U N I T E D N AT I O N S C O N F E R E N C E O N T R A D E A N D D E V E L O P M E N T

2024
Economic
development
in Africa report
Unlocking Africa's trade potential
Boosting regional markets and
reducing risks

OVERVIEW
© Adobe Stock

Geneva, 2025
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UNCTAD/ALDC/AFRICA/2024 (Overview)
 Economic Development in Africa Report 2024
Unlocking Africa's trade potential: Boosting regional markets and reducing risks
Overview

Content
Foreword Page iv
Introduction Page vii

Page 1 Page 7 Page 13

Shocks exposure and The economic Maximizing trade
vulnerability dynamics vulnerabilities to monitor resilience and regional
across countries in when trading and market benefits in Africa
Africa investing across Africa

Page 21 Page 27
Building resilience in Policy
businesses and cross- recommendations
border transactions in
Africa

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 Economic Development in Africa Report 2024
Unlocking Africa's trade potential: Boosting regional markets and reducing risks
Overview
©2024_UNCTAD

Foreword
The world is in polycrisis, and Africa is on the front line of exposure. The same
global shock has very different impacts depending on the location. Resilience is
the difference between the shock and the impact; how to build resilience in Africa
is the focus of this report. Recent crises have hit the continent disproportionately.
Building resilience will allow the continent to reap the many opportunities offered
by its future.

Though exposure varies by country, African economies are persistently exposed to

a range of external shocks due to commodity-dependency, high levels of debt and
limited technological infrastructure and connectivity. About half of all African countries
relied on oil, gas or minerals for over 60 per cent of their export earnings in 2023.
Global trade route disruptions have exposed them to significantly higher shipping and
trade costs. In 2024, African shipping rates were 115 per cent above pre-COVID-19
(coronavirus disease) pandemic levels and double the 2023 average costs. At the
same time, official development assistance to Africa declined by 4.1 per cent in 2022,
while Africa’s average borrowing cost increased to 11.6 per cent, 8.5 percentage
points higher than the risk-free rate of the benchmark of the United States.

This year’s Economic Development in Africa Report 2024: Unlocking Africa’s Trade
Potential – Boosting Regional Markets and Reducing Risks presents some important
tools in this context. This includes a comprehensive framework to help African
countries analyse the nature of their own exposure to shocks, with a particular
focus on trade and investment. We also provide an evidence-based analysis that
highlights how regional trade can increase the continent’s resilience. There are five
takeaways from this report.

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 Economic Development in Africa Report 2024
Unlocking Africa's trade potential: Boosting regional markets and reducing risks
Overview

First, the argument that economic diversification serves as a strong buffer against
economic shocks remains relevant. This is particularly true for African economies
that depend on a limited number of trade partners. Africa has five main trading
partners accounting for over 50 per cent of all its imports and exports.

Second, despite six decades of growth in gross exports, Africa’s integration into
high value added segments of global supply chains remains low. Only 16 of 54
African countries source more than 0.5 per cent of their intermediate inputs from
within the continent. Better infrastructure and leveraging the African Continental Free
Trade Area can improve regional market participation and drive positive outcomes.

Third, improving the operational environment is vital for African businesses,

particularly microenterprises and small and medium-sized enterprises. Less than
50 per cent of the population has reliable electricity access, which raises costs and
limits value chain integration. Reliance on fossil fuels, over 50 per cent of the energy
supply, heightens risks amid global energy transitions. Recent growth in renewable
energy investment in Africa (estimated at $15 billion in 2023) remain direly low
compared to global renewable energy investment, at about 2.3 per cent of the total.

Fourth, polycrisis creates economic uncertainty and discourages trade and

investment, thus hampering long-term development prospects. In 2023, flows of
foreign direct investment to Africa declined by 3 per cent, to a total stock of $53
billion. Deeper regional integration can help reverse the trend. Last year, between 13
and 20 per cent of international projects financed in Africa were funded by African
investors themselves.

Finally, the report provides some key policy recommendations to African

Governments. This includes enhancing the legal and regulatory environment,
leveraging robust risk management tools, regional cooperation and strategic
investments in infrastructure and technology to ensure smooth trade and improved
connectivity.
I hope that this edition of the Economic Development in Africa Report will serve as
a valuable tool for policymakers and inspire urgent action in these urgent times.

Rebeca Grynspan
Secretary-General of UNCTAD

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 Economic Development in Africa Report 2024
Unlocking Africa's trade potential: Boosting regional markets and reducing risks
Overview

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 Economic Development in Africa Report 2024
Unlocking Africa's trade potential: Boosting regional markets and reducing risks
Overview

Introduction

Africa is facing a complex global polycrisis that encompasses

climate-related, economic, political and technological challenges.
The interconnectedness of vulnerabilities, intensified by
geopolitical tensions and climate change, poses significant risks
to the continent. However, Africa also possesses unique strengths,
such as a young population, significant natural resources and
growing regional markets and investment opportunities.

UNCTAD, in Economic Development in Africa Report 2024:

Unlocking Africa’s Trade Potential – Boosting Regional Markets
and Reducing Risks, emphasizes the need to balance these
opportunities and systemic vulnerabilities, to enhance resilience
and promote sustainable development. UNCTAD examines how
the complex interplay of crises in 2000–2022 impacted economic
development in Africa and exacerbated trade and financial risks,
particularly for firms. Six categories of shocks that pose significant
threats to African trade and development are identified, namely,
political, economic, demographic, energy-related, technological
and climate-related. Vulnerability to these shocks is analysed
across the following six domains: economic, governance-related,
connectivity, social, energy-related and climate.

To navigate the challenges of the global polycrisis, UNCTAD

highlights the critical need for regional cooperation, robust risk
management and strategic investments in infrastructure and
technology. The African Continental Free Trade Area serves as
a pivotal mechanism for fostering intra-African trade, reducing
dependency on external markets and building more resilient trade
networks. By leveraging regional integration and collaborative
policies, countries in Africa can mitigate vulnerabilities and
capitalize on growth opportunities.

