By Chimamanda Augustine
Introduction
Small and Medium-sized Enterprises (SMEs) form the backbone of Africa’s economy,[1] accounting for more than 80 percent of businesses and employing more than 60 percent of the workforce across the continent.[2] Yet, despite their importance, most SMEs struggle to scale beyond their local markets. This is often due to serious obstacles such as high trade tariffs, fragmented regulations and many other hidden barriers. The African Continental Free Trade Area (AfCFTA) was thus designed to tackle this challenge for many SMEs in Africa. Launched in 2018 and regarded as one of the largest trade initiatives in the world, the AfCFTA sought to remove all barriers that have made it difficult for African countries to exchange goods and services with each other.[3] To make this possible, the AfCFTA was set up with several key provisions and protocols designed to break down the barriers that have held intra-African trade back for so long. First, it sought to remove tariffs on up to 90 percent of goods traded within the continent. It also establishes mechanisms to reduce non-tariff barriers such as customs delays, hidden charges and the problem of different product standards. Beyond goods, the Agreement covers trade in services like banking, telecoms and transport, and further sets rules to guide areas such as investment, intellectual property, competition and digital trade. In addition, it includes rules of origin to ensure that only African-made goods benefit from its tariff reductions, and even introduces simplified trade regimes to help support small traders move low-value goods legally without heavy paperwork. Finally, the Agreement establishes a dispute settlement system to help member states easily resolve trade disagreements when they arise. Taken together, these features are intended to transform Africa’s fragmented markets into one large competitive marketplace.
In terms of scope, the Agreement is quite vast. It covers more than 1.4 billion people and unites economies with a combined GDP of over 3 trillion US dollars.[4] And if fully implemented, the AfCFTA has the potential to scale Africa into one of the largest and most dynamic economic blocs in the world. For Small and Medium Enterprises (SMEs) operating in Africa’s economies, the AfCFTA is not just another policy document, it is a framework with the potential to reshape the way trade and business is done across the continent. The AfCFTA is thus Africa’s attempt to take its many separate markets and turn them into a single powerful trading community.
Opportunities for SMEs under AfCFTA
One of the most immediate opportunities AfCFTA offers SMEs is the access to a much larger market. Instead of being restricted to selling within one country, businesses now have the chance to reach customers across Africa. This expansion will help SMEs scale beyond the narrow limits of their domestic economies and it creates the potential for them to generate more revenue.[5] For a Nigerian farmer producing cocoa, this could mean supplying to processors in Ghana. And for a tech start-up in Kenya, it could mean finding new clients in Rwanda or South Africa. Another important opportunity is the chance to be part of regional value chains. At present, many African countries export raw materials to Europe, only to import them back later as finished products, meaning most of the processing takes place outside the continent. The AfCFTA changes this by opening up the possibility and actively encouraging that more of the processing and manufacturing happens within Africa. This keeps the production chain regional, which in turn creates opportunities for SMEs to supply inputs or services to larger industries across borders.[6] AfCFTA also opens doors for service-based SMEs, especially in digital sectors. The protocols on services and digital trade make it easier for companies in areas such as fintech, e-commerce, and logistics to expand regionally. With the introduction of the Pan-African Payment and Settlement System (PAPSS), businesses can conduct cross-border transactions more easily and at lower cost. This reduces reliance on foreign currencies like the dollar and will, in the long run, strengthen the currencies of all individual African states.[7]
Barriers Limiting SME Participation
The AfCFTA has created incredible opportunities for small businesses to grow and expand beyond their country borders. But the reality on the ground is that many SMEs still struggle to take full advantage of these opportunities because of very tough barriers. One of such tough barriers is poor infrastructure. For SMEs, it is incredibly hard to trade when roads are filled with potholes, seaports are congested with delays, electricity supply is unstable, and internet connection is unreliable. These everyday struggles negatively impact cross-border trade because it makes business operations harder than it should be.[8] Another barrier that affects SMEs is limited access to finance. Many SMEs lack the capital to scale up their production because they lack the funds to do so. Banks are also often reluctant to lend, and even when loans are available, the interest rates are incredibly high. Without affordable financing, many SMEs cannot take full advantage of AfCFTA’s promises.[9] Knowledge and awareness also remain low. Surveys in Nigeria and other African countries show that many SMEs either do not know about AfCFTA or do not understand how to use its rules. For instance, to benefit from tariff reductions, businesses must prove their products meet the required rules of origin. This often involves complex paperwork that SMEs are not prepared for. As a result, they risk losing out to larger firms that can afford legal and compliance teams.[10]
Recommendations/Conclusion
The AfCFTA is a great opportunity for African SMEs to scale, but for AfCFTA to achieve its objectives, deliberate policy actions must support SME readiness and capacity. The following steps are recommended:
- Financing Support: Governments and development banks should create SME-friendly financing schemes and guarantee funds to ease access to credit.
