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Africa Day is an annual celebration of the achievements and potential of the African continent which is celebrated in Africa and countries round the world. Its date – May 25 – commemorates the founding of the Organisation of African Unity (OAU), the precursor of the current African Union. This year marks the 60th anniversary of the signature of its founding charter in Addis Ababa, Ethiopia.
The African Union (AU) has chosen “Acceleration of AfCFTA implementation” as its theme for 2023. The AfCFTA (African Continental Free Trade Area) is an ambitious trade pact aimed at creating a single market for goods and services of almost 1.3bn people across Africa and deepening the economic integration of the continent.
Trade integration across Africa has long been limited by outdated infrastructure and differing regulations across dozens of markets. Intra-African exports were 16.6% of total exports in 2017, compared with 68.1% in Europe, 59.4% in Asia, 55% in America and 7% in Oceania.
When fully implemented, the AfCFTA will be the world’s biggest largest free trade area, with a combined gross domestic product of around $3.4 trillion. Fifty-four of the continent’s 55 countries are signatories to its founding agreement.
Real income gains
The AfCFTA is projected not only to lead to job creation, poverty alleviation, improved welfare and sustainable development but also to ensure inclusivity for women and youth, development of small and medium enterprises (SMEs) and overall industrialisation of the continent, guided by Agenda 2063, the AU’s master plan for transforming Africa into the global powerhouse of the future.
The World Bank has estimated that by 2035, real income gains from full implementation of the AfCFTA could be nearly $450bn. It has also suggested that Africa could see a rise in foreign direct investment by up to 159%, and a rise in exports to the rest of the world of 32%, while intra-African exports could grow by 109%, led by manufactured goods.
Turning vision into reality
Limited trading under the AfCFTA began in January 2021, but achieving its full potential depends on significant policy reforms and trade facilitation measures across the signatory nations, for which negotiations are still ongoing.
In order to turn this vision into reality, the main objective of the AU’s designated theme is to secure the commitment of all stakeholders to speed up the implementation of the AfCFTA in 2023 and fast-track the overall economic integration of agenda of the continent.
“The Theme of the Year and its mandate to support the implementation of the AfCFTA Agreement will aim to be celebrated through close collaboration with all relevant organs and specialized agencies of the African Union, regional mechanisms and Regional Economic Communities (RECs), in line with their respective mandates to fast track the implementation of the AfCFTA for the benefit of Africa’s population,” says the African Union.
Read more about the AfCFTA
- What you need to know about the AfCFTA
- AfCFTA could boost African incomes by 9%, says World Bank report
- Pan-African Payment and Settlement System drives Africa’s banking integration
- AfCFTA: We need business support to succeed
- Out of the starting blocks: One year of the AfCFTA
- For AfCFTA to work, Africa needs to speak with one voice, says Afreximbank’s Hippolyte Fofack
New protocols will boost investor confidence and private sector engagement, says AfCFTA secretary-general
The implementation of the AfCFTA has reached another important point with the completion and adoption of the protocols of competition policy; investment, protection and facilitation; and intellectual property.
Following their adoption in February this year by the assembly of heads of state and governments, the highest decision-making body of the African Union, the protocols are set for implementation at the national levels. According to Wamkele Mene, secretary general of the AfCTFA (pictured above), this significant milestone was achieved in less than a year. He was speaking at Invest Africa’s “The Africa Debate” in London, along with leading investors in and from Africa, who had gathered to examine issues of trade and investment in Africa.
These protocols will, among other things, help boost investor confidence and private sector engagement with the AfCTFA. Mene said the protocols offer investors predictability and the assurance that in the event of disputes, there will be a fair process of adjudication and resolution. It also means that investors can be certain that their investments will be protected.
Two more protocols are expected to be ready for presentation to the assembly of heads of state and governments at their next meeting in July 2023. The protocol on women and youth in trade is critical for the participation of SMEs in intra-African trade, which AfCTFA seeks to boost. Responsible for 450m jobs and about 60% of the continent’s GDP, SMEs, which are typically led by women and young people, will be a key factor in the success of the AfCFTA.
The protocol on digital trade will facilitate the use and integration of digital payments systems into cross-border African trade. Currently, payments between two countries where any of the 42 currencies in Africa are used have to make use of a third currency and a clearing house in a country outside the continent. Enhanced digital systems will ensure that the $5bn in annual transaction costs are slashed significantly.
“When you deploy digital technology to enable payments in local currencies, you are enhancing the capability of SMEs to be competitive, reducing their costs, and enabling efficiency of trade,” Mene said. Another benefit from digitisation will be harmonisation of customs systems in the continent, easing cross-border transfer of good and reducing delays which currently characterise border crossings in the continent. The protocol, when implemented, will also allow the free flow of data around the continent and position it as a competitor to Dublin as a host for data centres.
Mene said the AfCTFA secretariat is working with countries and regional economic communities to accelerate implementation in order to make the immense opportunities that will come with the agreement.
What is needed, he said, is increased investment from the private sector and support from development finance institutions in the provision of ports, rail and road infrastructure to facilitate trade. “We are positioning the continent for increased intra-African trade and reducing the barriers, to trade and investment and everything that we are doing is contingent on the efficiency of available infrastructure,” he argued.
Reporting from The Africa Debate by Omar Ben Yedder.
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