Africa risks remaining heavily engaged in global trade without achieving meaningful industrial transformation unless it shifts more production and commerce toward regional markets, according to a new World Bank report that calls for deeper implementation of the African Continental Free Trade Area (AfCFTA).
Nearly 85% of Africa’s trade is conducted outside the continent, while intra-African trade accounts for only about 15% to 17% of total exports, limiting opportunities for regional specialization, industrialization and diversification, the report said.
The report, Integrating Africa: From Threads to Hubs, argues that the continent’s challenge is not simply to trade more, but to change what it trades and where it trades.
Africa accounts for about 17% of the world’s population but contributes only 5.5% to 6.5% of global trade, according to the report. Its exports to the rest of the world remain heavily concentrated in raw materials and extractive commodities, limiting domestic value addition and economic spillovers.
By contrast, trade within Africa is more diversified and manufacturing-intensive. More than 60% of intra-African trade consists of manufactured products, while 52% of Africa’s exports to markets outside the continent are primary commodities, the World Bank said.
“Intra-African trade is richer in industrial content and offers higher development returns,” the report said, identifying processed agriculture, food products, textiles, pharmaceuticals and automotive manufacturing among sectors with greater potential to support jobs and industrial upgrading.
The findings strengthen the economic case for the AfCFTA, which seeks to create a continent-wide market by reducing barriers to trade and investment. But the World Bank warned that tariff reductions alone will not be enough.
Much of the cost preventing African countries from trading with one another originates behind national borders, including inefficient customs systems, regulatory differences and weak logistics. Divergent standards, fragmented transit regimes and other border-related barriers compound those costs, the report said.
The bank said Africa should focus on making goods, data, financial systems and regulations interoperable across borders, describing this as a more important condition for integration than trade liberalisation alone.
“Without a shift in the structure and direction of trade toward regional production, higher-value goods, and functional integration, Africa risks remaining open but not transformed,” the report said.
The report is built around four priorities: developing regional value chains, reducing trade frictions, deepening and enforcing regional trade agreements, and investing in regional public goods such as transport corridors, energy systems and digital infrastructure.
Regional markets could be particularly important for Africa’s industrial ambitions because many individual economies lack the scale needed to support diversified manufacturing.
With median gross domestic product below $15 billion, many African countries have domestic markets too small to independently sustain large-scale industrial production, according to the report. Regional integration can pool demand, lower production costs and support value chains in sectors such as agro-processing, automotive components and light manufacturing.
The World Bank said regional value chains are already emerging in several parts of the continent, including textiles, construction and horticulture in East Africa; agro-processing and cement in West Africa; and chemicals, food and machinery in Southern Africa.
In some regional blocs, including the East African Community and the Southern African Development Community, manufactured products account for more than half of intra-bloc exports, highlighting the potential of regional markets to support industrial development.
The report also argues that Africa’s integration agenda has become more urgent as geopolitical tensions, export restrictions, carbon-related trade measures and the restructuring of global supply chains reshape international commerce.
For African economies that have historically remained on the margins of global production networks, greater regional integration could provide a way to build more resilient supply chains and reduce dependence on distant markets.
“Africa already trades the right things with itself, but not enough,” the report said.
The challenge now is whether governments can move beyond trade agreements and policy commitments to build the infrastructure, institutions and cross-border systems needed to turn the AfCFTA into functioning regional production and trade networks.
