(Ecofin Agency) - Faced with high costs linked to poor infrastructure and regulatory barriers, about 34% of African business leaders are increasingly adopting digital tools to facilitate trade within the continent. This is the finding of a report published on January 20 by the UK-based research firm Economist Impact.

Titled "Trade in Transition Regional Insights Africa: Navigating Regional Ambitions and Global Realities," the document is based on a survey of hundreds of African business leaders as part of the global "Trade in Transition 2025" study, which collected insights from 3,500 executives across North America, Europe, Asia-Pacific, the Middle East, Africa, and South America.

Despite the growing use of digital tools, African executives say the lack of reliable data remains a major obstacle. They emphasize the need for coordinated efforts between governments and businesses to invest in data infrastructure and establish clear standards for data collection and management.

Challenges Facing the African Continental Free Trade Area

The report highlights several challenges preventing businesses from fully benefiting from the African Continental Free Trade Area (AfCFTA). The biggest concern is political instability and regional conflicts, cited by 39% of senior executives surveyed. This is followed by slow implementation of the common market (32%), lack of financial support (27%), high compliance costs (22%), weak digitalization of customs procedures (20%), and poor transportation infrastructure (17%).

With these obstacles slowing intra-African trade, many companies are looking beyond the continent to source supplies. A majority of executives favor geographic diversification—sourcing from multiple regions worldwide—over regionalization. About 46% of respondents say they prioritize diversifying their supplier base, while only 16% prefer focusing on regional supply chains.

Shifting Trade Partnerships

While China remains Africa’s top trade partner, other countries such as India, the United Arab Emirates, and Turkey are gaining ground in business transactions with African companies. This shift reflects the continent’s efforts to reduce its dependence on a single trade partner.

To strengthen their presence in international markets, African business leaders stress the importance of securing more favorable trade agreements (35%) and introducing government incentives (25%).

A Growing Commitment to Sustainability

Sustainability is emerging as a key priority for African businesses. About 27% of surveyed executives rank it as a top concern, compared to a global average of 15%, underscoring the continent’s strong support for sustainable practices amid the growing impact of climate change.

Executives say they are increasing investments in technologies to assess climate risks within supply chains (38%) and collaborating more closely with suppliers to improve data-sharing and joint strategies for handling extreme weather events (34%). These efforts aim to create a data-driven approach to climate risk management.

Collecting sustainability data is especially crucial for African exporters to the European Union. The EU’s Carbon Border Adjustment Mechanism (CBAM), which took effect in October 2023 with a three-year transition period, will impose new carbon pricing regulations on imported goods. Given that the EU accounted for 33% of Africa’s total exports in 2023, this policy is expected to have a major impact on African trade. To comply, business leaders say they need better access to green technologies (55%) and stronger support from local governments (50%).