Africa’s regional ambitions and global trade realities

Africa’s trade landscape in 2025 presents a dynamic interplay of regional potential and global challenges. With the African Continental Free Trade Area (AfCFTA) driving hopes for regional integration, businesses are navigating complex terrains shaped by infrastructure deficits, geopolitical dynamics and the pressing need for technological adaptation.

AfCFTA: a promise of regionalisation

The AfCFTA aims to unite 54 countries into a single market, promoting trade and economic growth by removing tariffs and non-tariff barriers. It aims to boost intra-African trade, which has historically been low compared with other regions: in 2022 intra-African trade stood at about 18% of the continent’s total trade, compared with 59% in Asia and 68% in Europe.^1,2 The agreement has the potential to increase intra-African trade by more than half by the end of 2025 and could add US$450bn to Africa’s GDP by 2035.³

However, the full potential of the agreement has not yet been realised. In 2024, just 31 countries out of the 48 that had ratified the AfCFTA had initiated trade under the agreement (although this was a significant increase from seven in 2023). Slow implementation was cited by 32% of our survey respondents as one of the top two impediments to realising the benefits of the AfCFTA. The primary challenges , according to about 40% of executives we surveyed in the region, are political instability and regional conflicts.⁴ Recent coups and political unrest across the Sahel and central Africa have dampened investor confidence and trade potential. Governments must note that accelerating the implementation of the agreement and maintaining a stable political environment will be fundamental to enabling businesses in their countries.

More broadly, there may be opportunities for the continent to negotiate with other regions as a single bloc—similar to the EU-Mercosur agreement—for more leverage. Establishing this quickly would have outsized benefits for the region.

Capacity challenges

Beyond these factors, Africa lacks sufficient infrastructure and state capacity to support regional sourcing effectively, despite investments from international companies and public-private partnerships. Although labour and utilities are cost-effective, the lack of local production capabilities for raw materials and packaging presents a significant barrier. Sneha Jacob, the head of supply-chain development and CapEx at KraftHeinz, stated that "you can’t produce chips or other essential materials in a country overnight. They need to build up comparative advantages in terms of capability and costs. And while the African continent has attracted investments in recent years, challenges in state capacity continue to limit the full realisation of these opportunities." Major fast-moving consumer goods companies have faced numerous challenges in their initial attempts at regional sourcing. Ms Jacob predicts that it will require years to address these gaps. “We’re not there yet, it’ll take a decade or so,” she adds.

Infrastructure is a perennial issue for Africa, however, some recent projects are promising. The Lobito Corridor railway connecting Angola to the Democratic Republic of the Congo and Zambia will be pivotal in improving trade logistics and connectivity. In September 2024 China, Tanzania and Zambia signed an initial agreement to rehabilitate the 1,860km Tanzania-Zambia railway.⁵ This project aims to enhance the rail-sea transport network in east Africa, facilitating cargo transport from Zambia's mines to Tanzania's coast.

Together, the abundance of infrastructure, logistics and regulatory barriers make regional trade significantly more expensive compared to global standards. To mitigate costs, companies are turning to digital tools—a top strategy for 34% of the executives we surveyed in Africa. But advancing technology use, particularly of artificial intelligence-powered tools, has been hindered by the continent’s data deficit. Addressing this deficit is critical for improving supply-chain efficiency and fostering resilience. This requires a concerted effort from governments and businesses, and will require investment in data infrastructure; standards for collecting and reporting data; and capacity building within businesses and among trade officials.

Global diversification as a priority

Amid regional challenges, African firms have turned their gaze outward. The African firms we surveyed demonstrated a strong preference for geographical diversification—that is sourcing from multiple locations across the world—over regionalisation. More than 46% are choosing to diversify their supplier base, whereas only 16% are regionalising it.

Although China remains Africa’s largest trading partner, countries such as India, the United Arab Emirates and Turkey are emerging as important players in Africa, offering an array of economic partnerships. This diversification reflects the continent's ambition to reduce dependency on a single partner. To increase engagement with markets beyond Africa, executives point to the need for more favourable trade agreements (cited by 35%) and supportive government policies and incentives (25%). Export promotion policies can be particularly effective, such as Rwanda’s reforms (digitising customs procedures, lowering tariffs and offering tax incentives for exporters) and Ethiopia’s industrial parks that permit duty-free imports of equipment.^6,7 Notably, in 2024 South Korea initiated Economic Partnership Agreement negotiations with Tanzania and signed a trade and investment promotion framework with eight African countries, including Ghana, Malawi, and Zimbabwe, to enhance co-operation in key sectors such as critical minerals mining, energy and manufacturing.^8,9 Partners that support the creation of value-added industries, enabling Africa to move beyond commodity-led exports, will be particularly beneficial.

But diversification does not imply a desire to divest from China; indeed, the continent continues to secure vital support from the Chinese government. The country recently pledged US$50bn in new funding for trade-related projects and has been involved in critical infrastructure projects such as the Tanzania-Zambia railway.¹⁰ More developed markets such as South Africa are seeking investment from China for their automotive industry. Furthermore, China is integral to Africa achieving its sustainability goals. It is promoting green technology exports to Africa, including electric vehicles and solar panels, aligning with the continent's renewable energy targets.

Sustainability considerations

Support for sustainable practices in Africa is important, given the region’s exposure to climate change—particularly its agricultural sector, which comprised about 13% of Africa’s exports in 2023.¹¹ "Climate change is impacting the region very badly,” attests Ms Jacob from KraftHeinz, “Today's solutions won't help tomorrow unless climate challenges are fixed." It is concerning, then, that a high share of executives in Africa stated that sustainability was a lower priority than it was 12 months ago (27% compared with 15% globally). This is largely owing to financial constraints and economic and geopolitical considerations taking priority.

Extreme weather events and shifting climate patterns in Africa require innovative solutions for crop planning and production. KraftHeinz is adopting sustainable agricultural practices upstream, particularly with farmers growing staple crops like tomatoes. The firm has provided educational programmes to Egyptian farmers on sustainable farming methods and established a hydroponic greenhouse in South Africa with local partners.^12,13 Across all sectors globally, executives we surveyed said that they were increasing investment in technology to identify climate risks within the supply chain (38%) and strengthening collaboration with suppliers to establish better data sharing and joint strategies to handle extreme weather events (34%). Both these strategies enable data-driven environmental management within supply chains, making it all the more critical to address the data deficit on the continent.

Data collection of sustainability metrics will be fundamental for countries exporting to the EU in light of the Carbon Border Adjustment Mechanism (CBAM), which came into force in October 2023 (with a transitional phase lasting until the end of 2025). This policy will have a significant impact, as exports to the EU comprised 33% of Africa’s total exports in 2023.¹⁴ To comply, executives in Africa feel that access to green technologies (cited by 55%) and local government policy support (50%) would be most beneficial. Green technologies such as renewable energy equipment (which could support irrigation and mining operations, for instance) and smart energy-monitoring systems could help companies in Africa to reduce their carbon footprint and comply with EU’s regulation.

A vision for the future

Africa stands at a pivotal juncture in 2025. Although trade challenges persist, the continent's commitment to regional integration through the AfCFTA and its proactive global engagement present a roadmap for sustainable growth. Africa’s supply-chain potential can be realised over the next decade with sustained investment in infrastructure, education and capacity building. By addressing systemic barriers and embracing innovation, Africa can unlock its vast trade potential and secure a stronger position in the global economy.