The World Bank has been significantly involved in supporting African trade initiatives, particularly through its collaboration with the African Continental Free Trade Area (AfCFTA). The AfCFTA, launched in 2021 is aimed at creating the largest free trade area in the world, encompassing 55 African nations with a combined GDP of US$3.4 trillion. The initiative seeks to reduce tariffs, harmonise regulations, and enhance trade facilitation to boost intra-African trade and economic growth.
World Bank’s Role and Strategic Support
The World Bank plays a pivotal role in supporting the AfCFTA’s ambitious goals. It provides technical assistance, funding, and policy advice aimed at helping African countries overcome barriers to trade. For instance, it is collaborating with the AfCFTA Secretariat, the World Trade Organization (WTO), and various African governments to remove trade restrictions, streamline customs procedures, and improve logistics and digital commerce infrastructure. These efforts are projected to generate significant economic benefits, potentially lifting 30 million people out of extreme poverty and increasing the incomes of 68 million individuals living on less than $5.50 per day by 2035.
One key area of the World Bank’s focus is trade facilitation—simplifying customs procedures, cutting red tape, and improving infrastructure. According to estimates, $292 billion of the AfCFTA’s expected $450 billion in economic gains will come from such facilitation measures. These reforms are vital for accelerating the movement of goods and services across borders, reducing trade costs, and fostering regional integration.
Investment in Value Chains and Infrastructure
The World Bank has also underscored the importance of integrating African economies into global value chains, especially in sectors like agriculture, manufacturing, and services. Countries like Zambia and the Democratic Republic of Congo stand to benefit from increased demand for raw materials such as copper and cobalt, essential for industries like automobile manufacturing. This diversification is crucial for reducing Africa’s over-dependence on commodity exports, thereby building more resilient economies.
Additionally, infrastructure investment remains a priority. The World Bank encourages African nations to invest in both hard and soft infrastructure—ranging from physical logistics networks to regulatory reforms—which are necessary for reaping the full benefits of the AfCFTA. Complementary reforms like improving the business environment, digital commerce, and regulatory transparency are also being promoted.
Challenges and Opportunities
Despite these opportunities, significant challenges remain. One of the main obstacles is the need to harmonise domestic laws on intellectual property, e-commerce, and competition policies. The World Bank has been working with African governments to address these legal complexities, recognising that a well-functioning regulatory environment is critical for fostering foreign direct investment and sustainable growth. Equally important is the active involvement of African businesses, which will be key to unlocking the trade potential of AfCFTA.
AfCFTA’s Potential Impact on Trade
Once fully operational, AfCFTA is expected to eliminate tariffs on 90% of goods by 2034. This will not only lower trade costs but also encourage industrialisation and job creation across the continent. Sectors like services, which already account for the largest share of job creation globally, are expected to experience substantial growth in Africa as restrictions in tourism, insurance, and transport are lifted.
According to the World Bank, AfCFTA could attract billions in foreign direct investment, fostering intra-African trade and enabling local firms to integrate into global supply chains. The agreement also aligns with broader global efforts to support sustainable development, including investments in green energy and climate-resilient infrastructure.
The World Bank’s comprehensive support for African trade initiatives is critical in driving the continent’s economic transformation. By backing the AfCFTA and related reforms, the World Bank aims to catalyse a new era of African industrialisation and integration into the global economy. However, success will hinge on addressing the continent’s infrastructural deficits, and regulatory bottlenecks, and ensuring that African businesses are fully equipped to seize the opportunities that AfCFTA presents.
