Trading under the AfCFTA Draws Near as 46 Countries Ratify the Agreement | The African Exponent.
- The AfCFTA operational phase was successfully launched in July 2019, but no trade has yet taken place under the agreement
- As of May 2023, 54 African Union member (AU) states had signed the agreement, and 46 (82.2%) had ratified it.
- According to the Bank, the accord may help lift an extra 30 million people out of extreme poverty and 68 million people out of moderate poverty.
Countries across the African continent have eagerly waited for the African Continental Free Trade Area (AfCFTA) to be fully functional. The potential benefits of this agreement are enormous, and countries like Eswatini have recently expressed their excitement as the trade draws near.
Have AfCFTA Negotiations been Completed?
The AfCFTA operational phase was successfully launched in July 2019, but no trade has yet taken place under the agreement. The delay was attributed to the COVID-19 pandemic. As of May 2023, 54 African Union member (AU) states had signed the agreement, and 46 (82.2%) had ratified it.
AfCFTA’s Anticipated Economic Advantages
African trade integration has long been constrained by deteriorating border and transportation systems, as well as a patchwork of unique legislation in dozens of markets. Governments frequently create trade barriers to protect their markets from regional competition, making trading with close neighbors more expensive than trade with nations considerably further away.
Given that Africa currently has 1.2 billion people and is projected to have 2.5 billion by 2050, the AfCFTA will be the largest free trade region since the founding of the World Trade Organization.
The World Bank predicted in research dated 2020 that by 2035, the full implementation of the deal may result in real income gains of 7%, or approximately $450 billion. In comparison to business as usual, the total export volume would rise by about 29% by 2035. Exports inside the continent would rise by more than 81%, while exports to nations outside of Africa would climb by 19%.
According to the Bank, the accord may help lift an extra 30 million people out of extreme poverty and 68 million people out of moderate poverty. However, there won’t be a consistent effect across all nations. According to the World Bank, countries like Côte d’Ivoire and Zimbabwe might have income increases of 14% each at the extremely high end. Some countries, like Madagascar, Malawi, and Mozambique, would only have real income growth of about 2% at the low end.
The Bank identified advantages from the anticipated rise in foreign direct investment (FDI) projected to result from the agreement in a follow-up study issued in June 2022. The “AfCFTA FDI Broad Scenario” forecasts that FDI to Africa might rise by 111%, pushing up real income growth there to roughly 8% in 2035.
An “AfCFTA FDI Deep Scenario” looks at the potential benefits of expanding the agreement’s scope beyond trade in goods and services to include a synchronization of investment, competition, e-commerce, and intellectual property rights regulations.
Occupations that pay more and are of higher quality, with women enjoying the highest wage increases. By 2035, wages for men and women will climb by 9.8% and 11.2%, respectively, with regional variances based on the fastest-growing industries in various nations.
Africa’s exports to the rest of the world would increase by 32% with deep integration, while exports inside Africa would increase by 109%, driven primarily by manufactured commodities.
AfCFTA’s position on the free movement of people
The free movement of labor, according to policymakers, will be crucial to the free trade area’s effective operation, but not all African nations are on board with the idea. South Africa and other countries are against the idea of free movement of people. Major AfCFTA signatories Nigeria and South Africa have not, however, ratified the Protocol, and there is a lack of political will on their parts to do so.