The implementation of the African Continental Free Trade Area (AfCFTA) agreement starts today, January 1, 2021. This is after the agreement was postponed twice in 2020 due to the outbreak of the COVID-19 pandemic.
With its secretariat in Accra Ghana, the AfCFTA will create the largest free trade area in the world measured by participating countries on the African continent
According the World Bank, the pact is expected to connect 1.3 billion people across 55 countries with a combined gross domestic product (GDP) valued at US$3.4 trillion
Even though the implementation of the agreement has the potential to lift 30 million people out of extreme poverty—achieving its full potential will depend on putting in place significant policy reforms and trade facilitation measures.
Per the World Bank’s expectations, the agreement will reduce tariffs among member countries and cover policy areas such as trade facilitation and services, as well as regulatory measures such as sanitary standards and technical barriers to trade.
Full implementation of AfCFTA will also reshape markets and economies across the region and boost output in the services, manufacturing and natural resources sectors.
“As the global economy is in turmoil due to the COVID-19 pandemic, creation of the vast AfCFTA regional market is a major opportunity to help African countries diversify their exports, accelerate growth, and attract foreign direct investment,” the World Bank projects.
The World Bank report, The African Continental Free Trade Area: Economic and Distributional Effects, is designed to guide policymakers in implementing policies that can maximize the agreement’s potential gains while minimizing risks.
The Bretton Woods institution cautions that creating a continent-wide market will require a determined effort to reduce all trade costs. Governments will also need to design policies to increase the readiness of their workforces to take advantage of new opportunities.