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 Economic Development in Africa Report 2024
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Overview

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 © 2024 UNCTAD. Image created by humans with the assistance of artificial intelligence

1
Shocks exposure and vulnerability
dynamics across countries in Africa
 Economic Development in Africa Report 2024
Unlocking Africa's trade potential: Boosting regional markets and reducing risks
Overview

A variety of interconnected external shocks, such as geopolitical conflicts, the global

coronavirus disease (COVID-19) pandemic and inflationary pressures, have disrupted supply
chains, increased costs and magnified socioeconomic vulnerabilities worldwide. These
shocks interact with the vulnerable socioeconomic and political structures in Africa, creating
unique challenges to sustainable development. During recent episodes of global crises,
such as the oil price shock in 2014–2016 and the pandemic in 2019–2020, countries in
Africa, as were many other countries worldwide, were subject to higher levels of uncertain
economic and political situations (figure 1).

Figure 1
World uncertainty index: Africa and global averages
(Index)

Trade tensions,
United States of America recession including China
and attacks in the United States on Financial and the United
Gulf War 11 September 2001 credit crunch States, and Geopolitical
“Brexit” tensions and
United collapse of
80 000 Sovereign States Silicon Valley
debt crisis presidential Bank, Signature
Iraq war and in Europe elections COVID-19 Bank and Credit
70 000 outbreak of severe pandemic Suisse
acute respiratory United States
syndrome fiscal cliff and
sovereign
60 000 debt crisis in
Europe
Federal Reserve System War in
tightening and political risk Ukraine
50 000 in Greece and Ukraine

“Brexit”
40 000

30 000

Africa
20 000

World
10 000

0
1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 2022 2024

Source: UNCTAD calculations, based on data from the world uncertainty index, 2024.
Abbreviation: GDP, gross domestic product.

Heightened political risks due to conflicts, frequent governance disruptions and instability
experienced on the continent affect economic resilience and hinder recovery efforts in
countries in Africa. Of the 492 attempted or successful coups recorded globally since
1950, 220 have taken place in Africa. This has contributed to low levels of investment and a
challenging business environment in many countries. With 46 per cent of countries in Africa
having debt-to-GDP ratios exceeding the sustainable level of 60 per cent, the continent is
particularly exposed to high borrowing costs and high inflation rates driven by economic
crises and supply chain disruptions.

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 Economic Development in Africa Report 2024
Unlocking Africa's trade potential: Boosting regional markets and reducing risks
Overview

The vulnerability of Africa stems from exposure to the following six categories of shocks:
(a) Political: Coups d'état, governance challenges and the erosion of democratic institutions;
(b) Economic: Debt burdens, trade imbalances and inflation;
(c) Demographic: Rapid population growth and migration pressures;

(d) Energy-related: Dependency on fossil fuels and limited renewable infrastructure;

(e) Technological: Digital gaps and exposure to disruptive innovations;
(f) Climate-related: Severe weather events and agricultural dependency.

The extent to which these shocks pose risks to trade and investment depends on the
vulnerability of countries to being harmed by such shocks if they occur. Less vulnerable and
hence more resilient countries will be less harmed and trade and investment will be less
at risk. There are six domains across which countries in Africa are particularly vulnerable
to the effects of the polycrisis, namely, economic, governance, connectivity, social, energy
and climate (figure 2).

Figure 2
Africa: Interconnected exposure to polycrisis shocks and vulnerability
across different domains that can threaten trade and capital flows

Exposure to shocks Domains of vulnerability

• Political • Economic
• Economic • Governance
• Demographic • Connectivity
• Energy-related • Social
• Technology • Energy
• Climate-related • Climate

Source: UNCTAD.

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 Economic Development in Africa Report 2024
Unlocking Africa's trade potential: Boosting regional markets and reducing risks
Overview

For instance, in 2022, climate-related hazards in Africa caused $8.5 billion in damages,
affecting over 110 million people. Climate change poses existential risks, particularly in
agriculture-dependent economies. Severe weather events and environmental degradation
threaten food security, livelihoods and economic stability. Countries with inadequate climate
adaptation policies face intensified challenges from extreme weather and environmental
degradation, which limits the ability to cope with crises.
In addition, in Africa, with less than 50 per cent of the population having reliable access to
electricity and given a reliance on fossil fuels and the significant barriers faced in the energy
transition, vulnerability to global energy price shocks is intensified. Most countries in Africa
lack the infrastructure to harness hydro, solar or wind power. Building renewable energy
capacity in order to reduce the reliance on fossil fuels and securing international funding
for sustainable energy projects are critical for transformation and resilience in Africa; $190
billion is needed annually for energy investment, equal to 6.1 per cent of GDP of Africa.
Exposure to polycrisis shocks does not necessarily mean that Africa is at risk. The extent
of risk depends on how vulnerable a country is to harm by the occurrence of such shocks
and whether it can deal with them. Connectivity vulnerability and economic vulnerability
are two of the main domains in which countries in Africa are most vulnerable in the current
context of polycrisis shocks (see table).
Addressing the sources of vulnerability in Africa requires the following actions:
(a) Encourage diversification away from resource dependency, to reduce vulnerability
to market shocks;
(b) Increase trade within Africa, particularly through mechanisms such as the African
Continental Free Trade Area, to reduce dependence on global markets;
(c) Implement sound fiscal policies, to reduce debt dependency, and improve access
to financing, to sustain economic resilience;
(d) Enhance transportation networks and digital connectivity, to reduce trade costs
and support efficient logistics;
(e) Invest in renewable energy and build infrastructure for reliable energy access, to
reduce exposure to global energy market fluctuations.

