Strengthening The Africa-Europe Economic Corridor

The time is now for strengthening the Africa-Europe economic corridor, a new Boston Consulting Group (BCG) report has found, with significant opportunities for both continents to scale local production and deepen bilateral collaboration. A stronger corridor is predicted to increase bilateral trade from an estimated US$545 billion today to US$1 trillion within a decade.

According to the report, this significant potential has long existed, but now, improving policy frameworks and economic fundamentals in many African countries, alongside growing European demand for diversification, are creating a more favourable context for action. Moreover, global shocks in recent years have made these structural patterns more visible and consequential.

The report suggests that leveraging this potential will require focusing on a select set of high-potential industrial clusters where Africa has clear structural strengths and Europe has strong strategic interests. These can be grouped into three types – resource-based value chains, where Africa can move from upstream extraction to midstream processing; light manufacturing, including both finished goods and components integrated into European value chains; and tradable services, including digital services, tourism, and cultural and creative industries.

ConstructAfrica spoke with Badr Choufari and Patrick Dupoux, senior partners at BCG, about the opportunities and challenges presented in the report.

Strategic Imperative

Strengthening the Africa-Europe corridor has moved from being desirable to a time-sensitive strategic imperative for both continents, say the experts, due to two factors.

“First, the geopolitical shocks of recent years have exposed how vulnerable both economies have become to externally-dependent value chains. Covid-19 revealed supply-chain fragility and left Africa short of vaccines; trade uncertainty and protectionism have surged (industrial policies motivated by national interest have risen roughly six-fold); the [2024] Draghi report [on European economic competitiveness] has laid bare Europe's structural competitiveness gaps.

“Both continents have grown dependent, becoming increasingly net importers of finished goods (the EU runs a US$374bn goods deficit with China, Africa a US$64bn deficit), and both depend heavily on US digital services. This is why we describe them as ‘objective allies’; they face the same two structural dependencies (industrial reliance on China, digital reliance on the US) and hold complementary strengths to address them together.

“Second, demographics make their complementarity unusually strong. Africa is projected to hold almost 60% of the global workforce by 2050, is rapidly urbanising (14 megacities [hosting populations of] more than 10 million by 2050), and holds outsized shares of critical minerals, uncultivated arable land (about 60% of the global total) and renewable energy potential. Europe faces the mirror image: an ageing population and maturing markets; but it brings capital (more than US$9 trillion in outward FDI [foreign direct investment] stock), industrial and institutional know-how, and a single market of above 440 million consumers. One continent has the labour and resources; the other has capital, technology and demand.

The urgency, the BCG team says, is sharpened by the fact the corridor has been losing ground precisely when it should be gaining it.

“Africa-EU goods trade grew about 25% over the past decade while global trade grew an estimated 30%, and European FDI stock in Africa grew about 30% against a near-doubling globally. The fundamentals point one way; the momentum has been going the other.”

Immediate Action

It is important for governments and companies to act now, before the window of opportunity to strengthen this partnership closes, says the report, with Dupoux and Choufari noting this is because the corridor is becoming increasingly contested and since dependencies harden the longer they are left in place.

“Other actors are moving fast and deliberately,” says the team. “In critical minerals, China already controls roughly 40% of global copper and 65% of cobalt midstream processing, and more than 80% of solar PV and battery manufacturing downstream. Every year that Africa's minerals leave the continent as raw ore and get processed elsewhere, that midstream and downstream capacity gets more entrenched and harder to relocate. Another illustration is cashews, where more than 70% of West African production is shipped raw to Vietnam and India; Vietnam alone supplies about 70% of Europe's cashew imports despite growing almost none itself. Once processing hubs, offtake relationships and logistics are locked-in elsewhere, the economics of building them in Africa get steadily worse.”

The US relationship illustrates how quickly a window can close, the team notes.

“[The] AGOA [African Growth and Opportunity Act] (the backbone of US-Africa trade preferences for 25 years) has been a source of insecurity and uncertainty since 2025. While the recent extension now provides certainty through 2028, it still does not provide sufficient certainty for mid- to long-term planning. Meanwhile, ‘reciprocal’ tariffs of 10-30% now sit on top of most African goods regardless of AGOA eligibility, and African apparel and agri-exporters (Kenya, Lesotho, Madagascar, South Africa) are already cutting jobs. That is a live demonstration that preferential access can evaporate, and it makes the case for anchoring a durable, predictable European alternative now.

