The African Free Trade Agreement (AfCFTA) was signed in March 2018 by 44 African countries to create a single market for goods and services in the continent. It is a landmark agreement that is expected to boost intra-African trade, create jobs, and spur economic growth. However, like any policy, the AfCFTA has its pros and cons, which we will examine in this article.
Pros of the AfCFTA
Lower trade barriers
The AfCFTA aims to create a single market for goods and services in Africa, which will eliminate tariffs and reduce non-tariff barriers to trade. This will make it easier for African countries to trade with each other, leading to increased commerce and economic growth.
Increased intra-African trade
Currently, intra-African trade accounts for only 15% of Africa`s total trade. The AfCFTA aims to increase this percentage by creating a more conducive environment for trade among African countries. This will lead to increased commerce, job creation, and economic growth.
Attracting foreign investment
The creation of a single market for goods and services in Africa will make the continent a more attractive destination for foreign investors. This is because investors will have access to a larger market, which will increase their chances of making a profit.
Cons of the AfCFTA
Unequal distribution of benefits
Some countries will benefit more from the AfCFTA than others. Countries with more diversified economies and stronger industrial bases will likely benefit the most, while those with weaker economies may find that their markets are flooded with cheaper goods from other countries, hindering their development.
The AfCFTA will increase competition among African countries, which may lead to the displacement of local businesses that cannot compete with foreign firms. This may result in job losses and economic dislocation in some sectors.
Infrastructure and governance challenges
The AfCFTA will require significant infrastructure investments in areas such as transportation, energy, and communications to support the movement of goods and services across borders. Additionally, the agreement requires that African countries improve their governance structures to ensure that the benefits of the AfCFTA are equitably distributed.
The AfCFTA is a landmark agreement that has the potential to transform Africa`s economy by boosting intra-African trade, creating jobs, and spurring economic growth. However, like any policy, it has its pros and cons. African countries must work together to ensure that the benefits of the AfCFTA are equitably distributed, and that the agreement is implemented in a way that leads to sustained economic development.