The African Continental Free Trade Area (AfCFTA) Agreement
The African Continental Free Trade Area (AfCFTA) agreement; which entered into force at the beginning of 2021, aims to boost intra-African trade and to accelerate economic development on the continent The AfCFTA will cover a market of 1.3 billion people and gross domestic product (GDP) valued at US$3.4 trillion, across the 55 member states of African Union. In terms of the number participating countries, the AfCFTA will be the world’s largest trade agreement since the foundation of the world trade organization.
The general objectives of the AfCFTA are to: Create a single market for goods, services, facilitated by movement of persons in order to deepen the economic integration of the African continent and in accordance with the Pan African Vision of “An integrated, prosperous and peaceful Africa” enshrined in Agenda 2063; * Create a liberalized market for goods and services through successive rounds of negotiations; * Contribute to the movement of capital and natural persons and facilitate investments building on the initiatives and developments in the State Parties and RECs; *Lay the foundation for the establishment of a Continental Customs Union at a later stage; * Promote and attain sustainable and inclusive socio-economic development, gender equality and structural transformation of the State Parties; * Enhance the competitiveness of the economies of State Parties within the continent and the global market; *Promote industrial development through diversification and regional value chain development, agricultural development and food security; and *Resolve the challenges of multiple and overlapping memberships and expedite the regional and continental integration processes.
AfCFTA - Small and medium-sized enterprises; SMEs are key to growth in Africa. They account for around 80% of the region’s businesses. These business usually struggle to penetrate more advanced overseas markets, but in a consolidated continental market, they are well positioned to exploit scale economies, tap into continental export destinations and use the continental market as a stepping stone for expanding into overseas markets including through continental supply chains as well as global value chains.
AfCFTA - Women Population; Women are estimated to account for around 70% of informal cross-border traders in Africa. When engaged in such activity, women are particularly vulnerable to harassment, violence, and confiscation of goods. By reducing tariffs, the AfCFTA makes it more affordable for informal traders to operate through formal channels, which offer more protection. This can be further enhanced by simplified trading regimes for small traders, such as the simplified trade regime in the Common Market for Easters and southern Africa (COMESA), which provides a simplified clearing procedure alongside reduced import duties that provide particular help to small-scale traders.
According to World Bank’s analysis the AfCFTA will boost intercontinental exports by over 81% and exports with non-African countries by 19% by 2035. In terms of sectors, manufacturing exports are anticipated to make the most gains: a 110% increase for intra-African trade and 46% for non-African trade. In contrast, service trade is envisaged to have the most modest rise (14% of intra-African trade).
In the manufacturing sector; Europe and China are estimated to see the largest increase in trade with Africa. The removal of tariff barriers and non-tariff trade barriers across the AfCFTA member states facilitates sourcing within Africa to form a regional manufacturing cluster, which will in return attract more foreign investment to establish manufacturing activity in this region.
There is already an emerging tendency for foreign investment; in labor-intensive manufacturing sectors in Africa, for instance the textile industry in Ethiopia. China is a major investor in Africa's light manufacturing industry, especially textile and footwear. Some of the factories in this field with foreign investment are already sourcing a significant share from local suppliers and the AfCFTA will further add to this tendency. The growing labor force in this region will be another reason to see this trend increase.
Intra-AfCFTA exports to AfCFTA partners would rise especially fast for Cameroon, Egypt, Ghana, Morocco, and Tunisia, with exports doubling or tripling with respect to the baseline. Under the AfCFTA scenario, manufacturing exports would gain the most, 62 percent overall, with intra-Africa trade increasing by 110 percent and exports to the rest of the world rising by 46 percent. Smaller gains would be observed in agriculture—49 percent for intra-Africa trade and 10 percent for extra-Africa trade. The gains in the services trade are more modest—about 4 percent overall and 14 percent within Africa. Any