“There are also hard timing triggers. The EU's Carbon Border Adjustment Mechanism [CBAM] entered its definitive, paying phase on 1 January 2026, which reshapes the economics of steel, aluminium, fertiliser and hydrogen imports, and rewards suppliers that can prove low-carbon production. Africa can position as a CBAM-aligned supplier if it moves now; if it doesn't, others will. And windows like the Lobito Corridor offer time-limited leverage: freight is already moving, procurement for the Zambian extension is under way in 2026, and the decisions about whether the corridor merely moves minerals or actually captures value through local processing are being taken right now, not later.

“Put simply: the enabling conditions (improving African fundamentals, European appetite for diversification, industrial policy momentum on both sides) are aligned today in a way they may not be for long. Dependencies deepen, competitors entrench and preferential arrangements are proving fragile; so, the cost of delay is rising.”

Probable Scenario

Asked about the chances of companies and African governments taking the necessary steps to strengthen the corridor, Choufari and Dupoux say the probability is mixed, but more plausible now than at any point in the last two decades, provided the approach is different from the past.

“Broad, non-selective past efforts have not yielded the expected impact: more than 40 African countries already have duty-free EU access, over 90% of African exports enter the EU tariff-free, European FDI stocks grew and €150 billion [US$174.6 billion] was earmarked under Global Gateway – yet trade stayed flat and stuck in raw commodities (an estimated 35% of Africa's exports to Europe are manufactured, compared with about 95% for China),” says the team.

“Access and money alone clearly do not shift value chains. What raises the odds this time is a genuine alignment of political will on both sides. In Europe, economic security and strategic autonomy are now top of the agenda: the Draghi report, the Clean Industrial Deal, the Critical Raw Materials Act, the Net-Zero Industry Act, REPowerEU … all point the same way. In Africa, AfCFTA [African Continental Free Trade Area] is building the integrated market, and there are concrete signs of intent: the DRC-Zambia EV [electric vehicle] battery cooperation agreement, EU critical raw materials MoUs [memorandums of understanding] with both countries translated into a 2024-30 roadmap, Benin's 2024 ban on raw cashew exports and Ghana's planned phase-out in 2026.

“The decisive factor is execution discipline, and this is where the report is most cautious. Success depends on avoiding the classic failure modes: initiatives driven by funding cycles rather than industrial strategy; fragmented rather than sequenced interventions; capital deployed without capability-building; and weak accountability. It requires both depth (a clear industrial blueprint with coordinated trade, investment and skilling) and duration (political commitment beyond electoral and financing cycles). The precedents show it is achievable – Morocco's two-decade automotive transformation (exports to Europe up from US$2.5 billion to US$10 billion, poverty down from 15% to under 4%) and Slovakia's ‘Tatra Tiger’ industrialisation both worked because they were deliberately engineered.

“Corridors don't emerge; they are built. So the chances rise sharply if stakeholders commit to focused, selective, well-orchestrated, patient execution rather than another round of broad, diffuse programmes.”

Probability of Financing

Asked about BCG’s views on securing financing for the projects and concepts highlighted in the report, Dupoux and Choufari opine that financing is a structuring challenge more than an availability challenge.

“Public money is under real pressure (overseas development assistance [ODA] is being cut 20-30% globally and European public budgets are stretched), so the model cannot rely on grants and concessional aid,” they say. “The report is explicit that private financing exists but “requires still much structuring to scale up”. The task is therefore to crowd private capital in, not to substitute for it.

“That means working on both sides of the market. On the supply side (investors), the priority is scaling risk mitigation instruments (first-loss guarantees, FX [foreign exchange] hedging facilities, political risk insurance, partial credit and partial risk guarantees) alongside blended finance platforms that bring together development finance institutions, export credit agencies and private investors to make industrial and infrastructure projects bankable. A parallel and often-overlooked lever is mobilising Africa's own idle domestic institutional capital (pension funds, sovereign wealth funds) through bonds and insurance products.

“On the demand side (investees), the constraint is a shortage of bankable, investable projects – the answer is demand aggregation (pooled project pipelines) and ‘industrialised’ project preparation. That includes standardised public-private partnership [PPP] frameworks, pre-approved legal and risk structures, and centralised technical assistance pools that lower the cost and time of getting projects to financial close.

