Pan-African free trade agreement will drive economic growth
Harnessing new technologies such as artificial intelligence (AI) and robotic process automation (RPA) to make business processes more efficient and resilient is unavoidable in times of disruption. The agreement will lead to the creation of a single continental market for goods and services, with free movement of business people and investments.
AfCFTA is intended to create a tariff-free continent that can stimulate local businesses, boost intraAfrican trade, encourage industrialisation and create jobs.
Addressing the G7 and Africa Partnership meeting in France on 25 August 2019,
South African President Cyril Ramaphosa said: “This free trade area is now the largest on the globe, bringing together 1.2 billion people with a combined GDP of USD3 trillion.”
Countries joining AfCFTA must commit to removing tariffs on at least 90% of the goods they produce as well as establishing a customs union with free movement of capital and business travellers.
Nigeria and Benin had committed to the free trade agreement during the 12th Extraordinary Session of the Assembly of the African Union about AfCFTA in Niger in July and of 55 African Union member states, only Eritrea has yet to sign the agreement.
Researcher at the South African Institute of International Affairs, Asmita Parshotam, said the agreement is a “massive show of political will, the extent of which has not been seem previously.
“It is important to see the implementation of the agreement against measures of international protectionism and continued uncertainty for global trade. African countries can compete globally, integrate into value chains and participate,” she said.
Trade between African countries is currently fairly insignificant. In fact, while almost two-thirds of African countries’ exports go to Europe, only 17% of exports go to other African countries. This is very low in comparison to other continents – in Europe trade within the continent is almost 70%, while in Asia it’s almost 60%.
A couple of the poorest African countries, Niger and Malawi, will get ten or even fifteen years to reduce their tariffs, to give their producers some protection against cheaper imports.
Other possible benefits from the agreement include: a planned African passport, which will mean holders won’t require visas when they go to another African country; and a new digital payment platform for African companies that trade with each other.
Currently, many businesses are forced to pay each other in dollars or euros because their currencies cannot be exchanged. In the future, they may be able to avoid this by using the platform.
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