The African Continental Free Trade Area (AfCFTA) agreement will create the largest free trade area in the world measured by the number of countries participating. The pact connects 1.3 billion people across 55 countries with a combined gross domestic product (GDP) valued at US$3.4 trillion. It has the potential to lift 30 million people out of extreme poverty but achieving its full potential will depend on putting in place significant policy reforms and trade facilitation measures.
The African Continental Free Trade Area (AfCFTA) presents a major opportunity for African countries to bring 30 million people out of extreme poverty and to raise the incomes of 68 million others who live on less than $5.50 per day. With the implementation of AfCFTA, trade facilitation measures that cut red tape and simplify customs procedures would drive $292 billion of the $450 billion in potential income gains. Implementing AfCFTA would help usher in the kinds of deep reforms necessary to enhance long-term growth in African countries.
The AfCFTA promises broader and deeper economic integration and would attract investment, boost trade, provide better jobs, reduce poverty, and increase shared prosperity in Africa. Africa could see FDI increase by between 111 percent and 159 percent under the AfCFTA.
The African Continental Free Trade Area (AfCFTA) has opened a new chapter for the continent and rekindled hopes for recovery through trade in a post COVID-19 world. As nations continue to battle a pandemic that does not respect national borders, the $3.4 trillion borderless market created by the AfCFTA presents an opportunity to reduce COVID-19 induced growth contraction, poverty and inequality trends, and spur sustainable and inclusive growth on the continent.
Intra-African trade is currently low at 14.4% of total African exports. UNCTAD estimates that the AfCFTA could boost intra-African trade by about 33% and cut the continent’s trade deficit by 51%.