African leaders last weekend named Ghana as the host of the future headquarters of the continental free trade zone which is expected to unite 1.3 billion people, and create a $3.4 trillion economic bloc that would usher in a new era of development.
The launch, which came after four years of talks, saw the 55-nation trade bloc signing to collapse their existing tariff and customs barriers for a united economic trade bloc that would enable it engage the rest of the world in international trade.
It is hoped that the African Continental Free Trade Area (AfCFTA) – the largest since the creation of the World Trade Organization (WTO) in 1994 – 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. He further added that “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,”
With Intra – regional trade at just 17 per cent of exports in 2017 as against 59per cent in Asia and 69 per cent in Europe, observers believe that Africa has much catching up to do having missed out on the economic booms that other trade blocs have experienced in recent decades.
Economists say significant challenges 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 have committed to eliminate tariffs on most goods, which will increase trade in the region by 15-25 per cent in the medium term, but this would more than double if these other issues were 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. It argued that “reducing tariffs alone is not sufficient,”.
Africa already has an alphabet soup of competing and overlapping trade zones – ECOWAS in the west, EAC in the east, SADC in the south and COMESA in the east and south. But only the EAC, driven mainly by Kenya, has made significant progress towards a common market in goods and services. These regional economic communities (REC) will continue to trade among themselves as they do now. The role of AfCFTA is to liberalise trade among those member states that are not currently in the same REC, said Trudi Hartzenberg, director at Tralac, a South Africa-based trade law organisation.