African Continental Free Trade Area (AfCFTA) or “Zone de libre-échange continentale (ZLEC)” update

15/07/2019
AfCFTA aspires to create a single continent-wide market with over 50 member states with an expected 1.2 billion people and a growing middle class in addition to a combined GDP of more than US$3.4 trillion blended with different legal systems, currencies, culture, to mention a few. It sounds rather like the EU, doesn’t it?  The African Union has, maybe with the EU and its 28 member states as reference, embarked for some years now on a Continental Free Trade Area which is in a way in line with the African Agenda 2063.  In terms of number of participating countries, the AfCFTA is meant to be the world’s largest free trade area since the formation of the World Trade Organization.  In total 54 member states, including Mauritius, have agreed on the process to implement the accord.  It is important to note that Nigeria with a population of circa 190 million and Africa’s biggest economy has eventually signed the agreement with Ghana hosting the AfCFTA’s secretariat. 
 
The main objective of AfCFTA is to boost Intra-Africa Trade (BIAT) which identifies seven clusters: trade policy, trade facilitation, productive capacity, trade related infrastructure, trade finance, trade information, and factor market integration.  As compared to around 47% in America, 61% in Asia and 67% in Europe, currently intra-African trade is a mere 15% (according to UNCTAD data for 2015 to 2017) but the participants think that AfCFTA could be a game changer.  According to UNCTAD estimates, if the agreement is fully implemented, the GDP of most African countries could increase by 1% to 3% once all tariffs are eliminated.  In addition, estimates from the Economic Commission for Africa (UNECA) suggest that the AfCFTA has the potential both to boost intra-African trade by 52.3 percent by eliminating import duties, and to double this trade if non-tariff barriers are also reduced.

One of the key factors in achieving this growth will be that the rules of origin will need to be simple, transparent, business friendly and predictable whilst considering the differences between the countries involved, such as size, GDP, religion, culture, and the existing exchange controls in place. This is no easy challenge.  The symbolic launch of the operational phase of the AfCFTA happened on 7 July 2019 at Niamey and time will tell us of its success. Mauritius will be looking to ensure that it makes the most of the opportunities for the African continent that will hopefully result from the simplification of business in region.  
 
In line with the wave of the African “consolidation”, the West African Economic and Monetary Union (WAEMU) and its proposed single currency (ECO) is meant to become operational as from year 2020 but as of now the timing remains unrealistic.  Equally sharing the aspiration of boosting cross border trade and economic development, the 15 member states of ECOWAS adopted the ECO in Nigeria in July 2019. 



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