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Export potential opened up by Africa's Continental Free Trade Agreement

54 countries representing 1.27 billion end consumers

The operational phase of the African Continental Free Trade Area Agreement has been launched. The Agreement establishes a market of 1.27 billion people creating an economic bloc of combined GDP of CHF2.46 trillion and combined consumer and business spending of more than CHF 3.9 trillion.

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Largest free trade zone since the creation of the World Trade Organization

On 7 July 2019 the African Union (AU) leaders met for an Extraordinary Summit in Niamey, Niger, which launched the operational phase of the African Continental Free Trade Area Agreement (AfCFTA), the largest free trade zone since the creation of the World Trade Organization in 1994. It aims to strengthen regional integration and to liberalize trade among the member states of the AU that are not in the same regional economic community.

The AfCFTA entered into force on 30 May 2019 for the 24 countries that had deposited their instruments of ratification. 54 of the 55 African states have signed the Agreement till date, with the largest African economy Nigeria and Benin being the 53rd and 54th signatories. The only remaining AU-member state yet to sign is Eritrea. The Secretariat for this continental free trade zone will be hosted in Ghana. 

Boost for intra-Africa trade expected

The United Nations Economic Commission for Africa (UNECA) predicts that intra-Africa trade will be boosted by 52 % by 2022 as a result of the implementation of AfCFTA. Currently Africa’s inter-regional trade stands at only 16% of its total exports, compared to 58% and 67% for Asia and Europe.

According to Article 4 of the AfCFTA “[t]he State Parties shall progressively eliminate tariffs and non-tariff barriers to trade in goods; progressively liberalise trade in services; cooperate on investment, intellectual property rights and competition policy; cooperate on all trade-related areas; cooperate on customs matters and the implementation of trade facilitation measures; establish a mechanism for the settlement of disputes concerning their rights and obligations; and establish and maintain an institutional framework for the implementation and administration of the AfCFTA.” 

In a first phase the aim of the AfCFTA is to increase intra-African trade by making doing business in Africa easier. The Agreement envisages the elimination of customs duties on 90% of goods. The negotiations for the tariffs and rules of origin are still ongoing and in the meantime the members states will continue to trade under the rules of the various, sometimes overlapping, regional trade agreements.

AfCFTA – a potential game changer

While the task of implementing the AfCFTA is challenging, the AfCFTA has the potential to be a game changer for Africa which will have some of the world’s fastest growing economies over the next years (growing at an average rate of a minimum of 5%). As the Egyptian President and AU Chairperson Abdel Fattah Al-Sisi put it at the Extraordinary Summit of the AU in Niamey: “The eyes of the world are turned to Africa”.

Africa as an export market for Swiss companies

Do you have questions about the African market and its existing landscape in regional trade agreements? Contact Suhail el Obeid, Senior Consultant Africa, Middle East, Iran & Turkey. He will be happy to support you with a free initial consultation, prepare detailed market and competition analyses as required and clarify the local framework conditions for you.

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