top of page

The Role of AFCFTA in Driving Trade Integration in Africa: A Gateway to Economic Prosperity.


Contactless payments, finance, central bank, CBN, payments, technology.


Business, Advertising, Marketing, Entrepreneurship.
Oyemaja; The Role of AFCFTA in Driving Trade Integration in Africa: A Gateway to Economic Prosperity.

1.0 Introduction

The African Continental Free Trade Area (AfCFTA) was launched at the 12th Extraordinary Summit of the African Union in Niamey, Niger on July 7, 2019 to date 54 African states have signed the Agreement, 46 have ratified it. The AfCFTA marks a critical milestone in Africa’s regional integration agenda. It has the potential of boosting (Gross Domestic product) GDP by up to 15% and intra-Africa trade by at least 52%. The African Continental Free Trade Area (AfCFTA) represents a historic opportunity for Africa to achieve economic integration and unleash its potential as a formidable player in the global trade arena. Spanning across 54 African nations with a population of over 1.2 billion people, AfCFTA aims to establish a single market, ignite intra-African trade, and bolster economic growth. This comprehensive article delves into the multifaceted role of AfCFTA in promoting trade integration in Africa and examines the potential transformative effects on the continent's economy.

Africa is characterized by a plethora of trade regimes. Three broad elements characterize the trade regimes on the continent. First, there are preferential trade agreements between individual African countries and countries outside the continent. These include agreements under the general system of preferences (GSP), granting duty-free treatment for least-developed countries, and preferential access to the US market under the African Growth and Opportunity Act. Second, there are regional trade agreements between African countries and regions outside Africa. This category includes the various economic partnership agreements the European Union has negotiated with various African countries and regional groups on the continent. These also call for the partial and gradual liberalization of African markets to EU imports. Third, there is a web of intra-African trade agreements, including eight REAs and four sub-regional groups


2.0 The Objectives of African Continental Free Trade Area

The AfCFTA builds on negotiations of the Tripartite Free Trade Area (TFTA). The TFTA is composed of the Southern African Development Community (SADC), the Common Market for Eastern and Southern Africa (COMESA), and the EAC.  The AfCFTA has eight strategic objectives:

  1. creating a single market for goods and services, facilitated by the movement of people

  2. contributing to the movement of capital and people and facilitating investment

  3. Creating a continental customs union

  4. Expanding intra-African trade

  5. Resolving the challenges of overlapping memberships in REAs

  6. Promoting sustainable and inclusive economic development

  7. Boosting industrial development

  8. Enhancing competitiveness.

The AfCFTA also seeks to build on the integration already achieved by existing REAs, which are expected to contribute to its institutional structure. In the long run, the REAs’ trade functions are expected to be consolidated at the continental level.


3.0 Benefits Of AfCTA In Integrating Trade Among African States.

  • The Elimination of Trade Barriers: AfCFTA's foremost objective is to dismantle trade barriers, including tariffs, non-tariff barriers, and cumbersome customs procedures. By committing to eliminating tariffs on 90% of goods traded within Africa, the agreement creates a level playing field and promotes easier market access for African businesses. The removal of trade barriers reduces costs, increases competitiveness, and encourages African countries to trade more intensively with one another.Additionally, AfCFTA aims to address non-tariff barriers, such as excessive regulations and bureaucratic red tape, thereby streamlining cross-border trade and improving efficiency.

  • Stimulating Intra-African Trade: Intra-African trade currently accounts for a mere fraction of the continent's total trade. AfCFTA seeks to unlock the untapped potential by promoting and facilitating increased trade among African nations. By providing a framework for trade cooperation, harmonizing trade rules, and implementing a uniform trade regime, AfCFTA spurs economic diversification, reduces dependence on external markets, and fosters regional economic integration. The agreement's provisions for rules of origin and customs cooperation ensure that goods produced within Africa receive preferential treatment, further incentivizing intra-African trade.

  • Industrialization and Economic Development: AfCFTA is envisioned as a catalyst for industrialization in Africa. By promoting regional value chains, the agreementencourages nations to specialize in industries where they possess a comparative advantage. This specialization leads to increased efficiency, enhanced productivity, and improved competitiveness. The development of regional value chains not only boosts domestic industries but also attracts foreign direct investment (FDI) into Africa. Moreover, by fostering industrialization, AfCFTApaves the way for job creation, income generation, and technological advancements that can propel economic growth and shared prosperity.

  • Infrastructure Development and Connectivity: Efficient trade integration necessitates robust infrastructure and seamless connectivity. AfCFTA recognizes this critical aspect and emphasizes the importance of infrastructure development across Africa. Investments in transport networks, logistics facilities, energy infrastructure, and digital connectivity are crucial for facilitating the movement of goods, reducing trade costs, and enhancing trade efficiency. By improving cross-border transportation and connectivity, AfCFTA promotes trade facilitation, market access, and regional economic cooperation. Enhanced infrastructure also supports the expansion of value chains and ensures that all countries, regardless of their geographical location, can fully participate in the economic opportunities created by the agreement.

