The African Export-Import Bank (Afreximbank) has recently mobilized an adjustment facility of $1 billion to offset revenue losses for countries that lower cross-border tariffs. This is out of an attempt to make African countries begin swift implementation of the Africa Continental Free Trade Agreement (AfCFTA).
The AfCFTA will become the world’s biggest free-trade zone by area, built on a potential market size of 1.2 billion people. 54 of the 55 states that make up the continent have signed the accord, though only 34 have ratified it.
This deal comes at a time when states are rebuilding economies plummeted by the COVID-19 pandemic. AfCFTA has thus become imperative, following Afreximbank’s forecast that the free-trade pact could help the continent realize more than $84 billion in untapped intra-African exports.
To put it more succinctly, the continent has an untapped revenue potential similar to Volkswagen’s new investment in electric cars and batteries. The Afreximbank has revealed that the continent can explore this potential if the deal can:
Promote Economic Advantage
According to the Afreximbank, industrial products and manufactured goods are the major drivers of formal cross-border trade in Southern and North Africa. In these regions, South Africa and Egypt are the main drivers of export potential, while Nigeria holds sway in West Africa and Kenya in East Africa. Hence, the trade pact should ensure countries with economic advantages export commodities to other states within their regions, which will have spill-back effects on other states.
Facilitate Movement of People and Capital
AfCFTA should also put mechanisms in place that will promote the free movement of people by formulating a continental-wide custom policy that makes the movement of labor and capital easier.
Streamline Means of Payment
Recently, African Central Banks began the process to link payment systems that will help facilitate the AfCFTA. This should be fast-tracked as it will simplify trade, create a central database to monitor AfCFTA investments, and keep track of earnings.
The African trade deal has much to offer in intra-African trade and intra-continental trade—with projections up to over $231 billion or about 22% of total African commerce—but this untapped potential can be taken advantage of only when African nations take initiative and implement policies and economic strategies that will best promote the pact.
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