The African Continental Free Trade Agreement (AfCFTA) becomes operational today after several months of delay. Trading under AfCTA was supposed to begin in July 2019, but it was delayed by the Covid19 pandemic.
The trade agreement is expected to liberalize trade in the continent and open up a large continental market for public and private sectors. Following the commencement of trade under the regional agreement, African countries are expected to exchange products worth over $84 billion among themselves. This not only increases GDP in the continent, but also unlocks job opportunities for over 2 million people across Africa.
It is also expected that the new trade agreement will generate welfare gains of over $1.8 billion in Eastern Africa. Furthermore, AfCFTA increases Africa’s collective bargaining power in the international market. It will also increase intra-African trade by over 50%, giving African countries more opportunities through free movement of goods and services.
AfCFTA starts operations today after it has received ratification from 33 countries. 54 out of 55 African countries have already appended their signatures to the agreement and over 40 countries have made their initial offers.
Going forward, discussions on terms and conditions will continue, but the bottom line is that the new rules and preferences will create an integrated African market. Further negotiations will be concluded by July 2021.
Currently, intra-African trade amounts to approximately 16%, but it is expected to grow following the new trade agreement. Another key focus of AfCFTA is to increase value addition and reduce volatility in the region.
The AfCFTA becomes the largest free trade area in the world.