F1000ResearchF1000Research2046-1402F1000 Research LimitedLondon, UK10.12688/f1000research.170238.1Policy BriefArticlesAfrican Continental Free Trade Area's (AfCFTA) effects on East African exports and household welfare
[version 1; peer review: awaiting peer review]
ManirihoAristideConceptualizationData CurationFormal AnalysisInvestigationMethodologyResourcesSoftwareValidationVisualizationWriting – Original Draft PreparationWriting – Review & Editinghttps://orcid.org/0000-0001-7367-1479a1
Economics, University of Rwanda College of Business and Economics, Kigali, Kigali City, Rwandamanirihoaristide1@gmail.com
This policy brief investigates the impact of membership in the African Continental Free Trade Area (AfCFTA) and the East African Community (EAC) on export promotion and household welfare in Tanzania, Uganda, Rwanda, Kenya, and Burundi. The analysis reveals a positive association between export performance and investment, imports, consumption, political stability, and government effectiveness. Notably, traditionally relevant factors like GDP and FDI lacked statistically significant associations with export performance. The impact of EAC and AfCFTA membership on exports remains inconclusive. Regarding household welfare, a positive correlation emerged with GDP, domestic savings, trade (imports and exports), rule of law, and corruption control. Counterintuitively, EAC membership displayed a negative and significant impact on household welfare, while AfCFTA membership had a positive but insignificant effect. Policymakers should prioritize investments boosting domestic savings and productive capacity, cultivate a rule-of-law business environment, and implement strategic export promotion informed by import composition analysis. Future research should adopt a disaggregated approach to explore the insignificant effects of economic factors and EAC membership on EAC export performance, while investigating AfCFTA’s true impact and the negative EAC-welfare association.
export performanceopennesswelfare improvementfree trade area (FTA)WTO Chairs programme - Rwanda Chair ProgrammeThe authors would like to express their sincere gratitude to the World Trade Organization (WTO) for their generous financial support of this research project through the UR-WTO Chair ProgrammeThe funders had no role in study design, data collection and analysis, decision to publish, or preparation of the manuscript.Key points
The empirical findings suggest that traditional economic indicators, such as Gross Domestic Product (GDP) and Foreign Direct Investment (FDI), may not be the primary determinants of export growth in the East African Community (EAC) countries. This could be due to the region’s dependence on commodity exports, often subject to price fluctuations, which can limit the direct correlation between GDP or FDI and export growth. Government policies, such as export incentives and regulatory frameworks, can also play a significant role in stimulating exports, independent of traditional economic indicators. This contradicts established economic theory, highlighting the need for further research to identify the more influential factors driving export performance in the region.
The empirical evidence also suggests that political stability and effective governance are essential prerequisites for achieving strong export performance. A stable political environment and robust institutions are conducive to attracting foreign investment, fostering business confidence, and promoting a favorable climate for trade and economic growth.
The initial impacts of EAC and AfCFTA membership on exports and household welfare are inconclusive. This suggests that a longer time period may be necessary to observe the full effects of these regional trade agreements. Further research is warranted to assess the long-term implications of EAC and AfCFTA membership on the economic well-being of East African Community countries.
Figure 1 presents a comparative analysis of the exports and household consumption of selected East African countries, examining the periods before and after their accession to the East African Community (EAC).
Evolution of exports and household consumption among selected East African countries.
Introduction
The African Continental Free Trade Area (AfCFTA) presents significant opportunities for the East African Community (EAC) countries to boost exports and improve household welfare. However, existing research is limited on the specific effects of the AfCFTA on these outcomes. This study aims to evaluate the impact of the AfCFTA and EAC membership on export promotion and welfare enhancement in Tanzania, Uganda, Rwanda, Kenya, and Burundi.
Regional economic blocs have the potential to contribute to economic development by removing trade barriers and increasing trade flows. The AfCFTA, a new and ambitious trade agreement, offers the potential to transform the African economy. However, its specific effects on exports and welfare in EAC countries remain less documented.
East Africa is poised to experience a robust economic recovery, emerging as the fastest-growing region within Africa. Real GDP growth is anticipated to surge from an estimated 1.5 percent in 2023 to 4.9 percent in 2024 and further accelerate to 5.7 percent in 2025. The projected resurgence in Africa’s average growth will be predominantly driven by the remarkable expansion in East Africa (
AfDB, 2024).
