High tariffs! Price controls! Large bureaucracy and unnecessary regulation of the African market are what have made Africa have the identity as a poor continent because it is not free. This has caused Africa’s intra-trade to attain a percentage of less than twenty percent. Should the African Continent have a free trade area, the result is expected to boost the incomes of sixty-eight million people who live on less than $5.50 a day, lifting 30 million Africans out of extreme poverty.
The African Continental Free Trade Area, by the African Union, is an agreement that aims to establish the largest free trade area in the world. The agreement connects 1.3 billion people in the world across 55 countries. It seeks to incentivise the economic integration of Africa by increasing intra-African trade, stimulating investment and innovation, improving food security, and driving economic prosperity.
Africa’s trade among its member states will increase because of high tariffs on goods and services, cumbersome customs procedures will be eliminated, fast fast-tracking trade of goods and services. This will incentivise businesses across the African continent to gain access to regional markets. For instance, a Ghanaian manufacturer will export processed cocoa to Kenya, Nigeria, and South Africa at a reduced cost compared to Europe.
This will aid markets to expand and offer more opportunities to African businesses, especially the Small and Medium-sized Enterprises (SMEs). The increase in intra-trade will encourage competition, which drives businesses to be more innovative. It will bring about better-quality products and services that will benefit consumers.
Economic growth and job creation are other benefits of the African Continental Free Trade Area. Increased trade drives economic activities. When businesses gain access to larger opportunities and markets, they reach new customers and are motivated to expand their production, invest in innovation, and get on board with new workers. Individuals will gain job opportunities that will help them make a livelihood.
With the ability of the AfCFTA, poverty will diminish as individuals get hooked on jobs from employment opportunities due to the expansion and creation of businesses. Job creation will be expanded to the agriculture, manufacturing, transport, and logistics sectors. Since poverty is a result of a lack of income, job creation resolves the issue of poverty.
According to the World Bank, it estimates that a successful implementation of the AfCFTA could boost Africa’s income by $450 billion, improve the incomes of 68 million, and lift a total of 30 billion Africans from extreme poverty by 2035.
AfCFTA has the potential to drive industrialisation and value addition. For decades, many African economies have relied on foreign countries to add value to their exported raw materials. This pattern has kept the continent at the lower end of global value chains, making economies vulnerable to external price shocks and limited in economic diversification. A pathway out of this trap is by incentivizing African countries to process and add value to their raw materials by processing.
With a vast continental market, there is greater stimulation to invest in manufacturing processes and regional industries. Countries can leverage their comparative advantage by specializing in various stages of production, creating an integrated value chain that will benefit multiple economies. For instance, raw cotton from Burkina Faso could be processed into textiles in Ethiopia, sewn into garments in Kenya for sale across the continent.
Attention must be given to the issue of security and political instability, as it has the potential to disrupt the implementation of the AfCFTA. Conflicts, terrorism, and military takeovers in certain parts of Africa, like Sudan, Ethiopia, and Burkina Faso, are insecure to trade corridors and unstable governments discourage incentivization of the economy for trade and disrupt economic activities.
In resolving this, the African Union should strengthen peacekeeping and conflict prevention efforts, trade routes should be developed to avoid high-risk areas, and cross-border cooperation to ensure the safe movement of goods and traders.
Notably, poor infrastructure and logistic networks are a critical challenge facing the AfCFTA across the continent. The inefficiency of road networks, railway systems, and ports makes the movement of goods between countries consuming and difficult. This undermines the potential benefits of tariff elimination by increasing the cost of trade.
To make the AfCFTA beneficial, governments, regional bodies, and public-private partnerships should be encouraged to mobilize funds and technical expertise to improve transport systems and energy networks to increase trade efficiency.
My money, the buyer asked? I have cedis, not in naira, said the buyer. Return my goods, please. Trade between a Ghanaian and a Nigerian Cross-border payments affected due to limited financial integration and weak digital infrastructure. These issues hinder the ability of businesses, especially SMEs, to participate in continental trade.
For fast, trade increase, and low-cost payments in local currencies across borders, African businesses should leverage the Pan- African Payment and Settlement System (PAPSS). Expansion of access to digital infrastructure and training businesses in digital tools can enhance the efficiency and participation of businesses in continental trade.
If entrepreneurs can gain a deeper understanding and advocate for free continental markets, it relies on promoting awareness and stakeholder engagement. Leveraging the media to create awareness campaigns, disseminate simplified guides on the AfCFTA benefits and procedures to ensure successful implementation.
Performance indicators and metrics should be put in place to track the progress of the implementation, stating the benefits, problems that the AfCFTA encountered on an annual basis. This will help to know the progress of the implementation.
Is the successful implementation of the AfCFTA automatic? Deliberate efforts across infrastructure, industrial growth, digital systems, and inclusive policy-making. Harnessing the role of Regional Economic Communities (RECs) in economic integration and harmonization, maximizing member state engagement and empowering SMEs, and addressing abuse of economic dependence for public good is imperative.
With strong leadership, coordinated action, and private-sector participation, AfCFTA can become the engine of Africa’s economic transformation, creating jobs, reducing poverty, and making the continent more competitive globally.
After a successful implementation, Africa will be termed rich because it is free and it’s economic index will fall in areas of free and mostly free!
By Prince Addo Frimpong
The views expressed in this article are the author’s own and do not necessarily reflect The Chronicle’s stance.
