Why Africa's private sector must lead trade integration
FEATURED BLOG
Why Africa's private sector must lead trade integration
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By Tito Mbathi
Feb, 2025
Market Led Trade Integration in Africa
A Kenyan logistics company executive stares at her screen, frustrated. Despite years of continental integration rhetoric, her shipment sits idle at Mombasa Port, awaiting clearance to traverse three national jurisdictions, navigate four different payment systems, and satisfy seven separate documentation requirements. Meanwhile, continental bodies announce yet another trade facilitation milestone. This dissonance between institutional proclamation and commercial reality encapsulates the current state of Africa's economic integration.
The Integration Conundrum
The great economic potential of African integration lies locked behind invisible barriers of our own making. The cost of this self-imposed fragmentation? An estimated $22 billion in untapped commercial opportunity. While political commitment to continental commerce has never been stronger, trade between African nations remains stubbornly low at approximately 16% of total African trade volume (compared to the EU’s 60% and ASEAN’s at 25%). This disparity persists despite significant infrastructure development, such as the Pan-African Payment and Settlement System (PAPSS), the Single African Air Transport Market (SAATM), and One Stop Border Posts (OSBPs), to cite a few examples. These advancements provide the technical foundation for integration, yet practical implementation and widespread adoption lag precipitously.
A recent survey indicates that half of African CEOs have seen no impact from the AfCFTA on their business to date, and less than 10% reporting high impact from the initiative. The most frequently cited obstacles to trading in Africa reported by these CEOs include currency exchange risks (47.24%), logistical challenges (45.23%), and tariff barriers (44.12%). The implications of the corresponding trade deficit are severe. Models project that efficient intra-African trade can increase intra-African trade by 81% by 2035, correspondingly lifting more than 100 million Africans out of extreme and moderate poverty.
Realigning Incentives for Commercial Leadership
There is a unique opportunity to transform African trade by recognizing commercial enterprises as the necessary leaders. While government-led initiatives have established the architectural framework, businesses—motivated by profit, efficiency, and competitive advantage—must become the primary agents of implementation.
The logic underpinning this approach is compelling: commercial adoption of trade facilitation tools responds to entirely different motivations than policy implementation. Governments pursue political victories and, sometimes, aggregate economic gains; businesses require immediate operational efficiencies and clear market advantages. Without adequate financial incentives and visible competitive advantages, private sector entities rationally hesitate to pioneer adoption of continental trade mechanisms, suggesting that current approaches may require recalibration.
The Power of the Private Sector
From telecommunications to financial services, commercial enterprises have repeatedly proven more adept at scaling solutions than government initiatives. Private investment in Africa reached $7.6 billion in 2022, driven by sectors like fintech, renewable energy, and transport. The private sector’s role in Africa’s infrastructure development is pivotal, accounting for two-thirds of total investment and supporting 80% of the continent’s production. The commercial imperative for profitability naturally drives optimization, innovation, and practical implementation, precisely the elements currently missing from Africa's integration efforts.
Evidence from across the continent supports this thesis. The transition to regulated public operators with private sector management reduced service restoration timelines by 41% compared to previous purely public sector interventions in Tanzania's water infrastructure rehabilitation. Similarly, private logistics operators reduced Mombasa-Kigali transit times from 21 to 14 days (a 33% improvement) through coordinated scheduling platforms. While these pockets of success demonstrate the potential of private sector leadership, the argument is furthered when considering the potential network effects generated by private sector adoption. When major industrial players normalize the use of continental trade mechanisms, their extensive supply chains will naturally follow suit, creating exponential growth in adoption.
Strategic Interventions for Policymakers
To effectively harness private sector dynamism for continental trade growth, policymakers and private sector stakeholders alike should consider implementing commercial-centered approaches that create compelling business cases for adoption. The following recommendations provide practical pathways for catalyzing private-sector led transformation:
Port-Hinterland Corridor Partnerships: Create integrated commercial entities linking major ports with inland logistics hubs, incentivizing private investment through preferential land access and regulatory fast-tracking. This approach establishes end-to-end logistics corridors under unified management, eliminating jurisdictional conflicts and documentation redundancies. Proposed implementation could begin with high-volume routes, such as the Mombasa-Kampala-Kigali corridor, where a consortium of regional logistics firms could form a Special Purpose Vehicle (SPV) with shared infrastructure investment. Regional economic communities should establish corridor-specific regulatory sandboxes that allow these SPVs to operate under streamlined cross-border protocols.
Commercial Incentive Alignments: Restructure fees for existing trade infrastructure like PAPSS and regional payment systems to reward high-volume users with preferential rates, transitioning from the current public service model to a commercial utility approach. This recalibration transforms trade facilitation tools from cost centers to competitive advantages for businesses engaged in cross-border commerce. A potential tiered pricing model could offer large fee reductions or preferential exchange rates for enterprises processing over $2 million in monthly cross-border payments, directly improving their competitiveness against extra-continental importers, for example.
Industry Champions Program: Establish sector-specific implementation consortiums led by major continental players in key industries. For instance, an automotive manufacturing alliance spanning South Africa, Morocco, and Rwanda could standardize continent-wide component sourcing and logistics protocols. Each consortium should identify specific trade barriers impacting their sector and receive expedited regulatory support to address them. Regional economic bodies should designate industry liaison officers dedicated to these consortiums with authority to fast-track regulatory approvals.
These strategic interventions, while hypothetical, represent highly feasible approaches that could be transformational for African trade integration by aligning ambitions with commercial realities and incentives.
Reframing the Integration Paradigm
The conventional approach positions African economic integration primarily as a political project requiring commercial participation. A more effective framework recognizes that integration represents a commercial opportunity requiring political facilitation. This recalibration places business imperatives at the center of implementation strategies while positioning governments as enablers rather than pilots.
The path forward requires alignment between institutional frameworks and commercial realities, connecting visionary policy with pragmatic implementation. By positioning the private sector as the primary adoption mechanism for trade facilitation tools, we can effectively bridge the gap between Africa's integration ambitions and commercial implementation.
Tito Mbathi is an Associate at Botho Emerging Markets Group