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 Economic Development in Africa Report 2024
Unlocking Africa's trade potential: Boosting regional markets and reducing risks
Overview

Major areas of vulnerability to polycrisis shocks, by country: Africa is

most vulnerable across the connectivity and economic domains

Top two Top two

vulnerability domains vulnerability domains
Algeria Connectivity + Economic Libya Governance + Connectivity
Angola Connectivity + Economic Madagascar Connectivity + Economic
Benin Economic + Connectivity Malawi Energy + Connectivity
Burkina Faso Economic + Energy Mali Economic + Connectivity
Burundi Energy + Economic Mauritania Connectivity + Economic
Cabo Verde Connectivity + Economic Mauritius Connectivity + Economic
Cameroon Connectivity + Economic Morocco Economic + Connectivity
Central African Social + Economic Mozambique Connectivity + Energy
Republic
Chad Energy + Social Namibia Connectivity + Economic
Comoros Connectivity + Economic Niger Connectivity + Economic
Congo Connectivity + Social Nigeria Economic + Connectivity
Côte d’Ivoire Economic + Connectivity Rwanda Economic + Connectivity
Democratic Republic Connectivity + Energy Sao Tome and Connectivity + Economic
of the Congo Principe
Djibouti Governance + Connectivity Senegal Connectivity + Economic
Egypt Governance + Economic Seychelles Climate + Governance
Equatorial Guinea Governance + Connectivity Sierra Leone Connectivity + Economic
Eritrea Connectivity + Governance Somalia Governance + Connectivity
Eswatini Connectivity + Social South Africa Governance + Connectivity
Ethiopia Economic + Connectivity South Sudan Social + Energy
Gabon Connectivity + Governance Sudan Connectivity + Governance
United Republic of
Gambia Connectivity + Economic Economic + Connectivity
Tanzania
Ghana Economic + Connectivity Togo Economic + Connectivity
Guinea Economic + Connectivity Tunisia Connectivity + Economic
Guinea-Bissau Economic + Connectivity Uganda Economic + Connectivity
Kenya Economic + Connectivity Zambia Economic + Connectivity
Lesotho Connectivity + Economic Zimbabwe Economic + Connectivity
Liberia Connectivity + Energy

Source: UNCTAD.
Note: The 2023 social progress index score used to measure the vulnerability of countries in Africa to
polycrisis shocks in the social domain is not available for Seychelles; the social domain is therefore not
taken into account when identifying the top two domains for Seychelles.

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Unlocking Africa's trade potential: Boosting regional markets and reducing risks
Overview

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© Adobe Stock

2
The economic vulnerabilities to
monitor when trading and investing
across Africa

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 Economic Development in Africa Report 2024
Unlocking Africa's trade potential: Boosting regional markets and reducing risks
Overview

In 2002–2023, Africa emerged as a prominent and attractive destination for trade and
investment, given above-average levels of economic performance. However, economies in
Africa experienced upsets that had adverse effects on economic growth and sustainable
development. A major risk to trade in Africa is the lack of economic diversification, since
countries are therefore poorly buffered in times of economic and other crises that have an
impact on output.
One approach to assessing the performance of economies in Africa during periods of
shock involves two main perspectives on exposure to shocks, namely, effects due to
macroeconomic and structural vulnerabilities and effects due to a particular crisis, according
to vulnerability by country grouping. A key variable, often regarded as an indicator of interest
for trade and investment, is GDP growth. In 2000–2010, the economy of Africa grew by
an annual 4.8 per cent on average, which was 1.7 percentage points higher than the
global average of 3.1 per cent. Similarly, in 2011–2020, the average GDP growth of Africa
was 3.1 per cent, compared with the global average of 2.4 per cent. Growth rates varied
substantially, as the continent was exposed to numerous shocks, affecting economic growth
in various ways (figure 3).

Figure 3
Economy of Africa: Average growth of 4.9 per cent, underpinned by
commodity price booms
(Annual percentage change)

Commodity Global financial Arab Spring Commodity price COVID-19

price boom crisis decline pandemic

8
7
6
5
4
3
2
1
0
-1
-2
-3
-4
2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 2022

Source: UNCTAD calculations, based on data from the World Development Indicators database (World
Bank).

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 Economic Development in Africa Report 2024
Unlocking Africa's trade potential: Boosting regional markets and reducing risks
Overview

About 16 per cent of the global population lives in Africa. Trade volumes are, however,
disproportionately small, representing less than 2.9 per cent of world trade in 2022. The low
trade volume reflects the challenging economic placement of Africa in the world economy,
in which it is relatively weak and dependent on stronger economic regions, while also
particularly vulnerable to external shocks. Generally, the investment growth trajectory in
Africa is adversely impacted by shocks (figure 4). For instance, in tandem with commodity
price shocks in 2014, gross fixed capital formation growth declined from 11.4 per cent in
2014 to 4.8 per cent in 2015. Similarly, in 2020, the effects of the pandemic saw gross fixed
capital formation contract by 4.1 per cent.

Figure 4
Economy of Africa: Average gross fixed capital formation growth rate –
investment trajectory adversely affected by commodity price shocks and
the pandemic
(Annual percentage change)

10

2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023

Source: UNCTAD calculations, based on data from the World Development Indicators database (World
Bank).

Macroeconomic variables affect trading in an economy and can be used to assess trade
performance in the short to medium terms. In addition, a well-managed macroeconomy
strengthens trade performance. Two main variables in assessing macroeconomic risk are
fiscal balance and inflation, whereby sound fiscal policies ensure macroeconomic stability
and an overreliance on one source of revenue, underpinned by the lack of diversification,
leads to risks to longer-term macroeconomic sustainability.
In Africa, in 2010–2019, the average fiscal balance deviation, defined as the difference
between planned or forecast fiscal balance and actual fiscal balance, was a deficit of 0.1
per cent of GDP, with the highest deficit in 2014, at 2 per cent of GDP, due to a drop in
commodity prices (figure 5). In 2020, the fiscal balance deviation was a deficit of 3.4 per cent
of GDP, due to increased spending related to the pandemic. Such deviations demonstrate
the impact of shocks on the ability of African Governments to manage revenues, react to
emergencies such as the pandemic and mitigate risks.

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 Economic Development in Africa Report 2024
Unlocking Africa's trade potential: Boosting regional markets and reducing risks
Overview

Figure 5
Economy of Africa: Average fiscal balance deviations – adjustments
during growth periods often leave little room for adjustments during
periods of shock, posing risks for macroeconomic stability
(Percentage of gross domestic product)
1.6

1
0.7 0.7

0.1

-0.3 -0.2 -0.3

-1 -0.5
-0.8

-2

-2.1
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

Source: UNCTAD calculations, based on data from the World Economic Outlook database (International
Monetary Fund).

