Investing in transport infrastructure and logistics is a critical factor in advancing economic integration in Africa and is fundamental to the successful implementation of the (AfCFTA). Modernizing transport networks facilitates trade flows, drives economic growth, and enhances the movement of goods and services between member states, ultimately improving Africa’s global competitiveness.

Enhancing transport efficiency and expanding infrastructure is essential to keeping pace with the rapid evolution of regional trade. Despite existing challenges, major development projects in roads, railways, ports, and waterways present significant opportunities to reduce transportation costs,

making trade more affordable, minimize transit times, improving supply chain efficiency, strengthen intra-African trade linkages, and fostering regional economic cooperation. By addressing these infrastructure gaps, Africa can unlock its full trade potential, ensuring the AfCFTA delivers tangible economic benefits across the continent.

Projections indicate that the full implementation of the AfCFTA will lead to a 28% increase in demand for freight transport of all types by 2030. Meeting this demand will require significant expansion and modernization of Africa’s transport fleet, including:

1. 2 million trucks for road freight
2. 250 aircraft for air cargo
3. Over 100,000 rail wagons
4. More than 100 ships for maritime trade

By expanding investments in logistics and strengthening public-private partnerships (PPPs), Africa can achieve a transformational upgrade in its infrastructure. This will have far-reaching benefits, including, accelerating sustainable development, creating new job opportunities, and enhancing the competitiveness of African markets on a global scale.

Digital Infrastructure

Despite the challenges facing digital infrastructure in some landlocked African countries, it presents a significant opportunity to accelerate development and strengthen economic integration. As reliance on modern technology continues to grow, expanding digital transformation across various sectors becomes essential for improving the business environment, facilitating trade, and enhancing financial inclusion.

By investing in robust digital infrastructure, African countries can bridge connectivity gaps, streamline cross-border trade, and foster a more integrated and competitive continental economy.

In this context, many African countries are working to enhance investments in information and communication technology (ICT), creating greater opportunities for e-commerce, electronic single windows, e-government services, and digital finance. These technologies play a crucial role in reducing operational costs, accelerating trade processes, and improving financial transaction efficiency. By leveraging digital advancements, Africa can unlock its untapped economic potential, driving sustainable growth and enhancing regional trade integration.²³

1 United Nations Environment Program, https://www.unep.org/ar/regions/africa/mlna-fy-afryqya

2 ECA, https://www.uneca.org/stories/(blog)-as-africa%E2%80%99s-population-crosses-1.5-billion,-the- demographic-window-is-opening-getting

3 Patricia Augier, Export-led Manufacturing Growth and GVC’s across Africa: An Overview, fondation pour les études et recherches sur le développement international, https://ferdi.fr/dl/df-94eQtM45ho7RrR1wfkuftBgi/ferdi- wp347-export-led-manufacturing-growth-and-gvc-s-across-africa-an-overview.pdf

4 AUC, https://aps.aucegypt.edu/ar/articles/1422/afcfta-can-a-trade-agreement-unlock-africas-potential-help- us-be-as-one

5 AUC, 28 August 2024, AfCFTA: Can a Trade Agreement Unlock Africa’s Potential, Help Us Be as One? https://aps.aucegypt.edu/ar/articles/1422/afcfta-can-a-trade-agreement-unlock-africas-potential-help-us-be-as- one

6 World Bank, Making the Most of the African Continental Free Trade Area: Leveraging Trade and Foreign Direct Investment to Boost Growth and Reduce Poverty,

https://openknowledge.worldbank.org/entities/publication/09f9bbdd-3bf0-5196-879b-b1a9f328b825

⁷ محمد محمد إبراهيم، أبريل 2023، افاق التكامل االقتصادي االفريقي في ظل تفعيل اتفاقية التجارة الحرة القارية االفريقية، مجلة روح القوانين، العدد 102،

https://las.journals.ekb.eg/article_264706_b7a8033f70eb273462e26a33a15c53bc.pdf 8

World Bank, https://www.worldbank.org/en/topic/trade/publication/free-trade-deal-boosts-africa-economic- development

9 AfCFTA

10General Authority for Investment and Free Zones (GAFI)

https://www.investinegypt.gov.eg/Arabic/pages/AgreementDetails.aspx?id=30

11 Maria Daniel, The development of the AfCFTA: Where did it start?, Trade Unions and Trade in Africa, https://tradeunionsinafcfta.org/the-development-of-the-afcfta-where-did-it-start/

12 International Trade Centre, https://www.macmap.org/offlinedocument/AfCFTA/Discover_AfCFTA_ITC_16122022.pdf

13  Egyptian Commercial Service

14  Egyptian Commercial Service

15 Egypt Expo & Convention Authority, http://www.eeca.gov.eg/arabic/iatf1-023.htm

16 Africa Briefing, https://africabriefing.com/afcfta-adjustment-fund-corporation-established-to-support-africas- trade-transition/

17  Egyptian Commercial Service

18 Papss, https://papss.com/ar/about-us/

19 SMAEX, https://www.smaex.com/presentation.html

20 Policy Centre for the New South, Trade Policy in Morocco: Taking Stock and Looking Ahead, https://www.policycenter.ma/sites/default/files/2023-05/Rapport%20-%20BM%20-

%20PCNS%20Moroccan%20Trade%20Policy%2008-05-2023.pdf

21 Olorunfemi Akinduyite, December 2024, THE AFCFTA: LEGAL CHALLENGES IN PROMOTING REGIONAL INTEGRATION AND TRADE FACILITATION, Available at:

https://papers.ssrn.com/sol3/papers.cfm?abstract_id=4992323

22 African Union, https://au.int/sites/default/files/treaties/36437-treaty-consolidated_text_on_cfta_-_ar.pdf

23 Gift Mugano, August 2023, Data for Governance Alliance Policy Brief No.13: The African Continental Free Trade Area: Challenges and Possible Remedies, https://dataforgovernance.africa/wp-content/uploads/2023/11/the- african-continental-free-trade-area-challenges-and-possible-remedies.pdf