“Why The African Continental Free Trade Area Is Important”
7 July 2021
By Aletha Mudyahoto- The African Continental Free Trade Area (AfCFTA) is a true manifestation of how ideas have been transformed from ideologies into development.
Officially opened in January 2021, the AfCFTA aims to create a single market, requiring member states to lift tariffs from 90% of goods inorder to promote free access to commodities, goods and services across the continent.
A free trade area is the region encompassing a trade bloc whose members have signed a free trade agreement sealing economic cooperation. AfCFTA covers trade in goods and services, investment and intellectual property rights etc.
The full benefits of the AfCFTA are yet to be realised because it’s operations have been affected heavily by the persistent corona virus (covid-19) which has ravaged the whole continent, endangering economies resulting in disruption of industrial production, financial markets have become volatile, slow movement of goods and people as well as closure of borders which have slowed trade facilitation.
The AfCFTA presents a crucial opportunity for regional integration, all member states are unified for a common interest of economic growth and development. The ability to successfully trade under the AfCFTA refutes the idea that Africans cannot prosper without dependency or inter- dependency on Western countries.
Intra- Africa trade gives member states access to vast markets, with the removal of trade barriers countries are able to export their products and goods in many quantities and an increase in exports means an increase in domestic income and the flow of foreign currency and eventually reduction of trade deficits, in actual sense economic growth.
Increased exports and the availability of a ready market (the whole of Africa) enhances productivity as industries tend to produce more, this creates employment and improves standards of living.
Also because of less duty on imports, there will be a diversity of products on local markets at affordable prices however if not managed well, the cheaply imported products may end up outcompeting local products.
The Free Trade Area provides opportunities to business firms so they focus on manufacturing products basing on their comparative advantage. Economist David Ricardo asserts that countries should specialize by allocating their scarce resources to produce goods and services for which they have a comparative advantage.
This increases output since products are manufactured according to specialization, manufacturing industries become competitive and quality products are likely to be produced. Also, accessing raw materials across Africa may become easy because of the scrapped tarriffs on imports and this can help revive idle industries across African countries.
Consolidated relationships among Africans are formed through trade, the ability of people to move freely across the continent presents opportunities of appreciating other cultures, languages thereby strengthening African unity.
The AfCFTA facilitates the Sustainable Development Goals of the United Nations (2030) of economic growth, reducing reliance on external resources and encouraging independent financing and development. It also facilitates Agenda 2063 of the African Union which aims to transform Africa into the global powerhouse of the future.
However, for the AfCFTA to be fully successful, there is still need for infrastructure development, roads and ports still needs to be developed. The differences in African economic structures, different levels of economic development makes it difficult for the free trade area to function properly.
Aletha Mudyahoto is a Masters student in International Trade and Diplomacy at the University of Zimbabwe.