By Richmond Kwame FRIMPONG
Africa’s trade growth by 2025 will be largely shaped by several major developments, including the implementation of the African Continental Free Trade Area (AfCFTA), rising intra-African trade, industrialization efforts, and expanded connectivity through infrastructure projects.
AfCFTA, launched in January 2021, stands as the continent’s most ambitious trade agreement, aiming to create a single market of 1.3 billion people and a combined GDP of $3.4 trillion.
This monumental shift seeks to eliminate 90% of tariffs on goods traded between African countries, thereby boosting intra-African trade from its current level of 16% to an estimated 52% by 2025.
The political will demonstrated by African leaders, in harmonizing tariffs and policies, is pivotal in catalyzing this change. By removing trade barriers, AfCFTA will stimulate economic diversification, promote industrialization, and encourage value-added manufacturing across the continent.
For businesses, these changes mean more integrated supply chains, reduced costs, and broader market access. However, understanding these macroeconomic developments is only the first step toward capitalizing on Africa’s emerging trade opportunities.
Key Trade Drivers: Industrialization and Value-Added Exports
A critical driver of Africa’s trade growth in 2025 is the continent’s ongoing push towards industrialization and value-added exports. Africa has long been dependent on exporting raw materials such as oil, minerals, and agricultural products. However, global shifts in demand, coupled with internal political momentum, are driving a paradigm shift towards value addition. Countries like Ethiopia, Kenya, and Ghana have initiated policies to boost manufacturing capacity, enhance local production, and reduce reliance on raw material exports.
For instance, Ethiopia’s ‘Homegrown Economic Reform Agenda’ aims to transform the country into a regional manufacturing hub through industrial parks, creating job opportunities and attracting foreign direct investment (FDI). Similarly, Ghana’s ‘One District, One Factory’ initiative boosts local production and export capacity. One example of a critical industrial infrastructure supporting this initiative is the Dawa Industrial Zone in Ghana.
Located strategically along Ghana’s eastern coast, the Dawa Industrial Zone offers industries an integrated environment with reliable utilities, tax incentives, and logistical advantages, making it a hub for both local and international companies seeking to tap into West Africa’s manufacturing and trade potential.
These developments represent a significant opportunity for businesses, particularly those involved in manufacturing, logistics, and technology. Companies that can offer technology transfer, capacity-building services, or innovative manufacturing solutions will find fertile ground for investment. Moreover, the rise of industrial zones across the continent provides businesses with the necessary infrastructure and incentives, such as tax holidays and subsidized utilities, to set up operations efficiently.
Infrastructure as a Catalyst for Trade
Trade cannot flourish without adequate infrastructure. Africa’s infrastructure gap has long been cited as a key barrier to economic growth. However, there has been an intensified focus on infrastructure development to enable trade and commerce.
Major continental projects such as the Programme for Infrastructure Development in Africa (PIDA) are driving this agenda. PIDA aims to address the continent’s most critical infrastructure needs, from energy and transportation to ICT and water management.
The African Union and regional economic communities have prioritized the development of transportation corridors like the North-South Corridor, which connects eight African countries, and the Lamu Port-South Sudan-Ethiopia-Transport (LAPSSET) corridor, aimed at increasing trade in East Africa.
Furthermore, port modernization projects in countries such as Djibouti and Kenya will enhance Africa’s connectivity to global markets and improve logistics efficiencies. As these infrastructure projects near completion, they are expected to significantly reduce transportation costs, shorten delivery times, and increase the competitiveness of African exports.
For businesses seeking to expand into Africa, the development of trade corridors and transport infrastructure will reduce the logistical complexities that have long hindered the movement of goods. Multinational logistics providers and companies involved in construction, energy, and ICT are particularly well-positioned to benefit from these improvements.
Intra-African Trade: From Aspiration to Reality
One of the most transformative aspects of Africa’s trade future is the rise of intra-African trade. Historically, African countries have traded more with Europe, Asia, and North America than with each other. However, this is rapidly changing. With AfCFTA and new infrastructure developments, African countries are beginning to trade more with one another, recognizing that regional integration is critical to economic growth and resilience.
For instance, the trade of manufactured goods between African countries has increased significantly in recent years. The export of processed food, beverages, textiles, and electronics within the continent is on the rise, signaling that African economies are beginning to diversify beyond commodities. The Economic Commission for Africa (ECA) estimates that intra-African trade could rise by 33% with the full implementation of AfCFTA.