In the past two decades, the pandemic may be the most significant risk to economies in
Africa to have materialized. The pandemic had far-reaching economic implications for all
economies globally, with particularly adverse effects on services-exporting economies. In
Africa, in 2019–2021, the leading five exporters of trade in services in absolute terms on
average were Egypt ($20.6 billion), Morocco ($16.2 billion), South Africa ($11.2 billion),
Ghana ($8.9 billion) and Ethiopia ($4.9 billion). Other countries with trade in services exports
of over $1 billion were Kenya, Nigeria, Tunisia, the United Republic of Tanzania and Algeria
(figure 6). In 2019–2021, of the 10 countries with the highest average trade in services
exports, Algeria, Kenya, Morocco, Nigeria, South Africa and Tunisia had GDP unfavourably
impacted during the pandemic.

Macroeconomic stability and fiscal policy reforms are essential in managing vulnerabilities
in economies in Africa, particularly given exposure to external shocks, high debt levels and
economic reliance on a limited range of exports. To achieve macroeconomic stability and
sustainable fiscal policy, African Governments need to balance growth-oriented spending
with disciplined fiscal and debt management. Reducing reliance on external borrowing,
diversifying revenue sources and promoting transparency are vital steps. By instituting sound
fiscal frameworks and strengthening institutional capacities, countries can better withstand
economic shocks, attract investment and create a stable environment conducive to long-
term economic growth and resilience.

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 Economic Development in Africa Report 2024
Unlocking Africa's trade potential: Boosting regional markets and reducing risks
Overview

Figure 6
Economy of Africa: Trade-in-services exports average, 2019–2021 –
6 out of 10 countries with highest average trade-in-services exports
affected by global economic and social shocks
(Millions of dollars)
20 000

10 000

Egypt Morocco South Ghana Ethiopia Kenya Nigeria Tunisia United Algeria
Africa Republic of
Tanzania

Source: UNCTAD calculations, based on data from the UNCTADstat database.

© Adobe Stock

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 Economic Development in Africa Report 2024
Unlocking Africa's trade potential: Boosting regional markets and reducing risks
Overview

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© Shutterstock

3
Maximizing trade resilience and
regional market benefits in Africa

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 Economic Development in Africa Report 2024
Unlocking Africa's trade potential: Boosting regional markets and reducing risks
Overview

Economically vulnerable countries often fall into an instability trap when affected by polycrisis
shocks, which further weaken productive and trading capabilities and limit prospects for
equitable and sustainable development. Such shocks, including global economic downturns,
health crises, such as the pandemic, and geopolitical disruptions, such as the war in
Ukraine, reveal the fragility of markets in Africa, particularly due to dependence on a narrow
range of primary export commodities and minimal backward integration within value chains.
Modest progress has been made in intra-African trade, yet overall integration within Africa
remains low. Most countries in Africa export primarily unprocessed or semi-processed
goods to non-African markets, missing opportunities to build value added production
networks within the continent. Only 16 countries in Africa receive a small percentage of
intermediate inputs from other countries on the continent and few countries serve as core
suppliers in regional trade networks. This means that regional markets are underutilized
and there is untapped potential for countries in Africa to provide intermediate goods to
one another. The trade networks of Africa are currently highly concentrated among a few
countries, including a limited number of global partners such as China, France, India and
the United States (figure 7).
Only 16 of 54 countries in Africa source 0.5–6 per cent of total intermediate inputs from
other countries on the continent. A network analysis shows that a small number of countries,
including Kenya, Nigeria and South Africa, act as major suppliers and users of value added
goods. As a result, these countries are central to trade networks in Africa and disruptions
in these economies can have an outsized effect on other economies. That is, if a shock,
such as economic disruption or political instability, affects one of these central nodes,
the effects can spread quickly, impacting production and trade throughout the continent.
The countries that anchor the trade network form chokepoints in value and supply chains
in Africa and have the greatest potential to disrupt production and output across many
economies by amplifying the effects of various shocks. As a result, countries have limited
options in adjusting to shocks and protecting businesses from their impacts through trade.
By diversifying trade partnerships and reducing overreliance on a few core economies, Africa
can enhance the resilience of value chains and reduce vulnerability to localized disruptions.
Countries in Africa have significant potential for upgrading and diversifying exports
and improving the likelihood of better integration into global markets by leveraging the
opportunities of deeper regional integration. Most exports from Africa to the rest of the world
are either raw or semi-processed, yet processed and semi-processed goods account for 61
per cent of intra-African exports and are more diversified. More viable and well-integrated
regional supply chains are generally expected with deeper integration, as they enhance
the odds of more profitable engagement in the global production and supply networks for
the countries concerned. High transitivity coefficients, that is, the extent to which a group
of nodes is densely connected within a network, suggest a strong concentration of traded
value added among regional economic communities (figure 8), possibly in line with progress
made in such communities in reducing non-tariff trade costs through improvements in trade
logistics and facilitation. Enhancing regional trade integration, such as through the African
Continental Free Trade Area, could support the diversification of value added supply chains
and help build resilience by allowing countries in Africa to source more goods regionally,
spreading out production and reducing reliance on global suppliers.

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 Economic Development in Africa Report 2024
Unlocking Africa's trade potential: Boosting regional markets and reducing risks
Overview