  • Addressing Barriers and Challenges: While AfCFTA offers immense potential, it also faces certain challenges that need to be effectively addressed. These challenges include ensuring compliance with trade rules, addressing trade-related disputes, promoting inclusive and equitable growth, and mitigating the potential negative impacts on vulnerable industries and sectors. To overcome these barriers, AfCFTA requires strong institutional frameworks, effective dispute resolution mechanisms, capacity building initiatives, and targeted policies to support industries and sectors adversely affected by trade liberalization. Additionally, effective coordination among member states is vital to ensure the successful implementation of the agreement.


4.0 Potential Challenges That May Come With The Implementation of The Objectives Of AfCTA

The implementation of AfCFTA is not without its challenges. As the ambitious objectives of AfCFTA are set to become a reality, it is crucial to identify and address these challenges effectively.

  1. Infrastructure Deficit: One of the biggest challenges is the lack of adequate infrastructure, including transportation networks, energy supply, and digital connectivity. Poor infrastructure hampers the movement of goods and services across borders, increasing trade costs and limiting economic integration. Addressing this deficit requires significant investment and collaboration among African nations, regional bodies, and international partners.

  2. Non-Tariff Barriers: While the removal of tariffs is a crucial aspect of AfCFTA, non-tariff barriers (NTBs) remain a significant challenge. NTBs include stringent customs procedures, cumbersome border controls, inconsistent regulations, and administrative delays. Harmonizing standards, simplifying customs procedures, and implementing effective trade facilitation measures are essential to counter these barriers.

  3. Disparities in Economic Development: African nations have varying levels of economic development, which can create disparities in the benefits derived from AfCFTA. Advanced economies may have a competitive advantage over less developed countries, potentially leading to unequal gains. To ensure inclusive growth, mechanisms such as special and differential treatment, technical assistance, and capacity building must be in place to support less developed nations.

  4. Domestic Market Challenges: Some domestic industries may face challenges due to increased competition from foreign firms. Industries that areless competitive or lack the capacity to upgrade their operations may struggle to survive in the face of increased competition. Governments must implement policies that support localindustries, facilitate technology transfer, and encourage innovation to enhance competitiveness.

  5. Political Stability and Governance: Political stability and good governance are crucial for the successful implementation of AfCFTA. Countries with political instability, corruption, or weak institutions may struggle to enforce trade agreements and provide a conducive business environment. Strengthening institutions, promoting transparency, and enhancing the rule of law are essential for realizing the full potential of AfCFTA.

  6. Data and Information Gaps: Accurate and reliable data is critical for evidence-based decision-making and effective policy formulation. However, many African countries face data and information gaps, making it challenging to measure the impact of trade policies accurately.


5.0 Conclusion

AfCFTA is poised to transform the African continent by fostering trade integration, strengthening regional economic cooperation, and driving sustainable economic growth. Through the elimination of trade barriers, the stimulation of intra-African trade, the promotion of industrialization, infrastructure development, and the facilitation of connectivity, AfCFTA creates an environment conducive to investment, job creation, and socio-economic progress. However, the successful implementation of AfCFTA requires a comprehensive approach, including the establishment of robust institutional frameworks, the alignment of national policies, the strengthening of trade facilitation mechanisms, and the commitment of member states to collaboration and cooperation. With determined efforts and effective strategies, AfCFTA has the potential to catalyze Africa's economic transformation, lifting millions out of poverty, and positioning the continent as a significant player in the global economy.


Bibliography

  • Axline, WA. 1994. The Political Economyof regional Co‐operation: Comparative Case Studies. London. Pinter Publishers.

  • Balassa, B. 1961. The theory of economic integration. London.George Allen and Unwin.

  • Biswaro, J.M. 2003. Perspectives on Africa’s integration and cooperation from OAU to AU: an old wine in a new bottle. WIU. Washington

  • Bretschger, L. and Steger, T.M. 2004. The dynamicsof Economic Integration: Theory and Policy. Zurich. Institute of Economic Research.

  • Brodzicki, T. 16 November2005. Relative Centrality of Peripheriality and the Growth Effects of Economic Integration within the European Union. Poland. Economic Faculty of University of Gdansk.

  • Carbaugh, R.J. 2004. International Economics, 9th edition. Australia. Thomson South‐ Western.

  • Cheru, F. 2002. AfricanRenaissance: Roadmaps to the Challengeof Globalisation. Cape Town. New Africa Books/ David Phillip.

  • Commission for Africa. March 2005. Our Common Interest.Report of the Commission for Africa. London. DeRosa, DA. 1998. Regional Integration Arrangements: Static Economic Theory, Qualitative Findings, and Policy Guidelines. USA. World Bank Policy Research Report


Originally published by Oluwayomi O. Motajo on Linkedin


Oyemaja Law

Oyemaja Executives




Comments


bottom of page