African Heads of State and Government and business leaders are gathered in Kigali, Rwanda for the launch of the significant African Continental Free Trade Area, with African countries anticipated to sign the legal instruments establishing the African Continental Free Trade Area during the 10th Extra-Ordinary Session of the Assembly on Wednesday, 21 March.
We break down what the African Continental Free Trade Area is and also how it will benefit Africans.
What is the African Continental Free Trade Area (AfCFTA)?
The African Continental Free Trade Area (AfCFTA) is a flagship project of Agenda 2063 and refers to a continental geographic zone where goods and services move among member states of the African Union (AU) with no restrictions. The AfCFTA aims to boost Intra-African trade by providing a comprehensive and mutually beneficial trade agreement among the member states, covering trade in goods and services, investment, intellectual property rights and competition policy.
Why is the establishment of the AfCFTA urgent?
Globally, countries are concluding Mega-Regional Trade Agreements (MRTAs), thus reshaping and changing the global trading landscape in the process. The establishment of the AfCFTA will allow Africa to strengthen its position vis-à-vis the rest of the world, speak with one voice and act in unison on all continental and international trade issues.
How will the AfCFTA affect the development of African Countries?
The AfCFTA will create a wider market of more than 1.2 billion people with a combined GDP of $2.19 trillion. This will induce investments, result in pooling of African resources to enhance structural transformation and the development of regional value chains.
Benefits of the AfCFTA to Africa?
- Boosting employment opportunities;
- Increased food security through reduction to barriers on trade in agricultural products;
- Increased competitiveness of African industrial products through harnessing the economies of scale of a continental wide market;
- Increased rate of diversification and transformation of Africa’s economy and the continent’s ability to supply its import needs from its own resources;
- Better allocation of resources, improved competition and reduced price differentials;
- Growth of intra-industry trade through regional value chains and development of geographically based specialisation;
- Reduced vulnerability of countries to external trade shocks by reducing the trade balance deficits of African Countries;
- Enhanced participation of Africa in Global trade and reduced dependency on aid and external borrowing.
Who conducted the AfCFTA negotiations?
Negotiations of the AfCFTA agreement were conducted by AU member states through the AfCFTA-Negotiating Institutions with the support of the African Union Commission and Regional Economic Communities (RECs).
Participation of non-state actors in AfCFTA negotiations?
The AfCFTA provides for the establishment of an African Business Council, as a continental platform for aggregating and articulating the views of the private sector in the continental policy formulation processes. The Business Council shall play an advisory role in the continental policy formulation processes and will communicate its views and positions through the African Union Commission. It will be composed umbrella (regional) associations/business councils that represent private sector interests, Small and Medium scale Enterprises (SMEs), women entrepreneurs and trader, sectorial associations such as banking and finance, farmers etc.
In addition, the AfCFTA architecture provides for an African Trade Forum which serves as a pan-African platform for reflection and discussion on the progress and challenges of continental market integration.
AfCFTA role in development of regional value chains, fostering infrastructure and industrial development?
By taking into consideration the need to develop Africa’s productive capacity and industrial integration, the AfCFTA will provide an enabling environment where businesses can build efficient regional supply chains and encourage intra-industry trade, thereby promoting investment, growth and the creation of jobs.
How Private sector and SMEs will benefit from AfCFTA
Implementation of trade facilitation measures to boost speed and reduce the cost of customs procedures and port handling increasing cross border trade and investments thus enhancing market access for good and services produced in Africa.
The AfCFTA will promote innovation and enterprise through protection of intellectual property rights of African private sector.
How will the AfCFTA benefit and protect consumers?
The AfCFTA will create a competitive environment in which consumers will benefit from lower prices and wider variety of good and services. The AfCFTA will also ensure maintenance quality standards to safeguard the health and safety of consumers.
How will the AfCFTA benefit the youth and women?
Informal trade between African countries is driven mostly by the youth and women. The AfCFTA supports the economic empowerment of women and youth by creating trade and investment opportunities and easing cross border movement. Trade facilitation measures will benefit women in trade, and contribute positively to gender equality. The Addis Ababa Action Agenda states: “Recognising the critical role of women as producers and traders, we will address their specific challenges in order to facilitate women’s equal and active participation in domestic, regional and international trade.”
How will the least-developed countries compete with the more developed countries under the AfCFTA?
Flexibility shall be accorded to member states that have special trade needs, specificities and circumstances. Special and differential treatment shall apply to flexibilities in transitional periods for liberalization, exemptions as well as other measures within the scope of the AfCFTA negotiations applicable to member states at different levels of socio-economic development.
How will the AfCFTA Agreement be enforced?
After conclusion of AfCFTA negotiations, the AfCFTA agreement will be signed and shall enter into force after ratification by 15 member states of the AU. The AfCFTA will establish and administer a suitable dispute settlement mechanism to decide technical issues and ensure protection of sovereignty and good neighbourliness of member states.