Africa: At the intersection of geopolitics and trade

Africa’s trade and investment landscape is being redrawn higher tariffs (up to +$5bn on exports), increased sovereign debt, decreasing foreign aid, etc. Yet, key fundamentals remain strong, and the African Continental Free Trade Area (AfCFTA) represents a unique opportunity to seize the full potential of intra-Africa trade.

It is imperative that the AfCFTA succeeds, and leaders must respond to this new trade reality with clear priorities, coordinated action, and long-term vision.

These are the key messages from a recent research report released by Boston Consulting Group (BCG). Entitled “Africa Unleashed: Seizing Opportunity in a Shifting Geopolitical Landscape”, the report looks at how African countries will need to respond to a rapidly-evolving geopolitical landscape and what this means for relationships with key trading partners.

“Geopolitical developments in 2025 have generated significant emotive commentary, often intensified through media narratives. Our objective with this report was to re-centre the conversation around data-driven insights and a pragmatic view of the shifting landscape,” explains report co-author Badr Choufari, Managing Director and Partner at BCG Casablanca.

These insights are based on a survey of over 350 senior African executives, representing countries across key sectors and developed in conjunction with the Africa CEO forum.

Choufari adds that this report draws on BCG’s proprietary global trade forecast model, a tool that leverages over 500 million data points, historical trade patterns, and expert-adjusted geopolitical assumptions.

While much of the narrative has been around short-term uncertainty, BCG believes that there are many reasons for Africa to feel optimistic about the future – provided that countries on the continent understand the key strategic levers they can draw on.

BCG projects that Africa’s total trade will grow by 3.5% annually to 2033, outpacing the European Union at 2%, with the most significant shifts occurring toward Asia. The continent’s largest trade corridor – with China – is forecast to grow by $173bn, more than any other partner. By comparison, trade with the (EU) is expected to grow by $100bn, with India ($63bn), ASEAN ($30bn), and the US ($12bn).

“As global trade flows shift in response to geopolitical events, our projections show new opportunities for Africa – and the wider global south,” says Tim Figures, BCG Partner and Associate Director, and geopolitics and trade expert.  “Understanding the levers available to businesses and governments – and deploying these strategically – will be key to ensuring Africa benefits from these once-in-a-generation changes.”

“Africa’s potential is well understood,” says Trudi Makhaya, Partner at BCG Johannesburg   highlighting that the continent is home to the world’s youngest population, vast mineral and agricultural endowments, and unmatched renewable energy potential.

“The continent is structurally positioned to lead in areas such as green industrialisation, the energy transition, and food security,” she adds.

Yet much of this potential remains unrealised. Less than 5% of mined resources are processed locally, trade costs remain prohibitively high due to fragmented infrastructure, and youth unemployment persists despite growing demand for skills.

Short-term disruptions are also having a critical impact with the report highlighting that recent tariff hikes could impose up to $5bn in added export costs, with South Africa alone facing $2.6bn in incremental tariffs. Nigeria is another major African economy which is facing disruptions – its manufacturing sector is not only struggling with tariffs, but its lack of preferential access into other major trade blocs limit export diversification.

Kenya’s textile exports risk tariffs rising from 0% to 23% if the African Growth and Opportunity Act (AGOA) is not extended. Additionally, $50bn to $70bn in global aid flows are at risk, threatening fiscal stability and disruption in aid-dependent economies and sectors.

To unlock the latent potential available across the continent, there are key focus areas that BCG research has identified as part of a playbook for stakeholders:

AfCFTA – A high-potential platform still early in its journey

The AfCFTA brings together 54 countries under a shared ambition to create a $3.4 trillion single market and boost intra-African exports by 32%.

“If fully implemented the AfCFTA is more than a trade deal. It is Africa’s most ambitious platform for shaping a collective economic future,” says Lisa Ivers, Managing Partner and Head of BCG Africa system.

Ivers adds that while the trade bloc has been slow to gain momentum and there is much work to be done to achieve this goal, it should be recognised that it took the European Union (EU) more than 40 years to build a fully functioning single market.

Build geopolitical muscle to monitor risks and seize the advantage

Trade policy and global capital flows are now boardroom issues. Firms must develop the muscle to track, anticipate, and act on geopolitical shifts.

This includes monitoring shifts in tariffs and incentives that impact market access or competitiveness and tracking Foreign Direct Investment (FDI’s) trends from partners including the EU, China and the Gulf States. Further to this, there should be a keen understanding of regulation including ESG standards, carbon pricing and localisation rules.

Invest in ‘trade-conscious’ value propositions

To stay competitive, companies must prioritise sectors and business models aligned not only with current trade incentives and cost advantages, but also with changing patterns of future demand.

This could include using sustainability as a market access lever. Environmental standards are now embedded in trade policy – for instance, the EU’s Carbon Border Adjustment Mechanism (CBAM). Understanding these standards and meeting them early is a pathway to high-value export markets.

Partner to mobilise resources and shape the trade environment

BCG research shows that geopolitics is front of mind for many executives and industry leaders. While 63% of executives are optimistic about the outlook, 82% of African executives view global geopolitical tensions as high and are directly influencing strategic discussions.

Business leaders can no longer remain passive participants – if they want to unlock growth, they must engage strategically with governments and development financiers and champion the removal of non-tariff barriers while advocating for smart public incentives. This becomes even more relevant in the context of the transformative economic potential of the AfCFTA.

Makhaya concludes: “Long-term value will accrue to those who invest early in competitiveness: building local capacity, forming resilient supply chains, and aligning with sectors poised for structural growth. Africa’s fundamentals are not in question – what matters now is the ability to act with foresight amid short-term volatility.” 

The full report is available for download.