Figure 7
Africa: Principal global partners in value added trade network, 2022 –
trade networks are concentrated in a few countries, increasing risk of
disruptions if shocks impact core nodes
KEN
ZMB
ERI SWZ
CMR COD
EGY MWI
CIV TGO NAM
BEN SYC BWA
MLI
ZAF AGO
GIN
BFA MUS
DEU
FRA CHN
BDI LSO
DJI
MDG CAF IND
CPV MOZ
USA
SEN
COG SLE
MAR GBR
TUN
TCD STP
GHA
RWA
GAB GMB
MRT SSD
LBR LBY
SDN
Source: UNCTAD calculations, based on data from the UNCTAD–Eora Global Value Chain database.
Notes: The arrows representing the edges point towards the importer of the value added whose imported
share of foreign value added is at least 0.5 per cent of its exported value added. The size of each node
is proportional to its total degree; the larger the node, the more important a country as a supplier of
foreign value added. Users are depicted by the smallest nodes regardless of their relative weight as users.
Abbreviations: AGO, Angola; BDI, Burundi; BEN, Benin; BFA, Burkina Faso; BWA, Botswana; CAF, Central
African Republic; CHN, China; CIV, Côte d’Ivoire; CMR, Cameroon; COD, Democratic Republic of the
Congo; COG, Congo; CPV, Cabo Verde; DEU, Germany; DJI, Djibouti; EGY, Egypt; ERI, Eritrea; FRA,
France; GAB, Gabon; GBR, United Kingdom of Great Britain and Northern Ireland; GHA, Ghana; GIN,
Guinea; GMB, Gambia; IND, India; KEN, Kenya; LBR, Liberia; LBY, Libya; LSO, Lesotho; MAR, Morocco;
MDG, Madagascar; MLI, Mali; MOZ, Mozambique; MRT, Mauritania; MUS, Mauritius; MWI, Malawi; NAM,
Namibia; RWA, Rwanda; SDN, Sudan; SEN, Senegal; SLE, Sierra Leone; SSD, South Sudan; STP, Sao
Tome and Principe; SWZ, Eswatini; SYC, Seychelles; TCD, Chad; TGO, Togo; TUN, Tunisia; USA, United
States; ZAF, South Africa; ZMB, Zambia.

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 Economic Development in Africa Report 2024
Unlocking Africa's trade potential: Boosting regional markets and reducing risks
Overview

Figure 8
Common Market for Eastern and Southern Africa value added trade
network, manufacturing sector, 2022: Deeper integration within the
Common Market reveals diversified and resilient trade networks

SOM
ETH SDN

EGY LBY
KEN

ZMB SYC
COD TUN
BDI

MUS DJI
ERI

SWZ

MWI ZWE
MDG
UGA
RWA

Source: UNCTAD calculations, based on data from the UNCTAD–Eora Global Value Chain database.
Notes: The arrows representing the edges point towards the importer of the value added whose imported
share of foreign value added is at least 0.01 per cent of its exported value added in the manufacturing sector.
The size of each node is mapped to the eigenvector centrality, which reflects a country’s relative importance
as both a supplier and user of foreign value added, accounting for the relative importance of its key partners
in the network. The larger the node, the more important a country as a supplier and/or user of foreign value
added in Africa. The curved edges highlight reciprocal trade ties. Data are not available for the Comoros.
Abbreviations: BDI, Burundi; COD, Democratic Republic of the Congo; DJI, Djibouti; EGY, Egypt; ERI,
Eritrea; ETH, Ethiopia; KEN, Kenya; LBY, Libya; MDG, Madagascar; MUS, Mauritius; MWI, Malawi; RWA,
Rwanda; SDN, Sudan; SOM, Somalia; SWZ, Eswatini; SYC, Seychelles; TUN, Tunisia; UGA, Uganda;
ZMB, Zambia; ZWE, Zimbabwe.

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 Economic Development in Africa Report 2024
Unlocking Africa's trade potential: Boosting regional markets and reducing risks
Overview

The development in Africa of more interconnected and resilient regional value and
supply chains may, however, be hindered by infrastructure deficits and high trade costs.
Infrastructure gaps, particularly in transport, information and communications technology
and energy, present significant barriers to industrial output and growth and remain one of
the major risks undermining the development of regional value and supply chains on the
continent. Good infrastructure is essential for efficient production, distribution and access
to markets; however, such systems are underdeveloped in most countries in Africa. Both
information and communications technology infrastructure and transport infrastructure
remain underdeveloped in the region, notwithstanding significant improvements in the former
since 2010 (figure 9). Transport costs in Africa are among the highest globally, often due
to underdeveloped road networks and logistical inefficiencies. Landlocked countries, in
particular, face significantly higher transport costs, which can reach up to 50 per cent above
those in coastal countries. Intra-African transport costs, measured as the share of trade
value per 10,000 km, are much higher than extra-African transport costs, undermining the
development of intra-African value and supply chains. Despite general improvements made
in trade facilitation, there remains a need for further improvements in most countries, to
ensure efficiency and less costly processes in the movement of intermediate inputs, final
goods and persons within and across regions in Africa. Key challenges across countries
remain in border-agency management and, mainly, process automation, largely due to the
high cost of establishing and managing automation systems.

Figure 9
Africa: Evolution of connectivity – infrastructure development has
improved but missing links in transport and electricity persist

Africa infrastructure
development index
25

20
ICT
15

Electricity
10
Transport

0
2006 2008 2010 2012 2014 2016 2018 2020 2022

Source: UNCTAD calculations, based on data from the Africa infrastructure development index.
Abbreviation: ICT, information and communications technology.

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 Economic Development in Africa Report 2024
Unlocking Africa's trade potential: Boosting regional markets and reducing risks
Overview

Pertinent gaps are also observed across different indicators in trade logistics. Of countries in
Africa, only Egypt and South Africa exceed the global average score in the overall logistics
performance index. Other countries with high scores include Botswana, Côte d’Ivoire,
Kenya, Malawi, Morocco, Namibia, Rwanda, Tunisia and Uganda. In this regard, non-tariff
trade barriers remain a major challenge to trade within and among regional economic
communities in Africa. Non-tariff measures are trade rules and regulations that can affect
prices and quantities traded through a range of technical and non-technical requirements
such as sanitary and phytosanitary measures; non-tariff measures are estimated to restrict
intra-African trade three times more than regular customs tariffs.
There are large variations in non-tariff trade costs within and across regional economic
communities. Intra-community non-tariff trade costs range from 135 per cent in the East
African Community to 283 per cent in the Common Market for Eastern and Southern
Africa (figure 10). Such costs are even higher when trading across regional economic
communities, ranging from 254 per cent for trade between the East African Community
and the Common Market for Eastern and Southern Africa to over 400 per cent for trade
between the East African Community and the Economic Community of West African States.
This serves to highlight that goods traded across regional economic communities are
subjected to additional ad valorem equivalent trade costs of at least 100 per cent; and
partly underscores the high transitivity coefficient, which suggests a higher concentration of
value added trade within regional economic communities. Addressing infrastructure deficits,
high non-tariff costs and concentrated trade networks could position Africa to capitalize
on significant market potential, reduce reliance on external suppliers and build stronger
economic resilience against future shocks. Such an approach could support sustainable
growth and increase the competitiveness of Africa in global markets.
© Shutterstock

