The African Continental Free Trade Area (AfCFTA) is a landmark deal that aims to bring together 54 African countries with a combined population of more than one billion people and a combined GDP of over USD 3 trillion. The result: a single African market for goods and services, accompanied by the free movement of people and capital.
Slated to take effect in June 2020, the agreement is expected to stimulate intraregional trade flows, address Africa's industrial deficit, and reduce the continent's over reliance on primary goods exports.
This thought leadership report looks at the gains and benefits for the continent as a whole, and examines the barriers to the deal's effective implementation.
Some of the report's key takeaways:
- While AfCFTA will be positive for all the region's economies in the long term, costs and benefits are likely to be unevenly distributed across countries and sectors in the short term. Analysis by Oxford Economics reinforces that economies will reap more benefits when they are more export-oriented, have a higher propensity for tariff reduction, or have more favorable business environments.
- Africa's trade in services potential represents a way to overcome current production and industrialization limitations. With improved infrastructure and human capital development, African nations can hopefully leverage regional partnerships to reduce their reliance on imports from non-African nations.
- Currently, African countries are lagging behind the global average in terms of utility infrastructure. Within the AfCFTA context, reliable utility infrastructure is vital for businesses to be able to scale up production for regional export or to develop manufacturing bases.
- A longer-term consideration of Africa's multiple currencies and exchange rate regimes is crucial. The continent should look to address exchange rate volatility which concerns liquidity shortages and the inability to repatriate profits.