The Potential Role of Intra-African Trade and AfCFTA as US Tariffs Go Live

While the majority of African countries were subject to 15% tariffs on exports to the U.S., South Africa, Algeria, Libya, and Tunisia were imposed rates of 25% and above. These increased costs of exports will either be passed on to American consumers or absorbed by producers/exporters, or a combination of both, effects that might reduce African exports to the world’s largest economy.

South Africa, which has a 30% duty on all imports to America and an additional 25% tariff on all auto imports, continues to negotiate with the Trump administration. The U.S. is South Africa’s second-largest export market. President Cyril Ramaphosa spoke to Trump earlier today, Thursday, August 7, and a statement from the South African presidency said, “The two leaders undertook to continue with further engagements, recognizing the various trade negotiations the US is currently involved in.”

In recent years, the U.S. share in African exports has declined, as more African countries have increased their trade volumes with Asian and Middle Eastern countries. However, the U.S. has continued to be an attractive destination for African exports, especially with the duty-free perks of the African Growth and Opportunity Act (AGOA), which will effectively come to an end with Trump’s tariffs.

As countries seek alternative destinations, mostly externally, this appears to be an ideal time for African leaders and stakeholders to fully leverage the potential of intra-African trade. According to the recent African trade report by the African Export-Import Bank (Afreximbank), trade between African countries accounts for just over 14% of all formal trade, “underscoring continued dependence on external demand and exposure to commodity shocks.”

At the beginning of 2021, the African Continental Free Trade Area (AfCFTA) commenced. With 54 of the 55 member nations in the African Union assenting to its agreement, the AfCFTA is the largest free-trade area in the world. However, implementation has been painfully slow. At this year’s Africa CEO Forum, only 17 percent of respondents shared optimism about the trade agreement, despite leaders like Ramaphosa saying it will “open the floodgates for economic activity on our continent.”

The potential perks of the AfCFTA are tantalizing, including improved economic integration across the continent, the development of regional infrastructure, the creation of employment opportunities for Africa’s young population through industrialization, and many more. However, the past four years have seen an unsteady period of growth and contraction in intra-African trade. The value of intra-African trade in 2024 reached $220.3 billion, representing a 12 percent increase from the $196.04 billion value in 2023, following a contraction from $208.3 billion in 2022.

“Intra-regional trade has been minimal amongst African countries, and it’s an issue of developing regional value chains where several countries participate in the entire value chain,” independent economic consultant Dr. Mthokozisi Tshuma tells OkayAfrica, citing reliance on trade partners outside the continent.

“For example, the crude oil produced in Nigeria could be refined in Côte d’Ivoire and exported to other countries,” Dr. Tshuma says. Similarly, gold in Ghana can be processed into jewelry or other gold products in other African countries like neighboring Benin, before being exported to other continents. Typically, crude oil is exported to other continents and then refined for reimport as finished products. Jewelry, on the other hand, comes back as finished products from raw materials extracted here. What we’re seeing is African countries produce minimal goods with value addition, but with regional value chains, they allow African countries to expand trade with each other.”

Implementation has been slowed by inadequate transportation systems, poor communication between countries, diverse currencies, differences in advancements in financial and payment systems, varying regulatory practices across borders, and many other factors.

It’s worth noting that the free-trade agreement has yielded some positives, like the Pan-African Payment and Settlement System (PAPSS), which enables digital payments for trades across multiple African currencies. Still, a significant and sustainable uptick in intra-African trade remains contingent on many factors that extend beyond the movement of money across borders.

“There are several factors why the regional value chains have not flourished, and it’s issues around what you call non-tariff barriers (NTBs), where you talk about customs delays, issues of restrictive regulation, or inconsistent product design standards across the continent,” Tshuma says, recommending a harmonized standard of trade in Africa.

Ideally, the AfCFTA should build on sub-regional trade blocs, but even those have significant issues within their processes. In June, the East African Community (EAC) cited surges in NTBs across East Africa, keeping intra-EAC trade stuck at 15%. These barriers have been blamed on discriminatory laws and regulations by member states seeking to maintain a local advantage over neighbors that they should view as partners, rather than competitors.

Generally, NTBs are concerning because they raise questions about the feasibility of integrating African trade. “Right now, the problem is that this is not something that can occur overnight. It will take time,” Tshuma says, stating the need to synchronize regulation, customs processes, and technical requirements to achieve the AfCFTA’s goal of increasing intra-African trade by 52% by 2035.

“If we improve transport infrastructure such as cross-border roads, railways, ports, and air transport networks, make the borders and customs operations more efficient, [intra-African trade] becomes easier, especially with proper governance within relevant institutions.”