Economic 'game changer'? African leaders launch free-trade zone
African leaders launched a continental free-trade zone on Sunday that if successful would unite 1.3 billion people, creating a $3.4 trillion economic bloc, which ushers in a new era of development.
After four years of talks, an agreement to form a 55-nation trade bloc was reached in March. This paved the way for Sunday’s African Union summit in Niger where Ghana was announced as the host of the trade zone’s future headquarters and discussions were held on how exactly the bloc will operate.
The African Continental Free Trade Area (AfCFTA) is the largest since the creation of the World Trade Organization in 1994. It is hoped the deal will help unlock Africa’s long-stymied economic potential by boosting intra-regional trade, strengthening supply chains and spreading expertise.
“The eyes of the world are turned towards Africa,” Egyptian President and African Union Chairman Abdel Fattah al-Sisi said at the summit’s opening ceremony.
“The success of the AfCFTA will be the real test to achieve the economic growth that will turn our people’s dream of welfare and quality of life into a reality,” he said.
Africa has much catching up to do: its intra-regional trade accounted for just 17% of exports in 2017 versus 59% in Asia and 69% in Europe. There is no doubt that Africa has missed out on the economic booms that other trade blocs have experienced in recent decades. Economists say significant challenges still remain, including poor road and rail links, large areas of unrest, excessive border bureaucracy and petty corruption that have held back growth and integration.
Members of the trade-zone have committed to eliminate tariffs on most goods, which will increase trade in the region by 15-25% in the medium term. And these figures have the potential to more than double if the other challenges faced are dealt with, according to International Monetary Fund (IMF) estimates.
The IMF in a May report described the free-trade zone as a potential “economic game changer” of the kind that has boosted growth in Europe and North America, but it added a note of caution.
“Reducing tariffs alone is not sufficient,” it said.