AFCFTA offers huge economic opportunities

The Africa Continental Free Trade Area (AFCFTA) agreement came into effect on January 1. A total of 54 of Africa’s 55 countries agreed, in principle, to participate in the agreement, and 41 have submitted their tariff offers.

However, to date, only 34 countries have officially signed it and four have ratified it. In principle, a total of 15 countries need to ratify it to enable its full enforcement on the continent. If successfully implemented, this will be the largest free-trade area agreement in the world.

Hopefully, this will soon be the case because the opportunities that AFCFTA presents for all African countries, particularly after the impact of Covid-19 on trade in most regions, should not be underestimated. The proportion of trade in Europe that takes place intra-continentally is about 60%. In contrast, Africa’s intra-continental trade currently sits at around the 17% mark.

The UN has predicted that, on the back of the successful implementation of AFCFTA, that figure could rise to as much as 53%. When you consider that the value of trade between SADC countries alone is around $35-billion (R499-billion), the potential for this larger free-trade area agreement to comprehensively transform trade in Africa is clear – and it could easily be worth trillions of dollars.

The most obvious positive impact of AFCFTA is that it will likely be a significant catalyst of trade between African countries, while at the same time creating the opportunity for participating countries to retain much of their forex flows within the continent. The resulting surplus currency will deliver positive knock-on benefits for all Africans, effectively enabling about 1.3-billion people to become more integrally involved in moving Africa along its much-needed sustainable growth path.

An effective AFCFTA agreement will also drive significant transfer of knowledge, skills and expertise across the continent. Vital manufacturing and beneficiation capability, and activity, could increase massively and the transport sector should get a significant shot in the arm as well.

What’s more, such increased trade will almost certainly create more efficient value chains, have a stabilising effect on the price volatility and build a far more competitive environment overall. Finally, the ability to create greater diversification of goods in each country will also reduce dependencies on single commodities that have long characterised many African countries’ economies.

With a shared vision, transparent leadership and effective collaboration, AFCFTA has the potential to be a turning point for Africa.

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