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 Economic Development in Africa Report 2024
Unlocking Africa's trade potential: Boosting regional markets and reducing risks
Overview

Figure 10
Africa: Average non-tariff trade costs among and between regional
economic communities – intra-community non-tariff trade costs are
lower than inter-community costs
(Percentage ad valorem equivalent)
2010–2015 2016–2021

2.88
Intra-COMESA
2.83
Common Market 2.64
for Eastern and COMESA-EAC
2.54
Southern Africa
4.04
COMESA-ECOWAS
3.86

2.87
COMESA-SADC
3.03

1.36
Intra-EAC
1.35
2.64
EAC-COMESA
East African 2.54
Community
4.02
EAC-ECOWAS
4.13
2.71
EAC-SADC
2.77

1.91
Intra-ECOWAS
2.01

4.04
Economic ECOWAS-COMESA
3.86
Community of
West African 4.02
ECOWAS-EAC
States 4.13

3.55
ECOWAS-SADC
3.69

2.2
Intra-SADC
2.52

Southern African 2.87

SADC-COMESA
Development 3.03
Community
2.71
SADC-EAC
2.77

3.55
SADC-ECOWAS
3.69

Source: UNCTAD calculations, based on data from the Trade Cost database (Economic and Social
Commission for Asia and the Pacific–World Bank).
Note: Non-tariff trade costs capture all additional costs other than tariff costs involved in trading goods
bilaterally rather than domestically, including, but not limited to, transportation costs and direct and indirect
costs associated with currencies and languages and import and export procedures.
Abbreviations: COMESA, Common Market for Eastern and Southern Africa; EAC, East African Community;
ECOWAS, Economic Community of West African States; SADC, Southern African Development Community.

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 Economic Development in Africa Report 2024
Unlocking Africa's trade potential: Boosting regional markets and reducing risks
Overview

20
© Adobe Stock

4
Building resilience in businesses
and cross-border transactions in
Africa

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 Economic Development in Africa Report 2024
Unlocking Africa's trade potential: Boosting regional markets and reducing risks
Overview

Situations of vulnerability to polycrisis shocks that prevail in the connectivity and economic
domains, such as high non-tariff trade costs, weak infrastructure connectivity, low levels of
participation in trade networks, a high concentration of exports and a low degree or lack
of economic complexity can contribute to a shrinking appetite for business operations and
capital flows to countries in Africa and further undermine the already challenging business
and investment environments on the continent. The potential of the private sector to leverage
regional market advantages such as through the African Continental Free Trade Area is offset
by deficits in the financial system; scarcity in the factors of production, such as capital
and entrepreneurship; challenges in regulatory compliance; and insufficient infrastructure
integration in most countries in Africa.
Firms in Africa are vulnerable to multiple risks, including currency volatility, regulatory
unpredictability, political instability and logistics challenges. This exposure affects trade
flows, operational costs and investor confidence. Despite these risks, Africa offers high
returns, growing markets and trade benefits. Firms need to adapt by improving compliance
and the understanding of local markets. Countries with stronger regulatory environments,
connectivity, climate adaptability, economic diversification and political stability, such as
Botswana, Cabo Verde, Mauritius, Morocco and South Africa, demonstrate better resilience
to such challenges (figure 11).
However, this is not the case for many other countries in Africa, in which the regulatory
landscape is often complex and unpredictable. In such environments, businesses,
particularly small and medium-sized enterprises, face challenges with regard to regulatory
requirements, tax compliance and bureaucratic obstacles, which increase operational costs
and reduce competitiveness. For instance, some firms lack clarity on sector-specific legal
standards, which can hinder compliance and discourage foreign direct investment. Bilateral
investment treaties are among the key instruments used globally to minimize investment
risks associated with factors such as trade and investment disputes, employment and
wages, ownership and control of businesses, expropriations and transfers. Africa is a
signatory to several bilateral and international trade and investment agreements that help
minimize the risks of trading and investing in the region. Egypt leads the region in this regard,
with 100 treaties signed, 72 of which are in force with countries in Africa and elsewhere
(figure 12). Morocco follows with 76; Tunisia, with 55; Algeria, with 45; Mauritius, with 45;
and South Africa, with 38.

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 Economic Development in Africa Report 2024
Unlocking Africa's trade potential: Boosting regional markets and reducing risks
Overview

Figure 11
Botswana, Cabo Verde, Mauritius, Morocco, South Africa: Resilience to
polycrisis shocks and low levels of vulnerability, an attribute sought by
businesses and investors

(a) Botswana (b) Cabo Verde

Botswana Cabo Verde Economic

Economic
Africa average vulnerability Africa average vulnerability
80 80
60 60
Climate Governance Climate Governance
vulnerability 40 vulnerability vulnerability 40 vulnerability
20 20
0 0

Energy Connectivity Energy Connectivity

vulnerability vulnerability vulnerability vulnerability

Social vulnerability Social vulnerability

(c) Mauritius (d) Morocco

Mauritius Economic
Morocco Economic
Africa average vulnerability Africa average vulnerability
80 80
60 60
Climate Governance Climate Governance
vulnerability 40 vulnerability vulnerability 40 vulnerability
20 20
0 0

Energy Connectivity Energy Connectivity

vulnerability vulnerability vulnerability vulnerability

Social vulnerability Social vulnerability

(e) South Africa

South Africa Economic

Africa average vulnerability
80
60
Climate Governance
vulnerability 40 vulnerability
20
0

Energy Connectivity
vulnerability vulnerability

Social vulnerability

Source: UNCTAD.
Note: Values represent a score out of 100 in 2022 or 2023, depending on the domain.

