Intra-African trade, xenophobia and insurance protection

The African Continental Free Trade Area (AfCFTA) is the world’s largest free trade area by number of participating countries.

It was established to create a single African market for goods and services, allowing businesses and people to trade more freely across the continent.

The establishment of the African Continental Free Trade Area marks one of the most ambitious economic integration projects in modern history.

Since trading under the agreement began in January 2021, Africa has sought to reshape itself from a largely fragmented collection of national markets into a single integrated trading bloc.

Covering a market of more than 1.4 billion people and a combined gross domestic product estimated at over 3 trillion United States dollars, the agreement promises to transform intra-African trade, industrialisation and economic resilience.

Yet, despite the promise, structural challenges persist.

These include uneven infrastructure, regulatory fragmentation, currency volatility, and growing social tensions in certain member states, particularly episodes of xenophobic violence in South Africa that have periodically disrupted trust among African traders.

Against this backdrop, the question of trade facilitation insurance and cross-border protection becomes central.

One emerging idea is the expansion and harmonisation of regional schemes such as the ECOWAS Brown Card Insurance Scheme into a continental framework that can safeguard travelling traders and commercial mobility across Africa.

1. The African Continental Free Trade Area in context

The African Continental Free Trade Area was formally launched in 2018 and began trading operations in 2021.

It is one of the flagship projects of the African Union under Agenda 2063.

Key objectives include:

1. Eliminating tariffs on most goods traded between African countries
2. Reducing non-tariff barriers such as customs delays and quotas
3. Promoting industrialisation through regional value chains
4. Enhancing the free movement of goods, services, capital and eventually people
5. Increasing Africa’s share of global trade, currently below 20 percent of total African commerce

Recent projections by development institutions suggest that successful implementation could boost intra-African trade by over 50 percent by 2035 if supported by infrastructure and policy alignment.

2. Benefits of the continental free trade framework

The potential gains from the agreement are wide-ranging and multidimensional.

2.1 Economic expansion

1. Expansion of market access for small and medium enterprises
2. Increased export diversification beyond raw materials
3. Greater industrial production within African economies
4. Improved competitiveness of African goods globally

2.2 Employment and Skills Development

1. Creation of new manufacturing and logistics jobs
2. Expansion of cross border entrepreneurship
3. Skills transfer through regional industrial clusters

2.3 Consumer Welfare

1. Reduced prices due to tariff elimination
2. Wider availability of goods and services
3. Improved product variety across markets

2.4 Regional Stability and Cooperation

1. Strengthening of diplomatic relations through economic interdependence
2. Reduction of trade related conflicts
3. Enhanced policy coordination among member states
4. Opportunities emerging from AfCFTA implementation

The agreement creates significant structural opportunities for Africa’s future growth.

3.1 Industrial value chains

1. Automotive assembly hubs in North and Southern Africa
2. Agro-processing corridors in West and East Africa
3. Pharmaceutical production zones to reduce import dependency

3.2 Digital trade expansion

1. Growth of e-commerce platforms operating across borders
2. Mobile payment interoperability across African financial systems
3. Expansion of fintech solutions for trade financing

3.3 Infrastructure Development

1. Continental rail and road corridor expansion
2. Modernisation of ports and customs systems
3. Logistics hubs linking landlocked economies to coastal trade routes
4. Threats and structural risks to success

Despite optimism, several risks could undermine the effectiveness of the agreement.

4.1 Policy fragmentation

1. Inconsistent tariff enforcement across member states
2. Slow ratification of key protocols
3. Protectionist tendencies in domestic industries

4.2 Infrastructure Gaps

1. Poor road and rail connectivity between regions
2. High transportation costs across borders
3. Inefficient customs processing systems

4.3 Currency and financial instability

1. Exchange rate volatility
2. Limited cross-border payment systems
3. Weak trade finance access for small traders

4.4 Social and political risks

1. Periodic xenophobic incidents in South Africa disrupt foreign traders’ confidence
2. Political instability in parts of the continent
3. Informal border tensions and migration pressures

The xenophobic episodes in South Africa, particularly those recorded in 2019 and recurring sporadically in later years, have had psychological and economic impacts on cross-border traders from Nigeria, Zimbabwe, Somalia and other African states.

