January 1st 2021 represented a landmark date for Africa. After a six-month delay due to the pandemic, the African Continental Free Trade Agreement finally entered into force with the consensus of 54 of the continent’s 55 countries, except Eritrea.

90% of goods and services will be duty free among the 36 countries that ratified the AfCFTA (African Continental Free Trade Area) before the African Union Commission.

The agreement incorporates the largest number of member countries into a single trade treaty, and has been created in record-breaking time since it was proposed at the Extraordinary Summit in Kigali, Rwanda, in March 2018. The project will create the world’s largest market in terms of potential consumers, with a population of  over 1.2 billion people.

Diversity of African Countries

In the webinar organised by Casa África on this subject Elcano Royal Institute’s senior researcher, Ainhoa Marín, states that, although the AfCFTA has great opportunities, we must not lose sight of the great heterogeneity of the countries that make it up.  

For example, countries that are already part of one or more of the 8 regional economic blocks in Africa prior to the signing of the AfCFTA agreement have a certain advantage over others. This includes Ivory Coast, Burkina Faso and Senegal, where HOW2GO works.

For these countries, the process of harmonising different customs and tariff regimes will be easier based on the experience of existing commitments and, presumably, they will be able to enjoy the benefits of the AfCFTA more quickly. 

Undoubtedly, “the implementation process will depend on political will, as well as on the economic and socio-political characteristics of each member country,” as stated by Ainhoa Marín in the above-mentioned webinar.

The IMF (International Monetary Fund) warns that the benefits of the AfCFTA will come from the reduction of trade barriers, which will require continuous monitoring and substantial long-term investment. The results will depend on countries’ openness and intra-African trade’s strength and political links that need to be created.

It will be a long and not always easy road, but considering the starting project’s consensus and its progress’ speed, the prospects for success are good.

Tariffs and Trade Barrier Reduction

Although a level of economic integration already exists in the 8 regional economic communities acknowledged by the African Union, some African countries currently face higher tariffs when exporting to other African countries than when exporting to countries outside the continent. 

The AfCFTA seeks to correct this situation by gradually reducing tariffs on intra-African trade, which will promote industrialization in Africa, where most countries are classified as “rich countries without resources”, i.e., habitual commodity exporters. 

Mr Carlos Lopes is the African Union’s Special Envoy to the European Union. He says that with the launch of AfCFTA, intra-African trade is expected to increase by 52.3% in 3 years. This is a result of the elimination of trade barriers that fragment its economy and the opening of new channels “for regional suppliers of processed products to reach their consumers more easily.” 

In summary, with the AfCFTA, basic needs should become more accessible and affordable for the average African consumer. 

Growth Trends In Africa 

Africa’s consolidation into a large trading area offers great opportunities for businesses and consumers , as both can benefit from the growth of the African market and make it more sustainable. 

The integration of transportation networks and energy facilities between African countries is a key condition of the AfCFTA’s development, in addition to the establishment of intra-African value chains. It will enable the production and the diversification of processed products on the continent. 

An additional goal of the AfCFTA is also to ensure the continent’s agricultural output to enable food security. It meets the ever-increasing demand driven by the continent’s growing population.

Africa is also committed to technological and energy transition, ecological industrialisation and a new relationship with the European Union, moving away from the model of a simple exporter of raw materials or commodities.

If you would like to know more, please feel free to contact us without any commitment here. We will be delighted to address with you how we can help you open, develop and consolidate markets in Ivory Coast, and other locations where How2Go is present.

To read the first article of this series on the AfCFTA, click here, and to read the second article of the series, click here. Enjoy reading!