The benefits of the AfCFTA for the African economy
This article was first published on The Borgen Project website on 01 March 2021.
Trading within the African Continental Free Trade Area (AfCFTA) finally took effect on January 1, 2021. The AfCFTA is the world’s largest trading area since the establishment of the World Trade Organization with 54 of the 55 countries of the African Union (AU).
The AfCFTA was established by the African Continental Free Trade Agreement signed in March 2018 by 44 AU countries. Over time, other AU countries signed on as the official start of trading under the provisions of the agreement approached.
The AfCTFA is projected to create opportunities and boost the African economy. By facilitating this intra-African trade area, the international community expects sustainable growth and increased economic development. Opening up a market of over 1.3 billion people is expected to spur more intra-African trade while increasing the appeal of direct investment in Africa for the rest of the world.
The Implementation and Benefits of the AfCFTA
Creating a Single Market. The main objective is to create a single market for goods and services to increase trading among African nations. The AfCFTA is tasked to implement protocols to eliminate trade barriers and cooperate with member states on investment and competition policies, intellectual property rights, settlement of disputes and other trade-liberating strategies.
Expected Economic Boost and Trade Diversity. UNECA estimates that AfCFTA will boost intra-African trade by 52.3% once import duties and non-tariff barriers are eliminated. The AfCFTA will cover a GDP of $2.5 trillion of the market. The trade initiative will also diversify intra-African trade as it would encourage more industrial goods as opposed to extractive goods and natural resources. Historically, more than 75% of African exports outside of the continent consisted of extractive commodities whereas only 40% of intra-African trade were extractive.
Collaborative Structure and Enforcement. All decisions of the AfCFTA institutions are reached by a simple majority vote. There are several key AfCFTA institutions. The AU Assembly provides oversight, guidance and interpretations of the Agreement. The Council of Ministers is designated by state parties and report to the Assembly. The Council makes the decisions that pertain to the Agreement. The Committee of Senior Trade Officials implements the decisions of the Council and monitors the development of the provisions of the AfCFTA. The Secretariat is established as an autonomous institution whose roles and responsibilities are determined by the Council.