The African Continental Free Trade Area
On the first of January 2021, the long-awaited African Continental Free Trade Area (AfCFTA), which was planned since 2015, came into effect. The number of member countries makes this the largest Free Trade Area in the world since the founding of the World Trade Organisation.
The free trade area covers 54 member countries of the African Union with a combined population of 1.3 billion people and a combined GDP of approximately $3.4 trillion. By December 2020, 34 countries have ratified the agreement, with more to follow.
Economic benefits of the Free Trade Area to Africa
The new freedom of movement of people and investment is expected to expand intra-African trade and support Africa’s economic development.
The AfCFTA is fueling the economic transformation of Africa.
The agreement makes the African economy more efficient and thus significantly increases competitiveness, economic growth, investment volumes and innovation. As a result, The African Trade Deficit is expected to be halved.
Initially, intra-African trade is to be increased by 13-25%. According to the United Nations Economic Commission for Africa, trade may even increase by more than 50% as a result of the free trade agreement.
Opportunities for Trade and Investment in Africa
The agreement provides for tariffs and other trade barriers on goods to be greatly reduced initially and eventually eliminated. The goal is for 90% of trade in goods within Africa to become duty-free.
In addition, the free provision of services will be possible in key sectors.
The new agreement offers new opportunities for European companies operating in Africa. Companies can leverage the Free Trade Area to sell products and services to other African markets. For companies that have established a presence or are planning to enter the African market it is now easier to access and serve other African markets.
This will mean that Africa’s huge economic potential can be leveraged much more effectively.
For further information on the market entry in Africa, feel free to contact InterGest South Africa – experts in African markets.
Sources:
- https://www.gov.za/blog/afcfta-dream-our-founding-fathers-coming-life?gclid=CjwKCAiA_9r_BRBZEiwAHZ_v1_Yh-9vWm-bFu9bAUWvnHYIlJ1E5vmt4xGmNcEj2A3BBJOfQQPDrnRoCVzMQAvD_BwE
- https://www.africancfta.org/aboutus
- https://africa-eu-partnership.org/en/afcfta
- https://foreignpolicy.com/2020/11/13/afcfta-free-trade-africa-economics/
2 Comments