Unlocking Africa’s Cross-Border Trade Potential

Africa’s creative entrepreneurs are at the forefront of a transformative wave, showcasing their talent to meet rising global demand. Yet, many remain hindered by structural inefficiencies that prevent seamless cross-border trade. This pressing issue took center stage at the recent Ananse Africa Virtual Roundtable, where industry experts examined the challenges facing the continent’s micro, small, and medium enterprises (MSMEs). Despite the promising trajectory of the African e-commerce market, projected to reach $75 billion, systemic barriers such as fragmented financial systems, exorbitant transaction costs, and logistical delays continue to dampen the potential for cross-border commerce.

The Cost of Fragmentation in Trade

One of the most significant challenges highlighted during the roundtable is the fragmented financial landscape across Africa. Entrepreneurs must navigate over 277 mobile wallets and more than 500 banks, with transaction fees that eat up to 30% of profits. Compounding this issue are logistics hurdles, including an average customs delay of 12 working days and transportation costs that can account for as much as 60% of a product’s value. The lack of a cohesive and trusted payment and delivery system further diminishes confidence in cross-border trade, leaving intra-African commerce at a dismal 16% of the continent’s total merchandise trade.

Initiatives to Foster Growth and Trust

Fortunately, several initiatives are aiming to bridge these gaps and lay the groundwork for a thriving trade ecosystem. Afreximbank’s Pan-African Payments and Settlement System (PAPSS) is helping reduce financial friction by facilitating settlements in local currencies. Additionally, innovative tools like the ACDIRT platform are enhancing digital trust by providing real-time business verification services. Entrepreneurs like Samuel Mensah have also taken proactive steps, with Ananse collaborating with logistics giants like DHL to streamline shipping processes and ensure reliability. These efforts allow MSMEs to focus on their craft without the burden of navigating complex trade systems.

A Call for Action on Policy and Infrastructure

The roundtable issued a unified call to action, urging African governments to prioritize policy harmonization and the consistent implementation of the African Continental Free Trade Area (AfCFTA). Simplifying customs processes and removing non-tariff barriers are crucial steps to creating a predictable trade environment. Panellists advocated for a shared digital infrastructure to verify payments and shipments in real-time, enabling financial institutions to shift from perceived risk to actual risk assessments. This, in turn, would unlock greater access to credit for MSMEs, empowering them to scale up their operations and contribute more significantly to the continent’s economy.

Financial inclusion also plays a pivotal role in fostering sustained growth. Many MSMEs depend heavily on mobile money systems, which have yet to be fully integrated into formal cross-border trade ecosystems. Ensuring mobile money services are part of the broader financial framework would simplify onboarding processes for entrepreneurs. Aside from streamlining operations, this integration would build credible transaction histories and establish mechanisms for trusted settlements, further enhancing the viability of cross-border trade.

With MSMEs comprising 90% of African businesses and driving nearly half of the continent’s GDP, unlocking their trade potential is not just an economic imperative—it’s a pathway to realizing Africa’s broader ambitions on the global stage. The opportunities are vast, but addressing the challenges calls for collaboration and urgency among all stakeholders.