“Finance should also be anchored to trade and industrial outcomes. Investment incentives should be aligned with offtake and market access commitments, so assets are actually utilised and European-African joint ventures that share risk, embed local value creation and transfer know-how. Real corridors show both the appetite and the friction – the Lobito Corridor has drawn a roughly US$4 billion-US$6 billion coalition (US, EU, AfDB, AFC, private operators), yet financial close on the Zambian extension is only targeted around 2027 and observers flag financing-structuring and investor-risk-perception delays as the binding constraints. The consistent thread is that finance alone is insufficient; without accompanying capability-building at firm, sector and institutional level, capital does not translate into productivity or lasting value.”

Enabling the Transition

What needs to change in Africa to make this transition a reality? The report frames the answer to this question around three mutually reinforcing enablers: trade enablement, investments and skilling, says the BCG team. “The central lesson is that these have to be orchestrated together and in sequence.

“Trade enablement – building the market pull and clearing the path for goods to move:

Anchor long-term European demand through political commitment on trade preferences, buyer-led industrial partnerships, backed offtake agreements and sourcing commitments.

Remove Africa-Europe trade barriers through tariff and quota removal, regulatory and standards harmonisation, one-stop border posts, customs digitalisation and simplified rules of origin (intra-African as well as with Europe).

Improve Africa's export competitiveness through trade finance and risk mitigation solutions, risk-sharing by export credit agencies, firm-level export readiness, small and medium enterprise aggregation platforms and logistics-cost optimisation.

“Investments – mobilising capital into the physical capacity and the finance structures that unlock it:

Enabling infrastructure – the biggest hard constraints on processing: industrial capacity (processing plants, industrial parks/special economic zones); reliable, affordable, low-carbon energy (generation, grid, storage; the DRC and Zambia have large unmet demand today despite huge, untapped hydro and solar); digital systems; regional transport integration (ports and rail, the missing Lobito links, ageing Tanzania-Zambia railway stock); and urban development for the workforce.

Shaping the supply side (investors): scaling risk mitigation instruments (first-loss guarantees, foreign exchange hedging facilities, political risk insurance, partial credit and partial risk guarantees) alongside blended finance platforms that bring together development finance institutions, export credit agencies and private investors to make industrial and infrastructure projects bankable. A parallel and often-overlooked lever is mobilising Africa's own idle domestic institutional capital (pension funds, sovereign wealth funds) through bonds and insurance products.

Shaping the demand side (investees): demand aggregation through pooled project pipelines and ‘industrialised’ project preparation (standardised PPP frameworks, pre-approved legal and risk structures, centralised technical assistance pools) to overcome the shortage of bankable projects.

“Skilling/capacity-building – turning capital into productivity across three levels:

Individuals (workforce skills): demand-driven basic education, vocational training, apprenticeships and dual learning tied to real investments and offtake agreements, plus entrepreneurship; upskilling of artisanal miners is a concrete example.

Sectors and firms (industrial capability): technical know-how and productivity, managerial depth to scale firms, technology and know-how transfer through joint ventures, and alignment with EU standards and certification.

Markets and systems (institutional capacity): trade execution capacity, investment and industrial governance, transparency in mining and customs, and the standards/certification ecosystems increasingly non-negotiable under CBAM and due-diligence rules. Deeper regional integration through AfCFTA sits here too, providing the scale, cross-country specialisation and supply continuity European buyers require.

“Underpinning these three are intentionality and strategic patience. Corridors are engineered, not spontaneous. They need a clear industrial blueprint, selective and sequenced interventions concentrated where scale can realistically emerge, rigorous monitoring and accountability, and a dedicated joint coordination mechanism per corridor with sustained political commitment beyond electoral and financing cycles.”

How Europe Benefits

For Europe, the core benefit from strengthening the corridor is economic security and strategic autonomy, reducing the continent’s exposure to dominant suppliers for the inputs that its green and digital transitions depend on, says the BCG team.

“Today, that dependency is acute. For example, China controls roughly 40% of copper and 65% of cobalt midstream processing and more than 80% of downstream solar and battery manufacturing. If Africa develops midstream capacity, Europe gains a diversified, alternative source of battery-grade cobalt, London Metal Exchange-grade copper, green iron and alumina, green hydrogen derivatives and processed agri-goods, being sourced from a partner on its doorstep rather than a strategic competitor.

