A free trade area pact at last but what are its chances?


A number of African countries, 44 in total, have signed the African Continental Free Trade Area (AfCFTA) framework agreement, which commits countries to removing tariffs on 90% of goods and lifting all barriers to trade within the continent. Eventually the free movement of people and even a common currency could become part of the agreement. In the meantime, to deal with the currency problem, banks have proposed an inter-African trade payment platform, which would make it possible for people to trade inter regionally in their local currencies.

While Africa’s most developed countries are at an advantage due to their manufacturing capabilities, some of them such as Nigeria and South Africa remain opposed to the agreement. Trade unions are raising a red flag arguing unfettered access into their labor markets could cause problems as people move to stronger economies in search of jobs.

Unlike Europe where 70% of trade happens within the continent, at 16%, African countries do not trade that much with each other. For instance, while Kenya is a major producer of flowers, an African country buying them will likely have sourced them from Holland. Similarly, though Nigeria is a huge producer of palm oil, Kenya buys her palm oil from Malaysia.  The African Continental Free Trade Area (ACFTA) is geared towards correcting this. ACFTA would open up a market of 1.2 billion people with a combined GDP of about $3 trillion.

Its proponents want people and goods to move freely, similar to how the European Union works. Unfortunately, with fewer barriers, the European Union concept took close to 50 years to develop and effect. Security problems and poor infrastructure make trade harder. More so, the continent’s main exports are raw materials like oil and minerals, which are mostly sold to countries outside Africa that have the processing capacity.  The sheer size of Africa and the number of countries involved also makes reaching an agreement even harder.