Launched on 1 January the African Continental Free Trade Area (AfCFTA) agreement will create the largest free trade area in the world measured by the number of countries participating. The pact connects 1.3 billion people across 55 countries with a combined gross domestic product (GDP) valued at $3.4 trillion. It has the potential to lift 30 million people out of extreme poverty but achieving its full potential will depend on putting in place significant policy reforms and trade facilitation measures.
The agreement aims to reduce all trade costs and enable Africa to integrate further into global supply chains – it will eliminate 90 per cent of tariffs, focus on outstanding non-tariff barriers, and create a single market with free movement of goods and services. Cutting red tape and simplifying customs procedures will bring significant income gains. Beyond trade, the pact also addresses the movement of persons and labour, competition, investment, and intellectual property.
The scope of AfCFTA is sizable. The agreement will reduce tariffs among member countries and cover policy areas such as trade facilitation and services, as well as regulatory measures such as sanitary standards and technical barriers to trade. It will complement existing subregional economic communities and trade agreements in Africa by offering a continent-wide regulatory framework and by regulating policy areas, such as investment and intellectual property rights protection, that so far have not been covered in most subregional agreements in Africa.
According to the World Bank AfCFTA can provide a spark for the region. By 2035, it estimates that implementing the agreement would contribute to lifting an additional 30 million people from extreme poverty and 68 million people from moderate poverty. Real income gains from full implementation of the agreement could increase by 7 percent, or nearly US$450 billion. As African economies struggle to manage the consequences of COVID-19, AfCFTA can provide an anchor for long-term reform and integration.
“The AfCFTA is a critical response to Africa’s developmental challenges,” His Excellency Wamkele Keabetswe Mene, Secretary General, who is speaking at Africa Oil Week to be held in Dubai between 8th and 11th of November says. “It has the potential to enable Africa to significantly boost intraAfrica trade and to improve economies of scale through an integrated market. It has the potential to be a catalyst for industrial development, placing Africa on a path to exporting value-added products and improving Africa’s competitiveness both in its own markets and globally. It also sends a strong signal to the international investor community that Africa is open for business, based on a single rulebook for trade and investment.
“The global economy is on the brink of a new industrial revolution, driven by new-generation information technologies such as the Internet of Things, cloud computing, big data and data analytics, robotics and additive manufacturing. All of this presents challenges and opportunities for the AfCFTA.”
