The start of trading under the African Continental Free Trade Area agreement on 1 January 2021 marks the dawn of a new era in Africa’s development journey. Over time, the AfCFTA will eliminate import tariffs on 97% of goods traded on the continent, as well as address non-tariff barriers.
Opening up a market of over 1.3 billion people is expected to spur more intra-African trade while increasing the appeal of direct investment in Africa for the rest of the world.
Intra-Africa trade has historically been low. In 2019, only 12% of Africa’s $560 billion worth of imports came from the continent. African countries have also been trapped in the lower levels of the global economy by selling low-value raw materials and buying higher-value manufactured goods. This is seen as one of Africa’s major challenges for development. The free trade agreement seeks to reverse this.
The rationale behind it is simple in theory, but complex in reality. Free trade between African countries is expected to stimulate structural transformation in Africa. Structural transformation is expected to increase growth in exports of more complex goods and services. Export growth, in labour-intensive sectors at least, is expected to create jobs.