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The African Continental Free Trade Area (AfCFTA) Agreement is a key pillar of the African Union’s 50-year strategy to boost Africa’s economic growth.

African countries that have long traded with others outside the continent especially China will now be able to ship goods to each other according to this agreement.

But why was this agreement put in place by the African Union?

African governments have often created trade barriers to protect their markets from regional competition. At present, intra-continental trade tariffs mean that it is 6.1% more expensive to import goods from within Africa than to import from outside the continent. Due to that, African countries barely trade with each other.

Meanwhile, one-fifth of sub-Saharan Africa’s raw materials like crude oil, metal and copper are exported to China, the region’s single biggest trade partner. China is also one of the biggest exporters to Africa, meaning it is easier to find “Made in China” goods than “Made in Africa” products in markets across the continent.

Another issue limiting intra-Africa trade is poor connectivity. Prices of intra-Africa flights are often high and flight routes complicated. It is easier to fly to Europe than to fly to some African countries. Add to that, several countries require visas for other Africans that sometimes take months to obtain.

Africa spends a staggering US$78 billion of scarce foreign currency on food imports each year, with some countries such as Zimbabwe, Guinea and Sudan exceeding 100% of their annual foreign currency receipts. Approximately 80% of the continent’s food supply still comes from small-scale farmers, many still practicing subsistence agriculture.

The primary aims of the AfCFTA agreement are to deepen economic integration in Africa by increasing the easy, cheap flow of goods and services between countries, boosting cross-country investments, removing trade barriers, and advancing open visa policies. The AU also wants to leverage the plan to increase local manufacturing and fight for more influence in global trade where Africa currently contributes only 3 percent.

This only means that the agricultural sector, which accounts for 35% of Africa’s GDP and employs more Africans than any other sector will experience a significant boost because intra-continental trade will be possible through these policies. Ilaria Fusacchia, Jean Balie and Luca Salvatici in their journal “The AfCFTA impact on agricultural and food trade: A value added perspective” suggested that the agreement could have a significant impact on food trade patterns in terms of value-added structure. They find that the continental agreement translates in more widely spread benefits. Even though this agreement doesn’t apply to small and medium sized enterprises at the moment, it is still a positive step towards building a better Africa for Africans.

Helson George
Helson George

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