This study aims to address the knowledge gaps by analyzing the factors that influence export promotion and the role of the AfCFTA in enhancing welfare within selected EAC countries.
Actionable recommendations
The findings of this study provide critical insights for policymakers in the East African Community (EAC). To maximize the benefits of regional integration and address the complexities highlighted in the analysis, we propose the following actionable recommendations:
Strategic policy formulation
Focus on foundational drivers: Given the statistically significant positive correlations between export growth and domestic investment, political stability, and effective governance, policymakers must prioritize these areas. Instead of relying solely on traditional indicators like GDP and FDI, policy efforts should concentrate on fostering a predictable business environment.
Encourage domestic savings and investment: Implement policies that incentivize domestic savings and direct these funds toward productive sectors. This can include targeted tax breaks for companies reinvesting profits, establishing public-private partnerships to co-finance infrastructure projects, and developing a robust financial ecosystem that facilitates access to capital for local entrepreneurs.
Strengthen rule of law and governance: As the study confirmed, a strong rule of law and effective governance are key to attracting investment and improving welfare. Policymakers should focus on judicial reform to ensure fair contract enforcement, streamline bureaucratic processes to reduce corruption, and enhance transparency in government operations.
Leverage import composition analysis: Since the analysis shows a strong positive correlation between imports and exports, policymakers should conduct a granular analysis of the region’s import composition. This will help identify products currently being imported that could be produced domestically or within the EAC, guiding strategic investments in import-substitution industries and creating new export opportunities within the continent.
Addressing AfCFTA implementation gaps
Promote inclusive participation: To ensure the benefits of the AfCFTA reach a broader population, including the poor and vulnerable, create programs that support Small and Medium-sized Enterprises (SMEs). This can include simplifying customs procedures, providing access to trade finance through specialized credit lines, and establishing capacity-building initiatives to help SMEs understand and navigate the new trade regulations.
Establish sector-specific task forces: The study’s inconclusive findings on the AfCFTA’s direct impact suggest a need for a more targeted approach. Policymakers should establish sector-specific task forces to analyze how the agreement affects key industries like agriculture, manufacturing, and services. This will allow for the development of tailored policies that address unique challenges and opportunities within each sector.
Facilitate trade logistics and infrastructure: The study’s finding that infrastructure has an insignificant effect on exports, despite its theoretical importance, points to potential bottlenecks. Policymakers should conduct a detailed analysis of logistical chokepoints—such as border crossings and ports—and allocate resources to improve key trade corridors. This includes investing in digital infrastructure to streamline cross-border transactions and reduce administrative delays.
Recommendations for future research
Explore the negative EAC-Welfare nexus: The study’s counterintuitive finding that EAC membership has a negative effect on household welfare warrants immediate and deep investigation. Future research should use a mixed-methods approach, combining quantitative analysis with qualitative case studies and surveys of affected populations to uncover the specific mechanisms behind this relationship, such as short-term job displacement or the uneven distribution of trade benefits.
Investigate the role of unsignificant factors: The study’s findings on the insignificant effects of inflation, unemployment, and oil prices on exports challenge conventional economic wisdom. Future research should conduct a more granular, product-level analysis to determine if these factors have a more significant impact on specific export sectors. This will provide a clearer picture of the EAC’s export dynamics.
Policy outcomes and implications
The findings of this study offer critical insights for policymakers in the East African Community (EAC) seeking to leverage regional integration for economic growth and improved household welfare. The analysis highlights that traditional macroeconomic indicators like GDP and FDI do not exhibit a statistically significant association with export performance, suggesting a need to re-evaluate conventional approaches to export promotion. Conversely, empirical evidence underscores the profound importance of political stability, effective governance, and domestic investment as primary drivers of export growth and household welfare.
Based on these findings, we recommend a shift in policy focus towards creating a conducive business environment and strengthening institutional frameworks. Policymakers should prioritize investments that enhance domestic savings and productive capacity to boost export competitiveness. Furthermore, a commitment to upholding the rule of law and implementing robust anti-corruption measures is essential for fostering an environment of business confidence and attracting sustainable investment. These governance reforms are crucial for improving both export performance and the overall well-being of households.
