The African Continental Free Trade Area

On January 1, 2021, the African Continental Free Trade Area entered its operational phase. Trading under the AfCFTA Agreement was initially set to begin on July 1, 2020, but was postponed due to the COVID-19 pandemic. As of December 2020, 34 out of the 54 countries have ratified the Agreement. When fully implemented, the AfCFTA will create the largest free trade area in the world by number of participating countries, and will contain about 1.3 billion people, possessing a combined #GDP of $3.4 trillion.

AfCFTA will reduce 97% of tariffs by 2030, remove non tariff barriers, and will be accompanied by a trade facilitation agreement. Also, for the first time in Africa, it covers investment and intellectual property rights protection. It will complement existing subregional economic trade agreements in Africa by offering a continent-wide regulatory framework to address the long-standing economic fragmentation of Africa, and by boosting intraregional trade by 33%.

AfCFTA has the potential to lift 30 million people from extreme poverty and 68 million people from moderate poverty by 2035. The deal could boost Africa’s income by $450 billion by 2035, a 7% gain. However, $292 billion of gain would come from trade facilitation measures, such as cutting red tape and simplifying custom procedures, and not simply by trade liberalisations. Countries will therefore have to undertake major domestic reforms to reap the rewards of AfCFTA.

Achieving these gains seems more important than ever, due to the economic pains imposed by COVID-19. By increasing regional trade, lowering trade costs, and easing border procedures, pandemic related damage should be lessened.

However, the implementation of the AfCFTA has only just begun. Achieving its full potential will require effort by the respective governments, particularly in the field of trade facilitation and infrastructure. If this happens, when the deal becomes fully operative it will give Africa a stronger and more united voice on the world stage and could become the basis for a continent-to-continent Free Trade Agreement with the EU.