- Capacity Building: Trade associations and chambers of commerce should train SMEs on AfCFTA compliance, export readiness, and the use of PAPSS.
- Infrastructure Investment: Public-private partnerships should prioritize road, port, and digital infrastructure upgrades to reduce trade costs.
- Information Campaigns: National AfCFTA offices should collaborate with local agencies to raise awareness and simplify trade procedures for SMEs.
In conclusion, the AfCFTA has the potential to improve the economic state of the continent, but it is not an automatic guarantee of SME growth. For it to work, all relevant stakeholders must work together with deliberate actions to support small businesses.
[1] African Union. (2019, January 19). AU Strategy for SME Development in Africa. African Union Commission. https://au.int/sites/default/files/documents/44950-doc-AU_SME_Strategy.pdf
[2] Botha, A. (2025, September 18). Africa’s SMEs: Unlocking Financial Independence and Economic Resilience. Further Africa. https://furtherafrica.com/2025/09/18/africas-smes-unlocking-financial-independence-and-economic-resilience/
[3] African Union. (n.d.). The African Continental Free Trade Area. African Union. https://au.int/en/african-continental-free-trade-area
[4] World Bank Group. (2020, July 27). The African Continental Free Trade Area: Economic and Distributional ffects. World Bank. https://openknowledge.worldbank.org/bitstream/handle/10986/34139/9781464815591.pdf
[5] Hammond, A. C. & Ors (2024, November 6). Africa’s Free Trading Future: A Comprehensive Look at the AfCFTA. Initiative for African Trade & Prosperity (IATP). https://theiatp.org/2024/11/06/africas-free-trading-future-a-comprehensive-look-at-the-afcfta/
[6] African Export-Import Bank. (2024, October). Regional Value Chains and Intra-African Trade Promotion. Afreximbank. https://media.afreximbank.com/afrexim/Regional-Value-Chains-and-Intra-African-Trade.pdf
[7] Proshare Nigeria. (n.d.). Launch of the PAPSS – A New Dawn For Cross Border Financial Transactions in Africa. Pan-African Payment & Settlement System (PAPSS). https://papss.com/media/in-the-media/launch-of-the-papss-a-new-dawn-for-cross-border-financial-transactions-in-africa-in-proshare-nigeria/
[8] Hammond, A. C. & Ors (2024, November 6). Africa’s Free Trading Future: A Comprehensive Look at the AfCFTA. Initiative for African Trade & Prosperity (IATP). https://theiatp.org/2024/11/06/africas-free-trading-future-a-comprehensive-look-at-the-afcfta/
[9] 1st Fiduciary. (2023, October 27). AfCFTA’s Impact on Small and Medium-sized Enterprises (SMEs) in Africa. https://firstfiduciary.ng/afcftas-impact-on-small-and-medium-sized-enterprises-smes-in-africa/
[10] Dawn Commission. (2025, June). Unlocking AfCFTA for Nigerian MSMEs: Bridging the Awareness and Readiness Gap. Dawn Commission. https://dawncommission.org/wp-content/uploads/2025/07/Unlocking-AfCFTA-for-Nigerian-MSME.pdf