ADDIS ABABA, Janaury 2021 – The world’s biggest trade bloc by number of member countries launched on New Year Day.
The African Continental Free Trade Area (AfCFTA) brings together all 54 sovereign African countries which, together, have a GDP of $3 trillion.
The pact brings together the continent’s 1.2 billion inhabitants – almost the size of China and India – into one common market.
AfCFTA aims to boost intra-African trade by removing trade barriers between African nations.
Intra-African trade is only a fraction of the trade that countries of the continent have prioritized between partner nations outside of Africa, notably in Europe and the Americas.
According to the African Development Bank (AfDB), intra-Africa exports amount to only 16.6% of total trade.
AfCFTA sets up a continent-wide economic partnership that mirrors or outrightly copies several of the best provisions of the European Union.
The Executive Secretary of the Addis Ababa-based United Nations Economic Commission for Africa (UNECA), Vera Songwe, estimates that the new trade deal can create $1.8 billion in welfare gains and help create 2 million new jobs if properly implemented.
The UNECA predicts that the implementation of the partnership could reduce economic migration, by stimulating job creation in both small and large enterprises.
The UNECA adds that it could also help curb the foreign exploitation of Africa’s riches by non-African partners.
“It is the start of a new era of trade between African countries,” said South African President Cyril Ramaphosa of the pact in his new year speech.
Africa will now “realize its great potential”, Ramaphosa added.
While United Nations trade experts recognize the potential of the bloc to increase intra-African trade by over 50 percent, they lament the fact that obstacles make this a dream, more than reality.
Twenty African countries have not yet ratified the agreement.
The reluctance to sign on to the pact could delay progress.
The bloc was expected to come into effect last July 1, but because of the new coronavirus, the launch was postponed to 1 January 2021.
Under the continent-wide pact, 90 percent of all African goods are now tariff free, in principle, when traded between African countries.
In practice, though, the tariffs in place on 31 December 2020 remain in place and may be in place for a while as countries proceed at different speeds to remove them from the books.