The African Continental Free Trade Area (AfCFTA): An update

The African Continental Free Trade Area (AfCFTA) is a landmark economic initiative aimed at integrating the economies of African countries to boost intra-African trade, enhance economic growth, and promote sustainable development. Adopted in March 2018 and entering into force on May 30, 2019, the AfCFTA represents the most ambitious effort by African nations to create a single, unified market for goods and services across the continent12. This article will explore the progress made by the AfCFTA since its inception, highlighting its achievements, challenges, and future prospects.

Objectives and Scope of the AfCFTA

The AfCFTA seeks to create a people-centered developmental free trade area that addresses significant challenges facing Africa, including youth unemployment, migration, skills development, women’s empowerment, industrialization, and infrastructure development1. The agreement aims to establish a single market for goods and services, facilitate the movement of persons, and lay the groundwork for a future Continental Customs Union2. By liberalizing trade in goods and services, the AfCFTA aims to enhance the competitiveness of African economies both within the continent and globally2.

Progress to Date

Signing and Ratification

As of September 2024, all 54 African Union (AU) member states have signed the AfCFTA agreement, with 47 countries having ratified it7. This widespread support underscores the commitment of African nations to economic integration.

Operational Phase

The AfCFTA Operational Phase was launched in July 2019, marking the beginning of practical steps towards implementing the agreement. Key instruments introduced during this phase include the AfCFTA Trade in Goods Portal, the Pan-African Digital Payment and Settlement System, and the Online Tool for Eliminating Non-Tariff Barriers (NTBs)1. Trading under the AfCFTA regime officially commenced on January 1, 202124.

Protocols and Negotiations

Several protocols have been adopted to govern various aspects of trade under the AfCFTA. These include protocols on trade in goods, services, dispute settlement, investment, intellectual property rights, and competition policy25. Negotiations on trade in services are ongoing, with guidelines for specific commitments adopted in 20195. The Investment Protocol was adopted in February 2023, subject to further review5. Additionally, negotiations on protocols for digital trade and women and youth in trade were concluded by February 20245.

Implementation Challenges

Despite significant progress, the AfCFTA faces several challenges. These include inadequate human and financial resources for completing negotiations and implementing the agreement1. Some countries are also pursuing bilateral agreements with third parties, which could undermine the AfCFTA’s objectives1. The reliance on other projects, such as the Programme for Infrastructure Development in Africa (PIDA) and the Comprehensive Africa Agriculture Development Programme (CAADP), adds complexity to the implementation process1.

Economic Impact and Opportunities

The AfCFTA offers substantial opportunities for economic growth and development. By reducing tariff and non-tariff barriers, it aims to increase intra-African trade, which has historically been low compared to other regions4. The agreement is expected to boost industrialization, create jobs, and enhance the competitiveness of African economies7. Private sector engagement has been encouraged through initiatives such as the Guided Trade Initiative, which supports sectors like agriculture and pharmaceuticals7.

Trade Growth

Recent data indicate a significant increase in intra-African trade, with trade volumes rising from $589 billion in 2021 to $689 billion in 20229. This growth outpaced global trends, demonstrating the potential of the AfCFTA to stimulate economic activity on the continent.

Private Sector Engagement

The private sector has begun to capitalize on the opportunities presented by the AfCFTA. Examples include the trade of value-added coffee from Rwanda to Ghana and batteries from Kenya to other African countries3. These transactions not only reflect the growing intra-African trade but also highlight the potential for small and medium-sized enterprises (SMEs) to benefit from the agreement.

Future Prospects and Next Steps

Continued Negotiations and Implementation

Ongoing negotiations on protocols for digital trade, women and youth, and intellectual property rights are crucial for unlocking the full potential of the AfCFTA59. The implementation of these protocols will require sustained collaboration among African governments, parliaments, and private sector stakeholders7.

Addressing Challenges

To overcome implementation challenges, flexible mechanisms for resource mobilization and stakeholder sensitization are being established1. These efforts aim to ensure that all member states are equipped to fully participate in and benefit from the AfCFTA.

Strategic Partnerships

Strategic partnerships are being forged to reduce transport and logistics costs and strengthen manufacturing capacity7. Such collaborations are essential for enhancing the competitiveness of African industries and facilitating the movement of goods and services across the continent.

Conclusion

The African Continental Free Trade Area represents a pivotal moment in Africa’s economic integration journey. Despite challenges, significant progress has been made in establishing a unified market for goods and services. As the AfCFTA continues to evolve, its success will depend on collective action by African nations to address implementation hurdles and capitalize on emerging opportunities. With its vast market and growing economic potential, the AfCFTA is poised to transform Africa’s economic landscape and contribute to sustainable development across the continent.