For businesses, the rise in intra-African trade offers several advantages. First, companies can tap into new and expanding markets without having to navigate international trade barriers. Second, by sourcing products and services within the continent, businesses can reduce costs, benefit from preferential trade terms, and improve supply chain resilience. As regional economic communities continue to integrate, businesses that establish a presence in multiple African countries will have a strategic advantage over those entering single markets.
Navigating Africa’s Diverse Markets: Regional Considerations
Africa is not a monolith. The continent comprises 54 countries, each with its unique economic environment, regulatory landscape, and consumer preferences. For businesses to succeed, they must adopt a regional approach to market entry and expansion. North Africa, for example, offers a gateway to European and Middle Eastern markets and has well-established trade routes. Countries like Egypt and Morocco are expanding their industrial and logistics capacities, presenting opportunities for businesses in sectors such as automotive, textiles, and renewable energy.
In East Africa, countries like Kenya, Tanzania, and Uganda are experiencing rapid economic growth, driven by investments in agriculture, tourism, and technology. The region’s integration efforts, through the East African Community (EAC), are paving the way for smoother trade flows and increased investment opportunities. Meanwhile, West Africa is becoming a hub for manufacturing, with Nigeria, Ghana, and Côte d’Ivoire leading the way in sectors such as agro-processing, pharmaceuticals, and digital services.
South Africa remains the continent’s most industrialized economy, with a strong financial sector and sophisticated infrastructure. However, businesses must be mindful of regional disparities in market readiness, political stability, and ease of doing business. Engaging with local partners, understanding regional trade blocs, and leveraging local expertise are essential strategies for navigating Africa’s diverse trade environments.
Digital Transformation and E-Commerce
Digital transformation is another critical factor that will shape Africa’s trade growth by 2025. Africa is experiencing rapid growth in mobile phone usage, internet penetration, and digital platforms, which are revolutionizing how businesses operate and engage with consumers. E-commerce platforms like Jumia, Takealot, and Twiga Foods are expanding rapidly, connecting businesses to millions of consumers across the continent.
Moreover, digital payment systems, such as M-Pesa in Kenya, have facilitated greater financial inclusion and made it easier for businesses to conduct cross-border transactions. The digital economy in Africa is projected to reach $180 billion by 2025, driven by increased internet connectivity, rising demand for online services, and a burgeoning tech-savvy population.
For businesses, the digital economy represents an unparalleled opportunity to reach new markets, especially in sectors like retail, logistics, and financial services. Companies that invest in digital infrastructure, e-commerce platforms, and digital marketing strategies will be well-positioned to tap into Africa’s growing consumer base.
The Role of Sustainability in Trade
As businesses prepare for Africa’s trade growth, sustainability must be at the forefront of their strategies. African consumers and governments are becoming more conscious of environmental, social, and governance (ESG) issues, driven by the global sustainability movement and the continent’s own vulnerability to climate change. The transition to green economies is gaining momentum, with countries like South Africa, Morocco, and Egypt leading the charge in renewable energy development.
Incorporating sustainability into business models is no longer optional but a necessity for companies seeking long-term success in Africa. Businesses that prioritize ethical sourcing, carbon footprint reduction, and sustainable production practices will not only meet consumer demand but also position themselves favorably with governments and regulators.
Additionally, investment in green technologies and infrastructure will open new avenues for growth, especially as Africa seeks to balance economic development with environmental protection.
Challenges and Risks
While Africa’s trade potential is immense, businesses must also be cognizant of the challenges and risks associated with operating in the continent. Political instability, regulatory hurdles, and infrastructure deficits remain significant concerns in several countries. Corruption, bureaucratic inefficiencies, and uneven implementation of policies can create barriers to market entry and expansion.
Additionally, external factors such as global economic downturns, fluctuating commodity prices, and trade tensions can have a ripple effect on African economies. Businesses must, therefore, adopt a long-term view, diversify their investments, and develop robust risk mitigation strategies.
Conclusion
As intra-African trade expands, supported by regional trade agreements and enhanced connectivity, companies can benefit from integrated supply chains, reduced costs, and broader market access.
The rise of value-added exports, industrial zones, and digital transformation creates fertile ground for investment, particularly in manufacturing, logistics, and technology. However, navigating Africa’s diverse markets requires a regional approach and awareness of challenges like political instability and regulatory hurdles.
By aligning with sustainability and adapting to Africa’s evolving trade environment, businesses can unlock significant growth potential.
The writer is an award-winning “growth and turnaround” business leader with nearly two decades of multi-industry expertise across Europe, the Middle East and Africa. Specialized in Upstream financial Advisory, International Trade & Development, Economic Integration & Digitalization, Industrial Ecosystems & Special Economic Zones.
