The African Continental Free Trade Area (AfCFTA) could help African economies reduce their dependence on raw commodity exports by creating regional value chains and expanding opportunities for processing and higher-value production, according to an Afreximbank research paper.
The study, Revisiting the Singer-Prebisch Hypothesis: Commodity Price Volatility in Africa, argues that continued reliance on basic commodity exports leaves African countries exposed to deteriorating terms of trade and volatile global prices. It identifies AfCFTA as a potential platform for shifting from the export of raw materials toward intermediate and higher-value products produced within Africa.
The finding is part of a broader analysis of 29 major African commodity exports covering 1960 to 2024. The research concludes that most of the commodities examined continue to display long-term stagnation or deterioration in their terms of trade, despite temporary improvements during global commodity booms.
AfCFTA seen as industrialisation platform
The report says AfCFTA can provide the market scale needed to develop regional value chains in sectors including agriculture, metals and energy-related commodities, where much of the value generated from African resources is currently captured outside the continent.
By reducing barriers to intra-African trade and expanding the regional market, the agreement could support the movement of commodities from raw exports into processing and higher-value intermediate products within Africa.
The researchers therefore frame regional trade integration as more than a mechanism for increasing trade volumes. Its greater potential, according to the paper, is to support structural transformation by creating demand and scale for African processing and manufacturing industries.
The report says African policy should focus on moving away from reliance on global commodity-price movements through value addition, industrial upgrading, technology adoption and productivity increases.
Raw exports leave Africa exposed
The case for greater processing is rooted in the study’s findings on commodity terms of trade. The researchers say most African commodity exports remain vulnerable to a recurring pattern in which price shocks produce temporary improvements before markets return to stagnation or deterioration. Traditional agricultural and forestry commodities show the strongest evidence of this pattern, while some metals and precious metals have experienced periods of stronger performance.
That volatility can weaken the purchasing power of commodity exporters relative to countries producing manufactured goods. The report says continued dependence on commodities can reduce fiscal and revenue space and make long-term development planning more difficult.
For Africa, the implication is that simply increasing the volume of raw commodities exported may not resolve the underlying problem.
Instead, the researchers argue that domestic policy needs to link resource extraction to processing and industrial development so that a greater share of the value generated from African commodities remains within the continent.
Integration alone won’t be enough
The study cautions that AfCFTA cannot deliver this transformation without complementary investment. It identifies limited industrial capacity, infrastructure deficits, energy and logistics constraints and non-tariff barriers as structural obstacles that could limit the benefits of regional integration. Without improvements in these areas, the report says, AfCFTA may not translate into meaningful industrial transformation across member states.
The researchers also warn that gains could be uneven if industrial capacity remains concentrated in a relatively small number of economies.
This means the effectiveness of AfCFTA as a commodity transformation strategy will depend not only on removing trade barriers but also on whether African countries can build the infrastructure, energy systems, processing capacity and regional supply chains needed to support competitive manufacturing.
Commodity revenues still need stronger buffers
The report recommends that commodity-dependent countries complement diversification and industrialisation with policies designed to manage price volatility.
These include countercyclical fiscal buffers, stabilization funds, sovereign wealth funds and hedging strategies, alongside measures to increase agricultural output and protect vulnerable commodity sectors.
The study’s broader conclusion is that Africa’s continued dependence on raw commodities is a structural problem that cannot be resolved by waiting for the next commodity boom.
AfCFTA provides a potential route toward greater value addition by creating a larger regional market for African-produced intermediate and finished goods. But the report makes clear that trade integration must be accompanied by industrial upgrading, infrastructure investment and policies that enable African economies to capture more of the value generated by their natural resources.
