In January 2024, the Secretary-General of the AfCFTA announced that 24 new countries will join the seven already participating in the Guided Trade Initiative, the pilot phase of the free-trade project that began in October 2022. This expansion aims to boost intra-regional trade and act as a catalyst for industrialization and economic growth in Africa.
The World Bank estimates that the AfCFTA could increase the continent's real income by up to 9% by 2035 if all policies under consideration regarding investment, e-commerce, and intellectual property are adopted. The free-trade agreement is also expected to make Africa more resilient to external shocks by increasing intra-regional trade and attracting more foreign direct investment (FDI).
Challenges and Opportunities for Intra-African Trade
The AfCFTA, which commenced trading in January 2021, aims to create the world's largest free trade area with a potential market of 1.3 billion people and a combined GDP of $3.4 trillion. However, progress has been slower than expected due to various obstacles.
The lack of logistics infrastructure, for one, remains a medium-term brake on African countries' ability to increase exports within the continent. Additionally, some argue that African economies do not complement each other well due to varying stages of economic development.
African ministers meeting in Niger's capital Niamey in November 2023 also called for accelerating economic diversification, value addition, and structural transformation to boost intra-African trade. The United Nations Economic Commission for Africa (UNECA) also emphasised the need to increase regional trade to spur Africa's integrated development.
On the upside, real progress has been made in reducing Africa's dependency on the rest of the world. The Pan-African Payment and Settlement System (PAPSS), launched in September 2021, allows cross-border transactions to avoid using third currencies, resulting in annual savings of USD 5 billion and faster transactions.
NEWS SOURCES
- https://www.downtoearth.org.in/news/world/com2024-african-ministers-express-worry-after-report-shows-poor-intra-african-trade-94863
- https://www.un.org/africarenewal/magazine/january-2023/africa%E2%80%99s-free-trade-track-more-efforts-needed
- https://www.ifpri.org/news-release/new-report-african-trade-highlights-opportunities-challenges-trade-expansion
- https://www.cov.com/news-and-insights/insights/2024/02/africa-technology-regulatory-update-adoption-of-the-afcfta-protocol-on-digital-trade
- https://economic-research.bnpparibas.com/Media-Library/en-US/Will-Africa-free-trade-take-2024-2/8/2024,c40476
- https://english.news.cn/africa/20240303/285b37ccadb94daa9b06014daffdce13/c.html