The architecture of continental ambition
By Staff Writer
East Africa stands at a crossroads. Two ambitious trade frameworks promise to reshape manufacturing across the region, yet implementation lags far behind ambition. The African Continental Free Trade Area and the East African Community present manufacturers with unprecedented opportunities alongside formidable challenges that require immediate policy attention.
The AfCFTA represents the world’s largest free trade area by participating countries, spanning 1.3 billion people across 55 nations with combined GDP of $3.4 trillion. Trading under AfCFTA rules commenced in January 2021, yet by September 2025 only 11 countries actively trade under its provisions. Kenya features among them, positioning itself as a regional manufacturing hub within this evolving framework.
The agreement entered its operational phase in April 2024, marking a transition from negotiation to execution. Key infrastructure now exists: the Pan-African Payment and Settlement System enables transactions in local currencies across 42 African denominations, whilst the e-Tariff Book provides businesses with essential tariff information. Rules of origin covering 88 per cent of product lines have been agreed, though utilisation remains extraordinarily low.
The EAC, comprising eight member states with a combined population of 331 million and GDP of $296 billion, operates within this continental structure. Its customs union and common market protocols create deeper integration than the broader AfCFTA framework. Intra-EAC trade increased from $3.4 billion in 2024 to $5.2 billion in the first quarter of 2025 alone, demonstrating accelerating regional commerce. Total EAC trade rose 28.4 per cent to $38.2 billion in Q2 2025, driven largely by a 40.5 per cent surge in exports.
Opportunities masked by obstacles
For manufacturers, these agreements offer tantalising prospects. The World Bank estimates AfCFTA could increase Africa’s income by $450 billion by 2035, with manufacturing exports accounting for the bulk of the $560 billion increase in total exports. Kenya’s manufacturing sector contributed 9.2 per cent to GDP in 2024, employing 456,000 people. Projections suggest this will grow to 9.5 per cent and 500,000 jobs in 2025, though modest growth rates of 3.2 to 3.5 per cent suggest structural constraints remain binding.
The Route to Market Strategy launched in April 2025 targets doubling Kenya’s processed exports by leveraging special economic zones. Twenty-eight SEZs have been gazetted, intended as catalysts for industrial development. Priority sectors include textiles, leather, pharmaceuticals, automotive components and agro-processing, each positioned to capture regional demand.
Regional value chains present immediate opportunities. ISUZU East Africa’s managing director Rita Kavashe noted that sourcing inputs across the region has facilitated development of an integrated motor vehicle industry. Nestlé Kenya imported its first AfCFTA consignment from South Africa in October 2024, with infant nutrition product tariffs reduced from 25 per cent to 15 per cent, scheduled for complete elimination by 2030.
Yet opportunities remain largely theoretical for most manufacturers. Intra-EAC trade constitutes just 15 per cent of total EAC trade, unchanged despite years of integration efforts. This compares unfavourably with 60 to 70 per cent in Europe and Asia. Manufacturing credit growth registered a marginal 0.5 per cent in Q1 2025, whilst agricultural credit increased 6.6 per cent, signalling persistent capital constraints in industrial sectors.
The tyranny of implementation gaps
Non-tariff barriers constitute the primary impediment to realising trade agreement benefits. Regulatory divergence, customs inefficiencies and infrastructure deficits impose costs equivalent to 30 to 50 per cent ad valorem in certain sectors, effectively negating tariff reductions. Border crossing times, though improved at some posts, remain prohibitive for time-sensitive manufacturing supply chains.
Rules of origin requirements, whilst essential for preferential treatment, create documentation burdens that overwhelm smaller manufacturers. The Kenya Association of Manufacturers’ head of policy Miriam Bomett emphasised that complex certification processes cause many exporters to default to most-favoured-nation regimes rather than claim AfCFTA preferences. Small and medium enterprises lack the traceability systems and compliance capacity that preferential trading requires.
Infrastructure constraints extend beyond physical assets. Less than one-third of AfCFTA members maintain fully operational single-window systems for customs clearance, and interoperability across borders remains rare. Without digital certificates and pre-arrival processing, predictable supply chain timelines prove elusive. The infrastructure deficit across Africa is estimated at $150 billion, severely hampering the capacity to trade in larger volumes.
Access to affordable finance presents another binding constraint. Manufacturing firms in Kenya face lending rates averaging 13 to 14 per cent, limiting their capacity to scale operations or invest in productivity improvements. The East African Development Bank acknowledges supporting manufacturing and agro-industrialisation, yet trade finance remains scarce for smaller operators. Exchange rate volatility and liquidity constraints feature prominently amongst cited barriers.
