African Continental Free Trade Area: Is it practical?

The African Continental Free Trade Agreement is gaining traction as more countries join this monumental trade deal. With 27 countries having ratified the agreement and 54 signatories, including Nigeria, the potential for economic transformation in Africa is significant. Rudi Steinbach, an Africa Specialist and Senior Economist at the World Bank, highlighted the importance and complexity of this agreement in a recent interview on CNBC Africa. Steinbach noted that the agreement, once fully operational, will be the largest free trade agreement in the world based on the number of member countries. The primary focus of the current negotiations has been on trade tariffs, with a commitment to eliminating 90% of tariffs to facilitate free movement of goods and services within a single continental market. However, discussions are also underway regarding deeper aspects of the agreement, such as investment rules, competition policies, and intellectual property rights. One of the key challenges lies in establishing common rules, including rules of origin, within the diverse African continent. The varying levels of economic development across countries make the process of consensus-building more intricate and time-consuming. While progress has been made with 27 ratifications and 54 signatories, the complexity of the agreement requires additional time for thorough clarification. Steinbach emphasized the potential impact of the agreement on regional integration and economic diversification in Africa. Currently, interregional trade in Africa accounts for less than 20% of total trade, with the majority of exports directed outside the continent. The implementation of the free trade agreement presents an opportunity to create regional value chains, where resource-rich and resource-poor countries collaborate to enhance production capabilities and drive industrial growth. This could lead to economic diversification and the development of thriving manufacturing sectors across African nations. Despite the potential benefits, concerns have been raised regarding the inclusivity of the agreement, especially for smaller countries and businesses. Companies already integrated into global value chains may have an advantage initially, while others will need to enhance their infrastructure to fully exploit the new opportunities. Mechanisms are being explored to ensure that all participants can benefit from the agreement, promoting economic growth and inclusivity across the continent. As the African Continental Free Trade Agreement continues to evolve, the involvement of organizations like the World Bank plays a crucial role in providing technical support and expertise. While challenges remain in finalizing the agreement's details, the progress made so far signifies a significant step towards reshaping the business landscape in Africa. With the potential to drive economic transformation and enhance regional cooperation, the agreement stands as a beacon of hope for a more integrated and prosperous Africa.