Introduction

The Economic Report on Africa 2025 explores the African Continental Free Trade Area (AfCFTA) as a transformative tool for economic growth, industrialization, and trade-led development. This report, prepared by the United Nations Economic Commission for Africa (ECA), emphasises strategic actions necessary to maximize AfCFTA’s potential.

Economic and Social Developments in Africa

Key Insights:

• Africa’s economic growth is projected to rebound, reaching 3.9% in 2025 and 4.1% in 2026.
• Fiscal challenges persist, with high inflation, widening deficits, and debt vulnerabilities.
• Urbanization, gender inequality, and low productive employment remain barriers to sustainable growth.
• The AfCFTA presents a unique opportunity to boost intra-African trade and industrialization.

Economic Performance:

• East Africa leads regional growth with a projected 6.0% expansion.
• West Africa is expected to grow at 4.2%, led by sectors such as mining and agriculture.
• North Africa sees promising growth driven by energy production and infrastructure investment.
• Central Africa and Southern Africa face economic stagnation due to weak investment climates.

Overview of the AfCFTA

• The AfCFTA is the largest free trade area globally, covering 54 countries and a population of 1.3 billion people.
• It aims to reduce tariffs, improve trade facilitation, and create a single continental market.
• AfCFTA implementation is expected to increase intra-African trade by 45% by 2045.
• It will help Africa transition from an exporter of raw materials to a producer of high-value goods.

Implementation Strategies:

• Harmonizing trade policies to promote policy coherence.
• Developing regional value chains (RVCs) for sectors like agriculture, pharmaceuticals, and manufacturing.
• Investment in trade facilitation infrastructure, including digital platforms and customs modernization.

Economic Impacts of AfCFTA Implementation

Economic Transformation:

• AfCFTA will contribute to Africa’s GDP growth by 1.2% by 2045.
• Intra-African trade will increase across key sectors, including:
  • Manufacturing (+60%)
  • Agro-processing (+30%)
  • Services (+20%)
• The agreement will help reduce poverty and inequality, but benefits will not be evenly distributed.

Fiscal and Trade Impact:

• Tariff revenues will decline, but increased trade volumes and economic growth can offset revenue losses.
• Developing efficient taxation mechanisms and trade policies will be essential for sustained growth.

Transformative Potential of AfCFTA

Key Enablers:

• Digitalization: Expanding internet infrastructure and digital trade integration.
• Transport Connectivity: Investing in roads, ports, and air transport systems to facilitate trade.
• Renewable Energy: Enhancing Africa’s energy security through sustainable power solutions.

Challenges:

• Non-Tariff Barriers (NTBs) such as regulatory inconsistencies and trade restrictions must be addressed.
• Informal trade networks need to be recognized and integrated into the formal trade framework.
• Gender disparities must be tackled to empower women entrepreneurs and businesses.

Policy Recommendations for AfCFTA Success

National Reforms:

• Governments must focus on reducing tariffs and harmonizing trade regulations.
• Enhancing private sector participation in AfCFTA implementation.
• Investing in skill development to prepare the workforce for new opportunities.

Investment in Infrastructure:

• $120.8 billion needed for transport and trade facilitation by 2030.
• Developing digital payment systems like the Pan-African Payment and Settlement System (PAPSS).
• Strengthening climate resilience policies to support sustainable industrialization.

Gender and Inclusion:

• Increasing women’s access to finance and education to support their participation in trade.
• Implementing gender-sensitive trade policies to ensure equitable benefits from AfCFTA.

Conclusion

The successful implementation of the AfCFTA could revolutionize Africa’s economic landscape by promoting intra-African trade, industrialization, and inclusive growth. Strategic investments, policy coherence, and private sector engagement will be crucial in unlocking the full potential of this landmark agreement.

The International Trade and Research Centre (ITRC) is committed to supporting AfCFTA’s objectives by providing research, policy guidance, and trade facilitation expertise to ensure Africa achieves sustainable economic growth.

Download the Full Report here