On 7 July in Niamey, the capital of Niger, the Egyptian President Abdel Fatah al-Sisi, who is president of the African Union announced the establishment of the Afcfta (African Continental Free Trade Agreement). The African continental free trade agreement that will give a green light to the largest common market in the world by geographical extension and by number of countries involved (54 out of 55, all except Eritrea), which overall have a GDP of over 2,500 billions of dollars and 1.2 billion consumers. It is a market so tempting to many, starting with the major competitors in the area, China and the European Union in the lead, who also look at the demographic projections: in 2050 according to the United Nations, Africa will have 2.4 billion people and in 2100 will exceed 4 billion.
The agreement, which according to some observers is the greatest opportunity for development in Africa, provides for the elimination of customs tariffs on 90 percent of commercial products traded by African countries within the next five years. Liberalization also affects the services sector. This means that intra-African trade, up to now limited to 17% of the total transactions of the various states, will be able to develop to reach the maximum potential estimated by the Economic Commission for Africa (ECA) of 50% by 2022 (compared to the flow of 2010). A United Nations report predicts a doubling of intra-African trade within ten years.
In detail, 90 percent of goods will be liberalized over the course of 5-8 years, 7 percent will be classified as “sensitive” and liberalized for 10-13 years and 3 percent will be completely exempt from free movement. The assignment of goods and products to these three categories has yet to be negotiated, just as it remains to be determined where the secretariat will be located. Seven member states (Egypt, Eswatini, Ethiopia, Kenya, Ghana, Madagascar and Senegal) have submitted offers to host it.
So far, instead of turning to local production, African trade has been based on the resale of imported products even though the raw material with which most of these products are manufactured comes from Africa. This also happens because the tangle of customs tariffs made intercontinental exchanges expensive and time-consuming. The traders, therefore, preferred to send raw materials to Chinese or European factories to then buy back the finished product and put it on the market. All of this has meant fewer jobs than the continent’s manufacturing capacity and strong price exposure to global financial markets.
Africa therefore goes against the tide with respect to the protectionism that characterizes the relations of the world’s leading economies – the United States and China – and begins to cut down customs duties, standards and bureaucracy to facilitate trade between companies. A process that recalls the one that led to the birth of the European Economic Community.
The decision to establish the AfCFTA dates back to 2012 at the summit of the African Union, which was held in Addis Ababa where African leaders decided to create a new continental free trade area by 2017. At the 2015 African Union summit in Johannesburg, negotiations were launched that led to the agreement by 44 countries. On May 30, the threshold of 22 ratifications necessary for entry into force was reached. At the last minute, Nigeria – the most populous country in Africa and leading continental economy – and Benin entered. At this point, only the formalization of Eritrea is missing and its entry could take place in the not too distant future given the ongoing peace process with Ethiopia.
In Africa there are already smaller commercial areas, the Eac (East African Community) and the Comesa (Common Market for Eastern and Southern Africa), which have already partially introduced free trade at the regional level. The preamble to the agreement establishing the AfCFTA recognizes the existing regional economic communities “as building blocks towards the creation of the AfCFTA”. The new area should also reduce the vulnerability of African economies to commodity prices and create larger and more attractive markets for investments from other parts of the world.