Moreover, the study’s inconclusive findings regarding the impact of EAC and AfCFTA membership necessitate a more nuanced and strategic approach to trade integration. Policymakers should move beyond broad, top-down directives and focus on targeted, sector-specific interventions. This includes conducting a strategic export promotion analysis based on a detailed examination of import composition within the region to identify high-potential export markets and products.
To ensure that the benefits of regional trade are inclusive and reach the most vulnerable populations, efforts must be made to promote inclusive participation in the AfCFTA. This involves providing technical and financial support to small and medium-sized enterprises (SMEs) to help them overcome barriers to trade, such as complex customs procedures and limited access to trade finance. By fostering an environment that supports both large-scale investment and grassroots economic participation, EAC countries can better harness the potential of the AfCFTA to drive sustainable economic development and enhance household welfare.
ResultsIntra-African trade performance
The African Continental Free Trade Area (AfCFTA) represents a significant stride towards enhancing intra-regional trade within Africa. This strategic initiative offers a promising avenue for the continent to mitigate the adverse effects of external shocks and bolster its economic resilience (
African Trade and Economic Outlook, 2024).
Figure 2 describes the intra-African trade performance from 2017 to 2023. Concurrently,
Figure 3 presents a comparative analysis of exports, imports, and household consumption across selected EAC countries for the year 2020.
Status of export performance and imports in selected East African countries.
Exports, imports, and household consumption in selected EAC countries in 2020 (USD million).
Drivers of export performance in EAC countries
The empirical analysis reveals a positive association between export growth and several key factors within the East African Community (EAC). These factors include investment, imports, consumption, political stability, and the rule of law (
Maniriho et al., 2025). This suggests that countries with higher investment levels, engaged international trade, stable political environments, and effective governance are better positioned to achieve strong export performance.
Contrary to established economic theory, the analysis finds no statistically significant association between Gross Domestic Product (GDP), Foreign Direct Investment (FDI), and infrastructure development and export performance (
Maniriho et al., 2025). This suggests that other factors might be more influential in driving export growth in the EAC.
Regarding the impact of regional economic integration, the study finds a positive but statistically insignificant effect of EAC membership on export performance (
Maniriho et al., 2025). This indicates that while EAC membership might have some beneficial effects, its influence on exports is not statistically significant within the study period.
Furthermore, the impact of AfCFTA membership on exports remains inconclusive. The analysis did not find a significant effect of AfCFTA membership on exports, likely due to the short time period since its implementation.
Drivers of household welfare in EAC countries
The empirical analysis presented in this study demonstrates a positive association between household welfare and several key factors within the East African Community (EAC). These factors include Gross Domestic Product (GDP), domestic savings, trade (imports and exports), the rule of law, and corruption control (
Maniriho et al., 2025). This suggests that economic growth, domestic savings, international trade, good governance, and effective corruption control are crucial for improving living standards.
Unexpectedly, the study finds a negative impact of EAC membership on household welfare (
Maniriho et al., 2025). This counterintuitive finding suggests that regional integration might have unintended negative consequences for household welfare in some cases. Further research is necessary to understand the underlying reasons for this negative effect.
Regarding AfCFTA membership, the study finds a positive but statistically insignificant effect on household welfare (
Maniriho et al., 2025). This indicates that while AfCFTA might have potential benefits for household welfare, its impact is not statistically significant within the study period.
Conclusion
This policy brief provides valuable insights into the factors influencing exports and household welfare in EAC countries. The findings suggest that while traditional factors like GDP and FDI might not be the main drivers of export growth, investment, imports, political stability, and good governance are crucial. The impact of EAC and AfCFTA membership on exports and household welfare remains unclear and requires further investigation. Policymakers should focus on sectoral development, inclusive participation, and good governance to maximize the benefits of regional integration and improve household welfare in the EAC.
Data availability statement
Havard Dataserve. “
Data for AfCFTA paper August 2023.https://doi.org/doi:10.7910/DVN/VGBUVM”.
Maniriho, A. (2025).
This project contains the following underlying data:
Data for AfCFTA paper August 2023-1.xlsx
Data is available under the terms of the
CC0 1.0.
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