“Demand is set to outstrip supply (refined cobalt demand nearly tripling to 573 kilotonnes by 2040, with a projected 30-40% supply gap and copper rising to 42 million tonnes with a 20-30% gap), so securing diversified processed supply is a direct hedge against shortage and price-setting power concentrated elsewhere.

“There are several reinforcing benefits. Proximity means shorter, more resilient supply chains and materially lower transport emissions than Asian routing, which matters increasingly under CBAM and the EU's circular/low-carbon sourcing agendas. Europe also strengthens its own industrial base by securing feedstock for battery gigafactories, EV manufacturing and clean-tech, and protecting jobs in exposed downstream sectors (steel supports 300,000 direct EU jobs, food-and-drink manufacturing more than 4.5 million). Because integration is designed as two-directional, Europe keeps and grows the high-value downstream steps (precursor cathode active material/cathode active material, cell and pack manufacturing, roasting and branding) while Africa takes the midstream.

How Africa Wins

“Finally, deeper economic partnership brings broader dividends Europe increasingly values: more stable migration dynamics, a diversified growth market for European firms and stronger soft-power ties as an alternative to a purely transactional or contested relationship. The framing is deliberately ‘made in Africa, made with Europe’.”

Asked about the benefits for Africa in trading more with Europe versus other countries/regions, Dupoux and Choufari stress that the idea is to build complementary capabilities and a more balanced portfolio of partners, and it is not about decoupling from China, the US or anyone else.

“Within that, the Europe corridor offers Africa some distinctive advantages,” they say. “[These include a] more balanced, less extractive trade relationship. Africa's trade with Europe is far more balanced than with China: the goods coverage ratio with the EU is about 85% (and rising) versus 63% with China (and falling), and in services, Africa is roughly in balance with Europe.

“Trade with China, by contrast, is heavily skewed: Africa's exports there are about 90% raw metals, mining and energy, while it imports finished automotive and consumer goods. Europe offers a route to export processed, higher-value goods rather than just raw commodities.

“[Another advantage is a] partner that actively wants Africa to move up the value chain. Europe's own economic security and decarbonisation agenda gives it a genuine strategic interest in African midstream processing, technology transfer and joint ventures. That aligns Europe's interests with Africa's industrialisation ambition in a way a purely extractive relationship does not.

“[A further advantage is] proximity, standards and durability. Geographic closeness means shorter lead times, lower logistics cost and lower-carbon supply chains, which is a real competitive edge as carbon border rules bite. Alignment with demanding EU standards, while a hurdle, also upgrades African firms' capabilities and traceability, opening premium global markets. And Europe offers the prospect of durable, rules-based, predictable arrangements, which is especially valuable [given] the recent volatility of US access, where AGOA lapsed and only got a fragile one-year renewal while tariffs were layered regardless.

“[Moreover, trade with Europe offers] deep existing ties to build on. The relationship is already the continent's largest across trade, investment, finance and mobility. The EU is Africa's biggest investor (US$254 billion foreign direct investment stock) and top export partner ( about one-third of exports, US$215 billion), plus US$20 billion-US$25 billion in remittances and US$30 billion-US$35 billion in ODA annually, reinforced by language, education and diaspora links. That existing base lowers the cost of deepening.

“[Increased trade with Europe will also offer Africa] a large, quantified prize. Concretely, the opportunity is to grow bilateral trade from US$545 billion today toward US$1 trillion within a decade. This is roughly US$220 billion-US$280 billion of incremental growth above the baseline trend, by capturing share in sectors where Africa has a structural right to win (agribusiness, metals and minerals, energy, textiles, automotive, digital and creative services). For Africa that translates into industrialisation, jobs, value capture and sustainable growth. The benchmark ambition is credible: the Africa-China goods corridor grew 7% a year and the EU-US services corridor 11% a year over the past decade.”

Building on their longstanding economic and cultural ties, Europe and Africa could seize the opportunity to create a genuine win-win outcome through joint value chain integration in selected sectors and geographies, says the BCG report. View the report here.

Top photo: Ships travelling across the Strait of Gibraltar, which separates Africa from Europe (© Gennadi Tomme | Dreamstime.com)