The AfCFTA: A Quick Recap

Following its inception in 2018, the African Continental Free Trade Agreement (AfCFTA) has presented the prospect of enacting the most meaningful trade reform since the founding of the World Trade Organisation. By removing bureaucratic and legislative barriers to the trade of goods and services across Africa’s borders, policymakers are looking to stimulate intra-African trade, promote regional integration, address inequalities between coastal and inland nations, and help drive the development of regional value chains for manufacturing and other industries. Initial projections on the potential of the agreement are promising; if fully successful the AfCFTA will create the world’s largest common market, containing some 1.2 billion consumers. Optimistic forecasts further note that African trade would increase by over 50% in the first few years, and by 80% by 2035. The largest benefactors would be the continent’s nascent industrial sector, which at long last would have the freedom to establish regional value chains capable of challenging the dominance of Asian nations in low-cost manufacturing.

Following delays in 2020 due to Covid-19, the AfCFTA was finally brought into effect in January 2021. The announcement came as a welcome reprieve as African nations are grappling with the global economic downturn brought on by the pandemic and sent a clear signal that the continent needs to continue forging ahead with its ambition of regional trade liberalisation and integration. As the Programme for Infrastructure Development in Africa Priority Action Plan (PIDA PAP) established by the African Union (AU) moves into its intermediate phase, there is more scope for investors to participate in African integration and benefit from regional industrial growth. Going forward it will remain important, however, that international firms take heed of lingering compliance risks during the teething process of cross-border integration.