EAC institutional capacity itself faces severe challenges. Budget deficits have slowed community operations, with only $13.3 million of the $89.5 million budget for 2024/2025 remitted by member states as of November 2024. Several countries maintain significant arrears, with the Democratic Republic of Congo owing $20.7 million and Burundi $16 million. Staff vacancies number 150, with hiring frozen since 2024. The East African Legislative Assembly has been on indefinite break since July 2025 due to lack of funding.
Production costs remain uncompetitive. Business leaders consistently cite electricity and transport expenses as principal concerns. Climate change requirements for accessing European Union markets create additional compliance burdens. Intellectual property rights frameworks require strengthening to support technology businesses scaling across the region.
Policy imperatives for manufacturers
Policymakers must pursue several urgent interventions if manufacturers are to capture trade agreement benefits. First, completing tariff negotiations and rules of origin frameworks remains essential. Category B goods tariff phase-downs commence in January 2026, yet numerous product-specific rules remain contested. The textiles and automotive sectors require particular attention given their employment potential and value-chain complexity.
Second, harmonising technical standards across the EAC and broader AfCFTA space would significantly reduce compliance costs. Mutual recognition agreements for certifications and quality standards eliminate duplicative testing requirements. The AfCFTA’s online mechanism for monitoring and eliminating non-tariff barriers provides a continental system for addressing these issues, but requires aggressive implementation support.
Third, customs digitalisation must accelerate. Linking national payment system switches, as Rwanda and Tanzania commenced in November 2025, demonstrates practical integration pathways. Extending such linkages region-wide would reduce transaction costs and facilitate smaller-value trades. Full operationalisation of PAPSS across all member states would diminish USD-denominated transaction expenses.
Fourth, targeted industrial policy must accompany tariff liberalisation. Morocco and Rwanda demonstrate that linking preferential access to investment incentives, quality upgrade funds and skills programmes generates firm-level productivity gains that sustain regional competitiveness. Kenya’s Bottom-Up Economic Transformation Agenda aligns with this approach, though implementation must intensify.
Fifth, trade finance mechanisms require dramatic expansion. Afreximbank’s initiatives notwithstanding, blended finance instruments providing pre-shipment and receivables financing for AfCFTA-certified exporters would address liquidity constraints. Development finance institutions must prioritise manufacturing lending at concessional rates.
Sixth, the Common External Tariff requires consistent application across EAC states. Regulatory fragmentation undermines the customs union’s effectiveness, creating arbitrage opportunities whilst complicating supply chain planning. Full implementation of common market commitments, including service sector liberalisation and labour mobility provisions, would deepen integration benefits.
Conclusion
Africa contributes merely 3 per cent of global manufactured goods despite representing 17 per cent of world population. This disparity reflects decades of underinvestment, policy fragmentation and institutional weakness rather than inherent constraints. AfCFTA and the EAC provide frameworks for transformation, yet frameworks alone deliver nothing.
The secretary-general of the AfCFTA Wamkele Mene noted in February 2025 that 48 countries have deposited ratification instruments, with 19 actively trading under AfCFTA rules. He urged accelerated implementation of agreed rules to unlock markets and attract investment, particularly given rising global trade protectionism. Progress on key issues including tariff reduction and traded goods lists has advanced, yet the pace remains insufficient given manufacturing sector needs.
EAC secretary-general Veronica Nduva urged a different approach under the clarion call of “Buy East African, Build East Africa.” The private sector must drive growth, she emphasised, but governments must provide enabling environments. Infrastructure investments of $44 million in 2024 boosted intra-EAC trade by 13.4 per cent, demonstrating returns to coordination.
The combined scenario modelling by the Institute for Security Studies suggests that full implementation of AfCFTA alongside manufacturing, governance and infrastructure improvements could increase EAC GDP to $3.4 trillion by 2050, representing a 123 per cent increase over current trajectories. The AfCFTA scenario alone would lift 44.2 million people from extreme poverty whilst manufacturing interventions would lift 30.8 million.
Such projections remain speculative absent decisive action. Manufacturers require predictable regulatory environments, affordable inputs and efficient logistics. Trade agreements create potential; implementation determines outcomes. East African governments must choose between rhetorical commitment and operational reality. The manufacturing sector, and the millions dependent upon it, await that choice.
