African countries have declared their paramount interest in attaining deep economic integration at the continental scale since emancipation from colonial control dominated their political agendas half a century ago.

In the new century that resolution has gained momentum through successive African Union decisions to expedite regional economic integration with a view to forming a continental free trade area (CFTA) by 2017 and an economic union by 2019. ‘The ultimate goal of the African Union is full political and economic integration leading to the United States of Africa’.

It is acknowledged that the path to get there will not be easy but a number of studies suggest that it is not only feasible but also important for Africa’s economic development. What rests ahead, therefore, is to make decisions on how to speed up the process and clear the obstacles to address the inevitable challenges so as to realize the ambition of an integrated African continent politically, economically, socially and culturally with the resulting development gains. The CFTA is a key driver for Africa to realize the structural transformation and industrialization of Africa as envisaged in the AU Agenda 2063, as well as to promote implementation of the United Nations 2030 Agenda for Sustainable Development.

The path towards an accelerated pan-African economic integration presents formidable political, economic, legal and functional/institutional challenges that need to be tackled efficiently. It requires an approach that economizes scarce resources, avoidable errors, unintended delays, and predictable frustrations. High on the list of challenges is the conflicting disciplines and benefits of different African Regional Economic Communities (RECs) already in place, most countries being parties to more than one. Convergence between RECs will be of the essence for progress, as agreed upon in the African Union Minimum Integration Programme of 2009 (MIP) that sets priorities for enhanced inter-sub regional cooperation, independently of the priorities of each REC and of individual countries.

The impact of the CFTA on trade flows could be significant rather rapidly, according to many projections, and the loss of export income from the rest of the world being more than offset by intraregional trade growth. However, to multiply the benefits of the CFTA – expanded markets for goods and services, unobstructed factor movement, new investment opportunities, and the like – an ample vision of trade, investment and business facilitation needs to prevail. Hence other important challenges and opportunities come to the fore, like the free movement of people across borders, with the social, economic and security dilemmas it implies, or the insufficient financing of badly-needed infrastructure projects. Relinquishing national priorities in favour of regional ones requires firm, intertemporal determination and coordination, a philosophy leading to the adoption of directive principles of state policy, beyond the national plane.

A phased approach has been agreed upon, concentrating on the liberalization of trade in goods first, and that of services as well in a first phase, followed with the straightening up of intellectual property rights, competition and investment protection in a second phase. Several queries arise, as detailed planning requires definition on the sources of finance and investment, in an environment of scarcity of means of payment. This also means that financial development cannot wait for integration to fructify but rather that it is a condition for it, and that neither governments nor private operators can make progress without reasonable concertation. There is financing available for trade development that can be mobilized. Also, foreign investment by sovereign funds and multinational enterprises, including African ones, as well as cross-border financing are on the rise in terms of size, reach and complexity.

This report provides an overview of the opportunities and challenges for African continental economic integration through the Continental Free Trade Area (CFTA) initiative. This is discussed in chapter 1. It then discusses complementary building blocks for intra-African trade to flourish within Africa when it is stimulated by the adoption and implementation of the CFTA. This is provided in chapter 2. Some guiding principles for approaching the CFTA and priority policy measures for adoption by African countries to ensure sustained trade growth and economic integration following the CFTA are discussed in chapter 3. The report concludes with some remarks on African visionary approach to be taken in building the CFTA, and not just as a stand-alone free trade agreement.

This study was prepared for UNCTAD by Mr. Osvaldo Agatiello under the framework of a Development Account Project on “Strengthening Capacities of African Countries in Boosting Intra-African Trade”. The views expressed in this publication reflect solely the views of the author.