Experts say Africa’s free trade agreement could boost trade among African nations by 60 percent in just three years. The agreement will join the markets of 50 countries; unite the continent’s 1.27 billion people and its add to its $3.4 trillion nominal GDP.
The African Union (AU) finally launched the operational phase of the African Continental Free Trade Agreement (AfCFTA), after 17 years of negotiations. African countries with access to ports, railways, and airports will benefit the most from the new trade pact, making it the largest free trade zone in the world.
The agreement will cut tariffs for majority of the country up to 90 percent in the next five years, thereby, easing trade in the continent. African Development Bank President Akinwumi Adesina told the media that, “Manufacturing, trading in value-added products and strengthening supply chains will allow for markets to grow and for new markets to emerge. SMEs that account for 80 percent of all trade on the continent will benefit, as well as the financial sector, as digital payments will be needed to transact.”
The experts also highlighted the challenges that it could face such as bad transporting facilities, non-existent roads and rail lines, bad governance, corruption, and deeply entrenched bureaucracy. According to Akinwumi Adesina, the lack of infrastructure could be a major challenge. The continent’s infrastructure funding needs are at $130 billion to $170 billion a year, with a gap in the range of $68 billion to $108 billion.
He also added that the mechanics of the deal has to be negotiated. He stressed that the establishment of a digital system for payments converging one country’s currency to another membe’rs is vital before trading starts. The Economic Community of West African States plans to adopt a common trade currency to reduce foreign exchange risk.
The member nations will be provided with $4.8 million by the African Development Bank to set up the free trade zone’s headquarters in Ghana.