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Expected to bring 30 million Africans out of extreme poverty and raise the incomes of 68 million people who live on less than $5.50 per day, the African Continental Free Trade Area (AfCFTA) agreement will create the largest free trade area in the world, connecting 1.3 billion people across 55 countries with a combined GDP of $3.4 trillion, facilitating a platform to enhance long-term growth on the continent.
The AfCFTA will reduce tariffs among member countries, reshaping the African market and regional economies, providing an opportunity through which African-owned companies may enter new markets, expand their customer base, and reduce the continent’s investment gap.
“Can the demand on the continent be met by the supply on the continent? Do we have the real infrastructure or the logistics to be able to move goods from one country to another? In driving intra-African trade in the context of the AfCFTA, it is about the tradeoff between what is foregone now, in terms of tariffs, in terms of investment, and in terms of growth that comes in,” stated Shaahien Mottiar, Head of Trade and Working Portfolio Management and Transactional Products and Services at South African bank and finance services group, Standard Bank, in Cape Town, South Africa on 11 March.
The full implementation of the AfCFTA agreement will require the standardization of intra-regional policies such as trade facilitation and services, as well as regulatory measures and technical barriers that inhibit trade. As such, the agreement is expected to favor small- and medium-sized enterprises (SMEs), which account for approximately 80% of Africa’s employment and 50% of its GDP. Lower tariffs, free access to the market, and the removal of trade barriers, is projected to offer innumerable benefits to intra-continental SMEs, enabling access to cheaper means of production and thereby increasing production, trade, and their bottom line.
“The AfCFTA is supposed to grow intra-African trade and by doing so, improve on welfare for Africans,” stated Souleymane Diagne, Group Head for Trade Finance and Services for pan-African banking conglomerate, Ecobank, adding, “The opportunities are there to capture intra-African growth. We feel that it will be very critical for us to help SMEs have access to the markets on a national front, but also on a regional and continental front, and that will only be done through capacity building.”
Easing the process of importing raw materials among African countries and with restrictions lifted on foreign investments, the continent is poised to benefit from its vast natural and human resources, thereby creating more well-paid jobs for Africa’s youthful population, which will result in an alleviation in impoverishment and the promotion of socioeconomic growth.