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 Economic Development in Africa Report 2024
Unlocking Africa's trade potential: Boosting regional markets and reducing risks
Overview

Figure 12
Bilateral investment treaties and treaties with investment provisions
signed by countries in Africa: Realm of treaties shows efforts by
countries to protect foreign and African investments
Total bilateral investment treaties Bilateral investment treaties in force
Total treaties with investment provisions Treaties with investment provisions in force
Algeria 45 29 8 5
Angola 21 7 19 6
Benin 18 8 14 10
Botswana 10 12 8
Burkina Faso 17 14 14 10
Burundi 11 6 12 9
Cabo Verde 15 9 11 7
Cameroon 18 11 11 9
Central African Republic 5 8 6
Chad 15 8 6
Comoros 7 13 9
Congo 17 8 8 6
Côte d'Ivoire 18 10 16 10
Democratic Republic of the Congo 14 11
Djibouti 9 12 9
Egypt 100 72 17 13
Equatorial Guinea 12 8 6
Eritrea 9 6
Eswatini 15 10
Ethiopia 33 22 9 6
Gabon 16 9 10 8
Gambia 16 6 12 8
Ghana 27 9 13 8
Guinea 24 10 12 8
Guinea-Bissau 11 8
Kenya 20 12 12 8
Lesotho 12 8
Liberia 12 8
Libya 37 26 12 8
Madagascar 9 8 7
Malawi 7 7 11 8
Mali 22 8 11 8
Mauritania 22 10 9 6
Mauritius 45 28 16 12
Morocco 76 51 12 9
Mozambique 28 19 11 7
Namibia 14 8 11 8
Niger 14 10
Nigeria 30 14 13 9
Rwanda 15 6 14 11
Sao Tome and Principe
Senegal 29 21 14 10
Seychelles 13 9
Sierra Leone 12 8
Somalia 10 8
South Africa 38 14 10
South Sudan
Sudan 33 14 12 9
Togo 13 9
Source: UNCTAD Tunisia 55 39 13 10
calculations, based Uganda 15 6 11 8
on data from the United Republic of Tanzania 19 11 9 7
UNCTAD investment Zambia 16 10 10 7
policy hub. Zimbabwe 35 12 12 8

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 Economic Development in Africa Report 2024
Unlocking Africa's trade potential: Boosting regional markets and reducing risks
Overview

Progress achieved with the adoption in 2023 of the Protocol on Investment to the Agreement
Establishing the African Continental Free Trade Area provides renewed opportunities to
expand intra-African investment, with a wider geographical spread across the continent.
In 2023, of the $64 billion in international projects financed in Africa, 20 per cent of the
projects in the services sector and selected manufacturing industries and 13 per cent of
the projects in resource-based processing industries were funded by investors from Africa.
This indicates the market attractiveness of countries in Africa and intra-African investment
opportunities for African investors.
Notwithstanding growing regional markets and investment opportunities, many small and
medium-sized enterprises in Africa are particularly vulnerable because of the lack of access
to affordable financing options, which constrains ability to expand, innovate and invest in
risk-mitigation measures. Limited financial infrastructure and high transaction costs related
to banking and lending make it difficult for such businesses to secure credit or capital,
leaving them vulnerable to external shocks. In 2023, 32 per cent of firms in Africa surveyed
identified finance and investment opportunities as a major challenge to financial, operational
and trading performance (figure 13).

Figure 13
Africa: Business environment obstacles faced by firms, 2023 – more
accessible and affordable financing instruments have emerged but
access to finance remains a major challenge
(Percentage)

Transportation
Tax rates
2
8
Tax administration
3
32 Access to finance
Practices of the informal sector 8

Political instability 6

labour regulations 3

Inadequately educated workforce 6

6 Access to land
Electricity 6 2
7 Business licencing and permits
4
Customs and trade regulations 6 1 Corruption
Crime, theft and disorder Courts

Source: UNCTAD calculations, based on data from the Enterprise Survey database (World Bank).
Note: The latest available data for the 13 countries covered are from 2023.

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 Economic Development in Africa Report 2024
Unlocking Africa's trade potential: Boosting regional markets and reducing risks
Overview

Firms in Africa are significantly exposed to currency fluctuations due to the prevalence of
foreign currency-denominated transactions, debts and trade. Such volatility disrupts trade
flows, increase operational costs and makes firms in Africa less competitive internationally.
For instance, recent global economic disruptions have impacted the stability of local
currencies, affecting the profit margins of firms and increasing debt-service costs. About 56
per cent of limited partners perceive currency risk as a key challenge when investing in the
private equity market in Africa and 44 per cent of general partners consider macroeconomic
risk, particularly currency volatility and political instability, a key challenge when managing
the operations of a private equity fund on the continent.
Financial risk-management instruments such as derivatives may be used by firms in Africa,
particularly those involved in cross-border trade, to lower exposure to volatility in exchange
rates. Derivatives are financial instruments that banks, investors and businesses use to
insure against potential risks in portfolios; firms use derivatives to manage risks associated
with cash-flow volatility arising from adverse changes in interest rates, exchange rates and
commodity prices. An increasing number of financial markets and institutions in Africa
(e.g. Nairobi Securities Exchange, Kenya; Central Bank of Nigeria; Johannesburg Stock
Exchange, South Africa) offer facilities for using bond, commodity, currency, equity and
interest rate derivatives.
Another factor that can exacerbate the exposure of firms in Africa to shocks and market
uncertainties is the current state of energy infrastructure and access to affordable energy,
which leaves the growth prospects of economies and firms in Africa vulnerable to adverse
global and domestic events. Firms experience significant losses from power outages, an
issue that has persisted for decades, significantly impacting businesses and hindering
private sector employment growth. Leveraging the strength of the energy, infrastructure and
trade nexus can form a bulwark against the risks that the polycrisis holds for economies
and businesses in Africa.
Small and medium-sized enterprises in Africa often lack the financial resources and
expertise required to conduct regular risk assessments, develop contingency plans or
access insurance and hedging products. This leaves them vulnerable to unexpected
disruptions, such as currency fluctuations, political instability and supply chain disruptions.
Small and medium-sized enterprises can enhance resilience to shocks and build trust with
investors by adopting effective risk-management practices, including not only financial risk
management but also operational planning and crisis preparedness. Adopting effective risk-
management frameworks could help empower firms in Africa to integrate risk management
into operations and business processes, thereby improving stability and fostering growth.
Developing enterprise risk-management capacities across all sectors or departments of a
company is critical in raising awareness, understanding and prioritizing risks and reducing
overall exposure to threats from imminent or future events.
Addressing financial, regulatory and structural barriers, to create a more resilient business
environment across Africa, requires both regional collaboration and significant investment
in infrastructure, financial systems and regulatory reform in order to support businesses in
Africa in mitigating risks and achieving sustainable growth.

