The African Continental Free Trade Agreement (AfCFTA) is an ambitious trade accord signed by 54 out of 55 African countries and brokered by the African Union with the goal of creating the world’s largest single market for goods and services in the African continent. Ratified in Kigali, Rwanda on March 21, 2018, the deal is set to have a huge impact on how Africa conducts business across the continent and with other countries and trading blocks around the world.
In the past, African countries have mainly pursued multilateral trade agreements with immediate neighbours. For instance, the East African Community (EAC) brought together only the six countries in Eastern Africa; the Economic Community of West African States (ECOWAS) serves those in Western Africa; and the Common Market for Eastern and Southern Africa (COMESA) serves the Central, Eastern, and Southern African countries.
In context, the AfCFTA deal brings together over 1.3 billion people spread out across the continent's 55 countries. It has a potential gross domestic product of about $3.4 trillion which compares well to other regional blocks. For instance, the European Union’s Single Market is the world's largest single market area of 27 countries with a population of over 447 million people and GDP of close to $20 billion. While the Association of Southeast Asian Nations (ASEAN) is 10 countries with a total GDP of $2.5 trillion (3.4% of global trade) and a population of over 660 million people. Thus, AfCFTA could have even a bigger impact possibly lifting Africa’s millions out of poverty and accelerating development and trade.
Seen as the successor to the United States Africa Growth and Opportunity Act (AGOA) which is set to expire in 2025, AfCFTA's focus is intra-African and is better placed to promote Africa’s integration. Though AGOA was created in 2000 to establish stronger commercial ties between the United States and sub-Saharan Africa, it seeks to see Africa as a single market. The main, and perhaps most important difference is that AfCFTA is more inward-looking and seeks to facilitate enhanced trade among African countries with the removal of trade barriers that hinder intra-continental trade.
According to Wamkele Mene, Secretary-General – AfCFTA, the accord requires a major paradigm shift in the African political and economic mindset. Speaking during the 29th Brookings AfCFTA Forum, Wamkele indicated that African nations need to change how they view custom tariffs and duties. He highlighted that custom regimes as they have existed in the past are seen as protectionist policies and a source of government revenue. However, Wamkele views them as barriers to industrialization and expansion of industries and market opportunities.
To achieve the dream of AfCFTA, member states need to create the right environment. Again, Wamkele argues that member countries need collaboration and support from international bodies such as the EU that have experience in market integration to create a working legal and custom infrastructure that supports Africa’s industrialization.
So far, AfCFTA has a lot to celebrate. Wamkele indicates that current data shows that 87.6% of intracontinental trade is taking place under AfCFTA. With such momentum, Africa will likely become the largest single market in the world.
Another key goal of AfCFTA is the creation of a common currency to facilitate trade. Past discussions on the creation of a common African currency have not borne fruit with the US dollar largely used in the region. Consequently, the continent suffers massive inefficiencies in currency conversion. Speaking at the Brookings event, Landry Signé (Senior Fellow - Global Economy and Development Brookings Institute, Africa Growth Initiative) put the cost of currency conversion at over US$ 5 billion annually. This cost erosion is a hindrance to the growth of the intra-African market that is placed at about $ 5 trillion and is expected to hit $7 trillion by 2030.
However, the COVID-19 pandemic has also thrown a spanner in the works. Since the commencement of the pandemic in 2020, African countries have been slapped with travel restrictions by the developed world. While these restrictions are put in place to stop the spread of the virus, Wamkele views them as trade restrictions guised as COVID regulations. The western world has been very quick to impose travel bans on African countries when they report a relatively small spike in infections compared to when such reports are made by their fellow western countries. For example, the discovery of the recent Omricon variant of C-19, which was flagged to the world by South Africa, led to travel bans on Southern African countries by the developed world; when in reality, the Omricon variant was already in the developed world (The Netherlands) before it was detected in South Africa.
Another key challenge for the full realisation of the AfCFTA is the political pettiness among member states. Some countries have been imposing arbitrary custom requirements for some imported products and services where countries feel their local markets are threatened. Such political decisions are largely influenced by lobby groups. For example, Kenya and Tanzania have been putting on and off custom duties and even visa requirements across their borders. Such knee-jerk and retaliatory practices need to be addressed fully if the AfCFTA is to achieve its intended goals.
The AfCFTA is a significant opportunity for Africa to prioritise and lead its own development agenda in a way that benefits its people today and for the future. We must join hands and move forward together as a continent. For thousands of years, Africa’s history was of great civilisations and trade across the continent. Our continent’s recent past of slavery, annihilation, and colonialism by others – although horrific – must never hold us back from where we must get to for our future.
Useful information
Africa Free Trade Zone (Inside Story, Al Jazeera) – YouTube
History of Africa (BBC Africa documentary series) – YouTube
