REGGIE MLANGENI: Splintering global economy gives Africa space to build continental one

There is no shortage of hype about the promise of the African Continental Free Trade Area (AfCFTA), often framed as a ready-made substitute for the export markets Africa risks losing under shifting US trade policy.

The tariff wave under the Trump administration was a harsh — though in many ways inevitable — lesson in how fragile a trade model becomes when it leans too heavily on a few dominant markets. Many now argue that those tariffs, with the US-China trade war and wider disruption of the global trading system, are precisely the kind of shock Africa needs to accelerate the creation of its own integrated, self-sustaining market.

But that is a heavy burden to place on a framework still in its infancy, particularly when so many African economies rely on external trade for stability and growth. Intra-African trade has shown encouraging momentum, rising 7.2% in 2023 to $192bn, or 15% of the continent’s total trade. Yet it is not a silver bullet; it represents a longer-term goal that will require steady focus and commitment from across the continent.

The imperative is twofold: currency stability and monetary independence. Almost every cross-border transaction clears through the dollar. That reliance gives Washington immense leverage, but it also exposes African economies to shocks they cannot control. Building regional payment systems that enable direct settlement in local currencies would reduce that dependency and spread risk more evenly as a major hedge against volatility — perhaps not overnight, but at least incrementally.

In addition, global capital still follows the logic of carry trades, chasing spreads between low-cost borrowing markets and higher-yielding emerging economies. Yet the anchor point of this system is again US monetary policy. Whenever the Fed shifts, Africa feels the tremors. In SA, for example, the pattern is clear: US rate changes seep into local rates with a nine to 15 month lag, regardless of domestic conditions. That means Pretoria is often reacting to Washington rather than to its own economy. And this is not unique to SA; the cycle repeats across the continent.

Co-ordination and strong foundations

Breaking these dependencies is easier said than done. Markets function only when the foundations beneath them are solid. Growth depends on the systems that keep industry running, the resources that sustain populations, the networks that connect producers to consumers and the political environments that allow long-term commitments to hold. None of this can be left to chance. Without deliberate co-ordination, the vision of a continental market risks dissolving into fragmented ambition. 

There are five priorities Africa must address if the AfCFTA is to function as a stabilising engine of growth in an unsettled global economy.

The first is electrification. More than 30 countries still endure routine load-shedding or grid instability, conditions that make sustained production impossible. In Zambia, for example, blackouts stretch across most of the day, erasing any prospect of competitive manufacturing. Elsewhere, the paradox is reversed: Uganda generates surplus hydropower that it sells into neighbouring states, proof that energy can flow across borders when infrastructure exists to carry it. The issue, then, is not absolute scarcity but fragmentation.

Undermining AfCFTA’s industrial promise

Generation and transmission remain poorly integrated, an obstacle the AfCFTA cannot overcome unless grids themselves are connected. Initiatives such as the Southern African Power Pool has enabled modest cross-border flows, but in Central and West Africa similar systems are embryonic or inactive. This leaves little scope for load balancing and constrains the emergence of energy-intensive industries, even in hubs otherwise well-positioned to serve the continent.

Water follows the same logic. A young and fast-growing population is often described as a demographic dividend, but the dividend only pays out if people are healthy enough to participate in the economy. Where clean supply is absent, productivity collapses under the weight of preventable disease and instability rises with it. Water security must be planned and financed as core economic infrastructure, integrated into national development strategies and regional co-operation frameworks.

The physical infrastructure that enables trade is the next priority. Logistics account for as much as 40% of the retail price of goods in African markets, and importing a standard container into the continent costs more than 50% above the global average. It is still cheaper to move goods from Shanghai to Lagos than from Dar es Salaam to Lagos — a distortion that keeps African producers priced out of their own markets.

Strategic infrastructure beyond borders

The weakness is structural. Roads carry nearly 90% of passengers and 80% of freight, yet Africa’s road density is among the lowest globally. Rail is thinner still: just 87,000km of track across more than 30-million square kilometres of land. Linking the continent demands a strategic shift towards transnational infrastructure planning and pooled financing that reflect the geographies of production rather than the boundaries of states. Corridors that connect resource-rich interiors to regional processing hubs and coastal gateways would not only reduce costs but also create bankable assets capable of absorbing long-term capital. The AfCFTA will function as a continental market only when those arteries exist to carry value across borders.

However, this will not endure without political stability. Investors can price risk in almost any sector, but instability destroys the horizon over which investment is viable. The Democratic Republic of Congo is a stark reminder of how opportunity is wasted when governance is fragile: a state that holds nearly every critical mineral needed for the global energy transition has yet to convert that wealth into regional supply chains. What follows, inevitably, is co-ordination — the regulatory alignment, interoperable systems and enforcement mechanisms that give counterparties confidence to commit. If stability lowers the cost of capital, co-ordination ensures that capital, once deployed, serves a continental system rather than a collection of localised gains.

The end goal is diversification. The continent has learnt, often harshly, how dependence on a narrow set of partners or a single commodity leaves economies exposed to shocks they cannot control. The hedge is to widen the base: to cultivate more trading relationships, with priority given to those within the continent itself. Regional blocs prove the point. The eurozone, for all its imperfections, has shown that when countries negotiate as one, they carry weight even with the largest powers.

Africa’s advantage is the variety already present across its economies. Every state holds a form of competitive strength — in resources, in geography, in population — yet those strengths generate growth only when they are connected. Building industries around these natural advantages and trading with partners that complement them is how a continental economy begins to take shape. 

• Mlangeni is head of sales and structuring at Absa CIB.