IN every success story, people always praise the outcomes, but most people do not associate with the concept, the initial idea and its benefits. This is the case when it comes to the adoption of the of the African Continental Free Trade Area (AfCFTA) which came into effect on January 1, 2021. This initiative is a significant step towards improving the livelihoods of the people on the African continent by creating a single intra African trade and investment market.
Though critics are quick to point out at the shortcomings of the African Union initiative, the success of AfCFTA will be a process and not an event, as expressed by W. Gyude Moore – a former Liberian minister who is now a senior fellow at the Center for Global Development,” We must start somewhere!”
The World Bank in its 2020 financial report indicated that Africa accounts for 2,1% of global trade , has only a 2.7% share of global GDP despite it accounting for 16% of the global population, and above all trade between African nations is only at 8% .
These statistics are a clear reflection that the African continent is yet to maximise on the potential that it has despite having a potential internal market of 3 billion people.
These challenges are the ones that the AfCFTA seeks to rectify as its objectives are to boost intra African Trade by means of creating a single market for goods and services facilitated by the free movement of goods and people through the eradication of tariff and non-tariff barriers.
Benefits of such an initiative are instrumental for the economic growth of the African Continent from within as AfCFTA prioritises the free movement of capital which would translate to high capital mobility and capital flows within the continent.
This would entail those African businesses can operate in the continent without any government red tape and endless bureaucratic processes through the relaxation of visa rules and permits, which would enhance the ease of doing business on the continent.
One can imagine the exponential growth of African business entities such as Liquid Telecoms which had already penetrated the Zimbabwean, Zambian, South African, DRC, Nigerian and Egyptian markets before the AfCFTA was adopted on 1 January 2021, the adoption of AfCFTA can bring an exciting opportunity for growth, by Africans and for Africa.
This would also enhance competitiveness, innovation and the production of quality goods that may even compete on a global economic scale.
Furthermore the creation of a single market enhances the potential of creating companies that can be listed on stock exchanges on the continent due to the fact that a potential market base of 3 billion people will always attract people who want to invest in viable enterprises.
Such benefits would be realised by the streamlining and harmonisation of economic and trade policies within the continent in line with AfCFTA goals, as it is also tasked with cooperating with member states on investment and competition policies.
The advantage of having policies that are in line with a continental objective is that it promotes regional trade and cooperation as business opportunities are opened to a broader market.
Most importantly the Small and Medium Enterprises sector stands to benefit, especially enterprises owned by youths and women as the African Union Trade and Industry Commission is already undertaking a programme to understand the challenges that are being faced by SME’s and coming up with viable strategies on how to finance African SME growth with a special emphasis to the youths and women.
Another unseen advantage of eliminating tariffs and harmonisation of trade policies under the AfCFTA is that it reduces costs of trading amongst Africans.
More-so the respective border post institutions of the respective African nations such as immigration and revenue collection institutions will be trained and overseen in line with AfCFTA objectives, eliminating corrupt activities at border posts, saving time and allowing revenue to find its way into the national fiscus.
In this line increased economic activity within Africa translates to an increase in the tax pool for governments, which would entail more revenue which can be channelled towards infrastructure development and industrialisation.
As such it is advisable for governments and those who would like to explore the AfCFTA to make haste and reap the benefits of this initiative, because as the adage goes, the early bird always gets the fattest worm.
Kudakwashe Mataire is Masters of International Trade Student at the University of Zimbabwe.