LocationsThe African Continental Free Trade Area (AfCFTA) is poised to serve as Africa's gateway to economic transformation. AfCFTA is already proving to be a pivotal force in reshaping the economic landscape of Africa.
Turning the African Continental Free Trade Area (AfCFTA) into a reality for small and mid-sized businesses in Africa
May 19, 2025
Women entrepreneurs engaging with potential clients and partners at the Biashara Afrika 2024 marketplace, showcasing their products, Kigali, Rwanda, October 2024
UNDP Africa
The African Continental Free Trade Area (AfCFTA) is poised to serve as Africa's gateway to economic transformation. AfCFTA is already proving to be a pivotal force in reshaping the economic landscape of Africa.
To date, the African continent has made significant strides toward economic integration through trade, despite challenges posed by tariffs and non-tariff barriers across its national borders. These barriers have historically hindered business competitiveness, particularly for smaller businesses with fewer resources to engage in international commerce. This reality is compounded by the fact that nearly half of the African Union's member states have populations below 10 million, which means that many African countries have small domestic markets, limiting the scale at which businesses can grow. Without access to a larger, integrated market, firms—especially SMEs—struggle to achieve economies of scale, attract investment, and compete with larger global players. This fragmentation has historically increased transaction costs, reduced trade efficiency, and restricted economic diversification across the continent.
Fortunately, AfCFTA is dismantling these challenges and barriers, unleashing the potential for intra-African trade to flourish, primarily through value-added products. (See here the UNDP The Futures Report 2021, Which Value Chains for a Made in Africa Revolution?). This creates a trade system that is in marked contrast to Africa’s traditional global export dynamic centred on commodities. As noted by the World Bank Group, effective implementation of AfCFTA could act as a catalyst for Africa's structural transformation, tapping into a viable market driven by an anticipated African population of 1.7 billion by 2030.
Deliberate interventions are essential to make AfCFTA work for micro, small and medium-sized enterprises (MSMEs). In Africa, small and mid-sized businesses account for an estimated 80 percent of employment and half of overall production. Increasingly, a considerable number of MSMEs are exploring opportunities in regional and continental markets with a view of seizing emerging AfCFTA opportunities.
The second AfCFTA business forum, Biashara Afrika 2024, held in October in Kigali, Rwanda, highlighted the critical role of MSMEs in what is being dubbed the "Made in Africa revolution.” The forum emphasized that African markets eagerly await goods and services produced on the continent.
Engagement with both public and private entities at Biashara Afrika 2024 and other forums throughout the year have suggested that deliberate, strategic support is crucial to make AfCFTA work for MSMEs so that they can successfully integrate into Africa’s vast market. Many smaller businesses face challenges, such as access to market information and understanding trade regulations, necessitating comprehensive efforts to simplify these complexities.
’Africa needs to produce and trade more of what it consumes. MSMEs have the potential to catalyse the Made in Africa revolution by benefitting from AfCFTA markets. However, without deliberate support and effective implementation of required reforms at national and regional levels, they will not be able to fully enjoy emerging opportunities.Komi Tsowou, UNDP Regional AfCFTA Adviser
Harmonizing AfCFTA rules with existing sub-regional agreements is essential. For example, a Ghanaian industrialist may need to understand the market entry rules for both the Economic Community of West African States (ECOWAS) and AfCFTA, in a way that doesn’t require significant changes to her manufacturing processes.
Dr. Fatmata Lovetta Sesay, Resident Representative of UNDP Rwanda, participating in a panel discussion at the Biashara Afrika 2024 forum, Kigali, Rwanda October 2024
UNDP Africa
Harmonization of trade procedures under AfCFTA and aligning them with existing regional and global trade arrangements will go a long way to addressing persisting bottlenecks. AfCFTA’s online mechanism for Reporting, Monitoring and Eliminating Non-Tariff Barriers is an example of a continental system to address challenges businesses might encounter when they ship goods across borders.
Medium- to long-term solutions to render Made in Africa goods competitive include: (i) digitalizing trade processes in line with the AfCFTA Protocol on Digital Trade and the WTO Trade Facilitation, including the adoption of paperless trading in Africa, as well as increasing e-commerce capabilities of MSMEs and investing in their digital skills (statistics on digital trade are available here); (ii) improving infrastructure and logistics (for instance, efforts by RwandAir and Ethiopian Airlines to reduce air freight costs along regional routes should be maintained); and (iii) promoting innovative financing mechanisms to facilitate access to affordable trade finance for MSMEs.
Women and youth entrepreneurs at the Biashara Afrika 2024 marketplace, October 2024, Kigali, Rwanda
UNDP Africa
Products can be consolidated for export through ‘’groupage’’ to enable more MSMEs to trade efficiently. The concept of "groupage" is gaining traction in the AfCFTA context, offering a practical solution for MSMEs to lower trade costs by consolidating smaller shipments into larger cargo for export. This model is already demonstrating success, as seen in Ghana, where groupage has effectively targeted markets in Kenya under AfCFTA. Business support organizations (BSOs) play a crucial role in this by identifying suitable markets and streamlining supply chains. UNDP’s Business Supplier Development Programme, for example, support BSOs among others entities, to link small enterprises with large corporations, including buyers.
Market access through trade fairs and digital marketplaces enriches business experiences. The value of supporting ‘’champion’’ small businesses, especially women and youth-led entrepreneurs, to connect to marketplaces and enrich their business-to-business (B2B) and business-to-customer (B2C) experiences cannot be overstated. Digital trade platforms provide businesses with unparalleled opportunities to showcase their products and capitalize on market prospects. Several physical and digital trade fairs are organised annually, offering valuable dealmaking opportunities. The Intra-African Trade Fair (IATF) is a prime example, bringing together businesses, investors, and policymakers to facilitate trade and investment across the continent.
Investments in packaging industries on the continent should be a priority. High packaging costs, often sourced from outside the continent, which can create a ‘’just-in-time delivery’’ challenge, contribute significantly to trade costs for businesses. The acquisition of packaging equipment and advanced technology is often financially inaccessible to small businesses. To address this challenge, in Chad and Ghana, UNDP and its partners are supporting the emergence of green packaging industries for the shea and edible oil sectors. Promoting an enabling environment that attracts investments in packaging industries on the continent by medium to large-sized businesses is a must. The connections between packaging production hubs, such as Egypt, Nigeria and South Africa, and the rest of the continent need to be improved.
Peace and stability remain foundational to AfCFTA’s success. Ongoing instability and conflict, exacerbated by issues such as terrorism and political strife, pose significant challenges to cross-border trade. While AfCFTA holds the potential to foster peace by reducing inequities and creating wealth, including in border areas, achieving its objectives hinges on maintaining peace. Thus, safeguarding peace and fighting insecurity should remain at the top of Africa’s “behind-the-border agenda.”
UNDP remains committed to supporting an inclusive AfCFTA and unleashing the potential of women and youth in business. UNDP continues to pledge its support towards realizing an inclusive AfCFTA that empowers everyone, including women and youth. Through partnerships with the AfCFTA Secretariat, UNDP initiatives have strengthened the capacities of national and regional institutions to deliver on AfCFTA promises while enhancing the trade readiness of MSMEs.
From 2022 to 2024, UNDP and its partners supported over 12,000 MSMEs across 30 African Union member states. Many of these businesses are now breaking into new markets, such as Ghanaian agripreneurs exporting processed goods to East Africa or West African fashion entrepreneurs tapping into Southern African demand. These success stories highlight AfCFTA’s power to transform small businesses into regional champions, reinforcing the importance of continued investment in Africa’s trade ecosystem.