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© Adobe Stock

5
Policy recommendations

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 Economic Development in Africa Report 2024
Unlocking Africa's trade potential: Boosting regional markets and reducing risks
Overview

Africa faces risks from political, economic, demographic, energy-related, technological

and climate-related shocks. Related vulnerabilities, compounded by weak infrastructure
and a reliance on primary commodities, leave economies in Africa susceptible to external
disturbances. Many countries in Africa are highly vulnerable across the connectivity and
economic domains and vulnerable economic and infrastructure systems increase exposure
to shocks. Therefore, there is a need for a multidimensional approach to risk management
in Africa that addresses particular vulnerabilities across domains, to build resilience in the
context of a complex and interconnected global risk landscape. In addition, collaborative,
resilient and adaptive policies are critical in order to protect and advance economic and
social development in Africa and help strengthen resilience to the polycrisis.
The potential of regional economic integration in setting the pace of industrial growth and
development in Africa should be taken into account. It is important to broaden the capabilities
of countries in Africa to effectively leverage the opportunities accorded by regional trade
agreements, such as the Agreement Establishing the African Continental Free Trade Area.
Current regional market dynamics in Africa signal a broader narrative about opportunities
to foster stronger trade networks aimed at promoting value added production and the
supply of goods and services; and to enhance capabilities in the mitigation of trade risks. To
navigate the complex challenges posed by structural vulnerabilities, polycrisis shocks and
global market fluctuations, there is an urgent need for small and medium-sized enterprises
in Africa to mitigate financial, operational and regulatory risks, to bolster resilience and
capitalize on opportunities in an increasingly competitive environment. For instance, access
to financial instruments, such as derivatives and risk-management tools at the enterprise
level, is essential in order for firms in Africa to manage risks effectively and enhance stability
in volatile market conditions. Enterprise risk management can help guarantee a safer and
more reliable future for small and medium-sized enterprises in Africa.
UNCTAD concludes Economic Development in Africa Report 2024 by proposing short-
term, medium-term and long-term actionable policy recommendations for key stakeholders,
namely Governments, the private sector and trading partners and international organizations,
as follows:
(a) African Governments are encouraged to adopt policy measures that help enhance
crisis preparedness and foster resilience to polycrisis shocks;
(b) Private firms in Africa are invited to develop stronger productive and trade
capabilities by leveraging cost-effective risk-management strategies and other useful
mechanisms that reduce potential vulnerability in navigating uncertain economic
environments;
(c) The trading partners of Africa and international organizations are urged to support
and share knowledge about best practices, to foster resilience to polycrisis shocks.
The proposed policy actions could help enhance macroeconomic stability in countries in
Africa, optimize the resilience potential of regional trade markets, strengthen financial markets
to facilitate hedging instruments and encourage small and medium-sized enterprises to
manage risk and improve performance in a proactive manner.

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Highlights of proposed policy actions
(a) Apply a vulnerability lens to public financial management, monitoring and
reporting, in particular when designing fiscal monitoring and reporting templates
to keep track of targets compared with the actual revenue and expenditure of
development plans, to help African Governments better understand and assess
how vulnerability to particular shocks or crises can impact public finances and fiscal
management processes;
(b) Facilitate optimal monetary policy by tailoring capital and liquidity
requirements to risks and vulnerability to shocks: Adopting financial stability
tools to address stresses in the banking system while ensuring monetary policy
stability can help promote a resilient financial system and lessen the probability of
systemic risks and the potential costs of a shock hitting the financial system;
(c) Offer incentives that aim to promote industrialization and local
manufacturing and the sourcing or supply of goods and services targeted
at regional markets: African Governments could offer reduced corporate tax rates
for companies that invest in manufacturing or industrial projects, while financial
institutions could offer low-interest loans or credits on income tax for capital
investments in machinery, technology and facilities that boost production capacity;
(d) Develop regional mechanisms to manage trade-related risks by creating a
regional fund or pooling public and private resources to build early warning systems,
develop contingency plans and provide insurance to manage trade-related risks
and challenges in order to contribute to the better alignment of national and regional
strategies and facilitate the active participation of the private sector in interconnected
value and supply chains;
(e) Set up emergency or crisis-response trade finance and supply chain
finance facilities, to support businesses in Africa affected by global demand
shocks, helping them pivot to regional markets; such financing mechanisms could
help stabilize businesses that depend on exports and prevent job losses in key
industries and could also provide insurance in order to manage trade-related risks
and challenges when implementing African Continental Free Trade Area strategies;
(f) Create a supportive environment for the use of sophisticated financial
instruments and stability in cross-border financial transactions: Doing
so entails supportive actions through which derivatives and other risk-mitigation
financial instruments could best be deployed and used by traders and investors
when engaging in cross-border activities in Africa; and setting up innovation and
digital technology units within regulatory authorities (e.g. central banks), which also
contributes to greater and better processing of regulatory data and the supervision
of sophisticated financial instruments;
(g) Safeguard stability in cross-border capital flows by establishing public–
private support platforms that can facilitate access by businesses in Africa to risk-
management resources and support the building of a comprehensive financial
market infrastructure that includes derivatives exchanges, clearing houses and
robust settlement systems across Africa in order to help create the necessary
conditions to attract both domestic and international investors and improve financing
opportunities in intra-African trade;

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 Economic Development in Africa Report 2024
Unlocking Africa's trade potential: Boosting regional markets and reducing risks
Overview

(h) Institutionalize enterprise risk-management practices by developing policies

and practical guidelines at the small and medium-sized enterprise level, including
risk-management standards tailored to the African context and better adapted to
the resource capacity of small and medium-sized enterprises in Africa;
(i) Align enterprise risk-management strategy and regulatory frameworks
with regional trade agreements, such as the Agreement Establishing the African
Continental Free Trade Area, to ensure that cross-border risks are adequately
identified and managed, based on the level or type of vulnerability to shocks.

Risk management
strategies
and practices
are pivotal
approaches that
can help African
SMEs ensure
against market
uncertainties

© Adobe Stock

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