These events highlight the gap between policy ambition and social cohesion on the ground.

5. Africa’s readiness for a safe continental trading environment and a call for a harmonised African Trade and Mobility Insurance Scheme

The success of the African Continental Free Trade Area (AfCFTA) depends not only on reducing tariffs but also on protecting the people, goods, investments, and businesses that drive intra-African trade.

As traders, entrepreneurs, transport operators, and travellers move more freely across borders, Africa needs a harmonised continental trade and mobility insurance scheme that provides seamless coverage across member states.

Such a scheme would protect cargo in transit, cross-border businesses, commercial vehicles, health emergencies, travel disruptions, and trade-related risks under a single, mutually recognised framework.

It would reduce the cost and complexity of purchasing multiple national insurance policies, strengthen confidence in cross-border commerce, improve risk management, and support small and medium-sized enterprises that form the backbone of Africa’s economy.

Governments, regulators, insurers, development finance institutions, and the private sector should collaborate to establish an African Trade and Mobility Insurance Framework aligned with AfCFTA.

A unified insurance ecosystem would not only safeguard continental trade but also accelerate investment, enhance financial inclusion, and reinforce Africa’s journey toward a truly integrated, resilient, and competitive single market.

For AfCFTA to succeed, it must go beyond tariff reduction and address trader safety and mobility assurance.

5.1 Current strengths

1. Existence of regional economic communities such as ECOWAS, SADC and EAC
2. Established cross-border trade corridors
3. Growing digital identity and payment systems in several countries
4. Increasing political commitment to integration

5.2 Key weaknesses

1. Limited harmonisation of insurance systems
2. Weak enforcement of trader protection laws
3. Insufficient cross-border dispute resolution mechanisms
4. Lack of unified risk coverage for travelling traders
5. The case for a continental insurance framework

A critical but often overlooked enabler of trade is insurance.

The expansion of the ECOWAS Brown Card Insurance Scheme provides a model for scaling protection across Africa.

Originally designed to cover motor vehicle third party liability within West Africa, the scheme demonstrates how regional insurance cooperation can reduce risk and increase mobility.

6.1 Proposed continental expansion benefits

1. Protection for traders transporting goods across borders
2. Reduction of financial loss from accidents or cargo damage
3. Improved confidence for small scale cross border traders
4. Faster dispute resolution across jurisdictions

6.2 Key features of a harmonised African Trade Insurance Scheme

1. Continental third party motor insurance coverage
2. Cargo and goods in transit protection
3. Standardised claims processing across borders
4. Digital insurance verification systems
5. Integration with customs clearance platforms

6.3 Institutional requirements

1. Coordination between the African Union and regional blocs
2. Legal harmonisation of insurance regulations
3. Digital infrastructure for real time policy verification
4. Capacity building for insurers and regulators
5. Strengthening Trust in Intra African Trade

For AfCFTA to achieve its full potential, trust must become a central currency of trade.

1. Trust between governments through policy alignment
2. Trust between traders through legal protection
3. Trust between citizens through social cohesion
4. Trust in systems through transparent dispute resolution

Addressing xenophobia is not only a moral imperative but also an economic necessity.

Trade integration cannot flourish where traders fear physical insecurity or discrimination in key markets.

Conclusion

The African Continental Free Trade Area represents a historic opportunity to redefine Africa’s economic trajectory.

Its promise of a unified market, industrial growth and expanded trade is within reach, but only if structural barriers are addressed.

The persistence of social tensions, particularly xenophobic incidents in South Africa, highlights the need for deeper integration that goes beyond policy declarations.

Economic integration must be matched with social protection and cross-border security.

A continental insurance framework, built upon the foundation of systems like the ECOWAS Brown Card Insurance Scheme, offers a practical pathway to safeguard traders, reduce risk and strengthen confidence in African markets.

Ultimately, Africa’s trade future will not be determined only by agreements signed in summit halls, but by the safety, trust and predictability experienced by the ordinary trader moving goods from one border to another.

By DR. WINFRED KWASI DODZIH

The writer is the Permanent Secretary, ECOWAS Brown Card Insurance Scheme