The African Continental Free Trade Agreement (AfCFTA) has been receiving a great deal of attention recently. This is because the agreement has the potential to create a massive single market of 1.3 billion people with a combined GDP of approximately $3.4 trillion. The AfCFTA has the potential to change the current economic landscape in Africa, but what exactly is it and how does it work?
In essence, the AfCFTA is a free trade agreement that was signed by 54 African countries in March 2018, with the aim of creating a single market for goods and services across the continent. The agreement is designed to promote intra-African trade by reducing tariffs, harmonizing trade rules, and dealing with non-tariff barriers to trade such as bureaucratic red tape. The objective is to create a level playing field for businesses across the continent, making it easier for them to trade with each other.
The AfCFTA agreement has been divided into two phases. The first phase was launched in May 2019, and it involved the removal of tariffs on 90% of goods traded between African Union Member States. The remaining 10% of goods were classified as sensitive and would be given more time for tariff reduction.
The second phase of the AfCFTA agreement is a bit more complex. It involves the establishment of a framework for trade in services, investment, and intellectual property rights, among other things. This means that businesses across the continent will have access to a larger pool of customers and suppliers, enabling them to grow and develop.
The benefits of the AfCFTA are numerous. For instance, the agreement will promote industrialization across the continent by encouraging the development of regional value chains. It will also encourage the creation of jobs, as businesses expand and new businesses emerge. Additionally, the AfCFTA will foster the development of infrastructure across Africa, as businesses look to trade with each other more effectively.
The African Continental Free Trade Agreement is a significant step forward in Africa`s development. However, there are several challenges to be overcome. For instance, the absence of common standards across the continent can make it difficult for businesses to trade with each other. Moreover, some countries still have protectionist policies that make it difficult for businesses to operate freely.
In conclusion, the African Continental Free Trade Agreement is a game-changer for Africa`s economic development. It has the potential to create a single market of over a billion people, promote industrialization, and create jobs across the continent. While there are still challenges to be overcome, the AfCFTA is undoubtedly a step in the right direction for Africa`s future.