The year 2018 saw a significant development in international trade in Africa with the signing of the African Continental Free Trade Agreement (AfCFTA). This agreement aims to establish a single market for goods and services across the continent by removing tariffs and other trade barriers among participating countries. It is hoped that this will boost intra-African trade and attract more foreign investment to the continent.
The AfCFTA was signed on March 21, 2018, by 44 of the 55 African Union (AU) member states during a summit in Kigali, Rwanda. As of 2021, 54 countries have ratified the agreement, with only Eritrea yet to sign. The agreement covers a market of 1.2 billion people and a combined Gross Domestic Product (GDP) of $3 trillion.
One of the main objectives of the AfCFTA is to increase intra-African trade, which is currently low at only 17% of total African trade. By removing trade barriers and harmonizing trade rules and regulations, the agreement aims to increase intra-African trade by 60% by 2022. This will help African countries to diversify their export markets and reduce their reliance on exports to non-African countries.
Another goal of the AfCFTA is to attract more foreign investment to the continent. By creating a unified market, the agreement will make it easier for companies to do business in Africa. This will reduce the cost of doing business and increase the return on investment, making Africa more attractive to foreign companies.
The AfCFTA also aims to promote economic development and job creation in Africa. By boosting trade and investment, the agreement will create new jobs and increase the income of African households. It will also help to reduce poverty and promote sustainable economic development.
There are, however, some challenges that need to be addressed for the AfCFTA to be successful. One of the biggest challenges is the lack of infrastructure in many African countries. Roads, ports, and other infrastructure are often inadequate, which makes it difficult to transport goods and conduct business. This will need to be addressed if the agreement is to be successful.
Another challenge is the different levels of economic development among African countries. Some countries are more developed than others, and this could create problems if some countries are able to produce goods more efficiently than others. The AfCFTA will need to address these disparities to ensure that all countries benefit from the agreement.
In conclusion, the African Continental Free Trade Agreement is a historic development for Africa. It has the potential to boost intra-African trade, attract more foreign investment to the continent, and promote economic development and job creation. However, there are challenges that need to be addressed for the agreement to be successful. With the proper investments in infrastructure, harmonization of trade rules and regulations, and a commitment to addressing disparities, the AfCFTA could pave the way for a more prosperous and united Africa.