Create One African Market

The African Continental Free Trade Area

Accelerating intra-African trade and boosting Africa’s trading position in the global market by strengthening Africa’s common voice and policy space in global trade negotiations.

About

The African Continental Free Trade Area (AfCFTA) aims to integrate, diversify and industrialize African economies of about 1.3 billion people, with a combined gross domestic product (GDP) of 3.4 trillion dollars. All countries in Africa but Eritrea signed the agreement for the free trade area in March 2018, although 23 countries have deposited the agreement with their respective legislative bodies, for ratification.

AfCFTA became effective on May 30, 2019, as stipulated in the agreement establishing the continent's free trade area. It has two phases.

The first has seen outstanding issues such as schedules of tariff concession and rules of origin (RoO) yet to be addressed. They require negotiations for trade under the CFTA to begin. During the second phase, talks on protocols on competition policy, investment, and intellectual properties are undergoing.

An important landmark was January 1, 2021; the world’s largest economic bloc opens up for business among the African Union members (AU), which championed the free trade area in the continent. In a decade, countries in the continent have agreed to phase out 97pc of their tariff on imported goods with each other. It is, however, estimated that African countries might have a fiscal loss of over 4.1 billion dollars from the removal of tariffs due to the implementation of AfCFTA. However, African countries stand to gain more as it is highlighted here in the Digest section.

Africa also suffers from an annual gap in trade finance the International Chamber of Commerce estimates to have reached between 110 billion dollars and 120 billion dollars.

DIGEST

Pundits in the African gas and oil sector began to see the African Continental Free Trade Area (AfCFTA) is a game-changer for their industry. They believe free trade brings an economy of scale for a sector that accounts for 75pc of exports from Africa. The potential for growth in this industry is exponential; Africa is believed to have 71.pc of global reserves in gas, and a proven oil reserve of 125 billion bbl.

Trade barriers in high import tariffs have impacted the industry and left the market vulnerable. Pundits hope the implementation of AfCFTA will curb this by, “focusing more on growing intra-continental oil and gas trade,” which gives countries autonomy to govern their international trade agreements.

Ghana’s selection to host the Secretariat for the African Continental Free Trade Area (AfCFTA) is one of the factors that influenced the decision of the Californian-based social media company Twitter, Inc. , to establish its first physical presence in Africa. The company is hiring 11 people in Ghana to form a team of product, design, engineering, marketing and communications. However, team members will initially be working from their respective homes; Twitter eyes to open its office soon.

“To truly serve the public conversation, we must be more immersed in the rich and vibrant communities that drive the conversations taking place every day across the African continent,” the company said in a statement it issued.

Ghana’s reputation as a beacon of free speech in Africa and its open Internet ecosystem have contributed to its selection over larger economies in the continent such as Nigeria and South Africa.

Africa needs to expand a piloting project in establishing a pan-African Payment System to go the entire course with the implementation of AfCFTA. Underway in West Africa, COMESA’s Secretary-General, Chelisha Kapwepwe, believes this is one way of his organisation working together with the Accra headquartered AfCFTA. The Secretary-General for the AfCFTA, Wamkele Mene, was a guest in Lusaka, Zambia, in mid-April 2021 where he met with Kapwepwe, hoping to develop a working relationship with regional institutions such as the Trade & Development Bank, the African Trade Insurance Agency, and competition commission and business council under COMESA.

Several countries that signed up for AfCFTA may have the political will and the legal commitment to begin enforcing the free trade rules in Africa. But, capacity is altogether another matter. Inability to enforce customs agreements will be an Achilles hills of implementation of AfCFTA, Wamkele Mene, secretary-general, told a webinar organised by the Progressive Business Forum under the ANC, the ruling party in South Africa.

MORE TO DIGEST . . .

ARGUMENT


The obsession with economic nationalism in Africa gives way to liberalization, argues an op-ed published in Reason. In a decade, the AfCFTA 90pc of tariffs on goods traded between member states will be abolished. By 2035, the World Bank predicts that this enormous liberalization effort will boost Africa's gross domestic product by 450 billion dollars, increase wages for both skilled and unskilled workers by 10pc, and lift more than 30 million people out of extreme poverty, defined as living on less than 1.90 dollars a day.

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COUNTER ARGUMENT


Here is a sharp critic of Africa’s lack of preparedness for a free trade regime. The AfCFTA has values of economic inclusiveness, broad-based empowerment, property rights and the rule of law. Therein lies part of the problem, argues this writer. On a continent dominated by autocratic regimes run by rapacious cronies and cartels who thrive on the status quo, the AfCFTA is more likely to be honored in the breach. The trade pact is everything these regimes so passionately and violently despise, yet they are the ones to be counted on to implement it.

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CHECK

Close to 1.4 billion dollars in consumer spending, with a combined GDP of 2.6 trillion dollars; 50pc of the African population will be urbanized in a decade; and, 1.1 billion will be of working age in two decades. But last year, the number of households with disposable household income passed 128 million dollars. What is holding the continent back from realising the promise of free trade?

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LEARN

The difference in the size of economies between the African countries signed up for a continental free trade deal is often cited as a challenge to implement AfCFTA. Not for Wim Naude, a professor of economics at the Cork University Business School in Ireland. In this interview with IndepthNews.com, he argues it is “precisely because economies are different, trade is even more important to achieve gains in welfare.”

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GUIDE

Speaking to the South African Mail & Guardian; two experts provide a rundown on the African Continent Free Trade Area (AfCFTA). Trudi Hartzenberg, executive director of Tralac, and Professor Gerhard Erasmus, founder of Tralac, University of Stellenbosch. The share of trade between African countries represents only 16pc. The rest go to the rest of the world, making AfCFTA a helpful instrument. The considerable difference between countries that signed up to AfCFTA makes the process of implementation, “extremely difficult,” say these experts.

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FEAST


What does free trade mean for the largest demographic groups in Africa, women and youth? This document tries to answer this, produced in partnership between the African Union and the UNDP.

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Activities

  • January 04, 2021
African Business Council Applauds the Start of Trading on the Basis of AfCFTA

On 1 January 2021, at the launch of the start of trading on the basis of the AfCFTA, the Pan-African Private Sector,

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  • April 30 , 2021
How Africa Should Approach Trade, Industrialisation

The African Continental Free Trade Area (AfCFTA), launched on January 1, 2021, has been hailed as a “game-changer.” By bringing together 55 countries – with a total population of 1.3 billion...

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  • December 05, 2020
AfCFTA: The Assembly of the Union adopts decision on the start of trading

African Union Heads of State and Government have underscored the urgent need for member states to kick-start trading activities, under the African Continental Free Trade Area (AfCFTA).

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