Bringing Enterprises, Production and Jobs into the African Continental Free Trade Area
The AfCFTA Needs More Than Open Borders
This paper offers a critical reassessment of the African Continental Free Trade Area (AfCFTA), challenging the widespread optimism that dominates both policy and academic discourse. The core argument is straightforward but consequential: **market integration alone does not produce structural economic transformation**. While the AfCFTA is institutionally significant, its developmental impact depends on a set of complementary conditions — productive capacities, enterprise development, financing, institutional design, and political economy — that are currently absent or underdeveloped across much of the continent. Trade liberalisation is *necessary but structurally insufficient*.
The paper makes two principal contributions. First, it critically contextualises the prevailing optimism in parts of the AfCFTA literature by clarifying what structural prerequisites must be in place for integration to work. Second, it develops a complementarity framework that conceives of trade integration, production development, and political economy not as separate processes, but as mutually dependent and co-constitutive components of a single system.
The Implementation Gap and the Production Problem
The AfCFTA entered into force in January 2021, with the Guided Trade Initiative (GTI) launched in 2022 enabling preferential pilot trade among participating states. By early 2025, several countries were actively using this mechanism. Yet practical implementation has been slower, more selective, and more conflict-prone than early optimism suggested. Tariff preferences, rules of origin, and administrative procedures remain poorly implemented; in many countries, protocols have not yet been transposed into national law.
The paper acknowledges these implementation gaps but argues they represent only the *visible* layer of the problem. The deeper, more fundamental and systematically underestimated challenge is the expansion of productive capacities. Any integration project’s economic substance ultimately depends on whether firms can actually produce goods and services competitively, process intermediate inputs, organise supply networks, and serve regional markets. Institutional integration changes the conditions of exchange — it does not automatically change the structure of production. Market size is no substitute for production structure.
This connects to a broader phenomenon in African development: growth without transformation. Many African economies continue to be driven by commodity exports, public investment, or low-productivity services, while industrial diversification and productivity gains proceed only slowly. In structural change theory terms, the reallocation of labour and capital to more productive sectors — the very prerequisite for trade liberalisation to have a transformative effect — is not occurring at sufficient scale. Without this shift, market integration remains an external impulse without endogenous reinforcing effects.
Four Schools of Thought — A Shared Blind Spot
The paper systematically examines four major strands of the AfCFTA debate, identifying their respective strengths and the structural blind spots that each shares.
Institutionalist optimism (represented by Landry Signé and the World Bank) combines neoclassical trade theory with institutional arguments. By creating an integrated market of approximately 1.4 billion people, the AfCFTA is held to unlock economies of scale, attract investment, and initiate structural change. World Bank CGE models forecast substantial income gains and poverty reduction by 2035. The analytical weakness, however, is that these models treat supply capacities as elastic — they assume firms will respond to expanded market demand — without explaining how those firms come into existence in the first place. Structural constraints such as limited factor mobility, widespread informality, financing gaps, and institutional weaknesses are inadequately incorporated, leading to systematically optimistic projections.
Legal-institutional analysis (Trudi Hartzenberg) partially corrects this by focusing on the technical prerequisites for functioning trade integration: rules of origin, non-tariff barriers, dispute settlement, and regulatory harmonisation. Her key finding — that the AfCFTA’s rules of origin are too restrictive and administratively burdensome for SMEs — is analytically important: even where productive capacity exists, regulatory complexity prevents it from being translated into actual trade flows. Institutional design thus acts not neutrally, but as a *selective filter* favouring larger, formally organised enterprises and potentially exacerbating structural imbalances. The limitation of this perspective is that it treats production structures themselves as given, rather than as something to be built.
Development economic structuralism (David Luke) shifts focus to structural transformation and industrial policy, arguing that the AfCFTA must be conceived not as a mere free trade project but as an instrument of development. Trade liberalisation without active industrial policy, Luke argues, will reproduce existing inequalities and advantage stronger economies. This perspective addresses a crucial gap in neoclassical theory — asking not only how markets are opened, but what production structures must emerge for market opening to be effective. Its limitation is a degree of normative abstraction: the conditions under which industrial policy actually generates scalable production and avoids rent-seeking remain underspecified.
Structure-oriented political economy critique (Sebastian Krapohl and Fredrik Söderbaum) highlights that African regional integration operates in a fundamentally different economic context from European integration, which it is often implicitly benchmarked against. African economies tend to be more strongly oriented toward external, non-African markets, exhibit low levels of intra-regional trade linkages, and share similar rather than complementary export structures. Under these conditions, regional institutions do not automatically generate the economic incentives that drove deeper integration in Europe. Söderbaum further cautions against applying classical integration theories to contexts characterised by informality, asymmetric statehood, and external dependencies. Together, these critiques suggest the AfCFTA is institutionally ambitious but operates within an economic and political environment that continues to constrain continental market integration. Grossman and Helpman’s political economy framework adds that trade liberalisation is not a neutral process but reflects organised interests — a problem compounded in African contexts by fiscal dependence on customs revenue and a limited industrial base.
The paper’s synthesis is that all four schools, despite their differences, “implicitly converge on the same structural question”: each isolates important aspects of a system that is fundamentally interlinked. The paper’s distinctive contribution is to treat these dimensions as complementary components of a coupled analytical framework, rather than competing explanations.
The Complementarity Framework and Empirical Evidence
The paper develops a complementarity framework, in which the AfCFTA’s impact depends on the simultaneous interaction of market opening, productive capacities, corporate structure, financing, institutional design, and political economy. These components are not additive — they are mutually conditioning. The absence or weakness of any one element constrains the functioning of the whole system.
Empirically, the paper draws on comparative case studies, descriptive analysis of intra-African trade patterns by Regional Economic Communities (RECs), and a proposed panel study design. Ghana is examined as a case of limited industrialisation, illustrating how formal integration commitments fail to translate into productive capacity expansion. The SADC/South Africa configuration is analysed as a partially integrated production system, showing both the potential and the limits of regional value chain development when structural asymmetries are present. The descriptive trade data analysis consistently shows that intra-African trade is systematically correlated with productive capacities, industrial density, and regional production structures — reinforcing the central thesis that institutional integration and productive development must proceed together.
Conclusions and Policy Implications
The paper concludes that the AfCFTA should be understood not primarily as a free trade project, but as a development project requiring intensive coordination. Its success depends on the synchronisation of multiple mutually reinforcing processes: opening markets, building productive capacities, developing enterprises (especially SMEs), improving access to finance, designing inclusive institutions, and managing the political economy of reform.
This reframing has significant implications. It suggests that the standard metrics of AfCFTA progress — ratifications, tariff schedules, GTI participation — capture only the institutional surface of a much deeper challenge. Policies that focus narrowly on border procedures while neglecting the supply side will produce integration on paper without transformation in practice. Active industrial policy, regional value chain development, SME support, and investment in productive infrastructure are not supplementary to the AfCFTA — they are constitutive of its success.
The paper does not dismiss the AfCFTA’s potential. Rather, the paper argues that realising it requires intellectual honesty about what market integration can and cannot do on its own. The agreement establishes necessary conditions; it does not, by itself, establish sufficient ones.
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ssoar-2026-kappel-Bringing_Enterprises_Production_and_Jobs.pdf