I have been reading and reflecting on the probable benefits that might accrue from the implementation of the African Continental Free Trade Area (AfCFTA) and possible challenges.
This is thanks to the partnership with the Economic Policy Network (EPRN) at the University of Rwanda that’s involved in researching and producing policy briefs for policymakers involved in this and similar initiatives.
The AfCFTA came into force on May 30 after the required 22 nations of the 55 African Union (AU) member states ratified it. It will be officially launched at the next AU heads of state summit in July.
Once fully implemented, this “market” will have 1.2 billion consumers and is projected to expand to 2.5 billion by 2050 with a combined GDP of between US$2 trillion to $2.5 Trillion or even US$3 trillion.
Unlike past initiatives, everything I have read shows that there is unanimity across actors about the economic, social and political value of this agreement despite expected challenges.
Interestingly, the cause of this unanimity about this “African market” where African sellers and buyers will freely exchange goods and services as if they were from a single country isn’t something you will find in the main stream media.
For instance, while mainstream media tends to report when this or that country has ratified the agreement and which country is or isn’t ready to ratify it, the real meat is in what the continent, its traders, citizens and economies will gain once implemented.
Yet, for the AfCFTA to succeed, it has to be embraced and owned by Africa’s traders, bureaucrats and ordinary citizens; not just top leaders that originated it.
Yes, it’s important that heads of state support it, but challenges encountered by similar initiatives show that the best way to ensure success is to involve and ensure citizens and traders in each country buy into and own it.
Doing so would require not publicizing the market’s benefits.
So, what are the expected benefits?
First, while current intra-African trade is the lowest in comparative terms─standing at only 17% in 2017, a study by the Economic Commission for Africa shows that once fully implemented, by 2022, intra-Africa trade will increase to 52%. This will bring in an estimated US$35 billion and by 2040, income will have risen to between US$ 50-70 billion.
Other Estimates show that intra-Africa trade will increase by between 40-50% in 2040 while welfare gain will increase to $3.6 billion while consumer and business expenditure will rise to $6.7 trillion by 2030.
Secondly, the problem of rampant unemployed is also projected to be dealt with. Today, statistics show that 50% of Africa’s graduates have no jobs and about 70% of youths survive on only US$ 2 a day.
Third, continental economies could overcome over reliance on extractive commodities such as minerals and oil as manufacturing and the services sectors will be boosted.
UNCTAD projections show, for instance, that once implemented, food processing will grow by 76%; textile by 18%; etc. light manufacturing by 61%; heavy manufacturing by 31%, etc.
This will not only create more jobs but will also generate more revenue for governments to invest in the badly needed infrastructure while insuring economies against fluctuating global prices for extractive products that normally devastate economies.
Today, the influence of extractive commodities on continental economies is huge and accounted for 75% of exports out of Africa and 40% of intra-African trade between 2012-2014.
Ultimately, this will lead, progressively, to the diversification of economies across the continent which, in turn will spur economic growth and development.
And as we have illustrated elsewhere, evidence shows that contrary to fears that implementing this agreement will cost countries more, benefits far exceed loses.